Can private REITs issue bonds?
I see a lot of publicly traded REITs issue bonds that seem pretty attractive in terms of rate.
Is there any reason a privately traded REIT cannot issue bonds?
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Yes, they can - but I'm not sure how common it is. The transition to senior unsecured bonds among many (most?) of the larger public REITs has been a phenomenon of the post-GFC era and desire to decrease leverage in many of these companies (blue chips are typically sub 50%, usually in the 30-40% range). Private REITs are typically levered a little more aggressively than their public counterparts in order to buoy the dividend yield - so that would favor secured debt which generally allows higher LTV.
Sure, they can, just that with the funding structure of most non-traded (I'm guessing this is what you mean by private) REITs, they are often better served with lines of credit and bank loans. As to do with how slowly they raise capital (like literally daily) and thus a LOC is more useful to let them buy property then retire with equity raise and repeat.
Bonds require fixed terms for many years to be useful and make the issue cost worthwhile, and once a non-traded ends cap raise, it's more likely to merge or go public (and then may issue bonds) than re-cap anyway.
I've sold many of these non-traded REITs / BDCs over the yrs. Really took major hold after GFC as the banks weren't lending so private direct lenders (CIM, FSI, Griffin, etc) stepped in. You're exactly right in terms of more leverage and hold and then create a liquidity event (IPO or sale to another public traded - which now moves them from non-correlated to correlated as they join the daily auction). Bonds would not be a good capital structure as they're typically looking to "get out" within 7 - 10 yrs from capital raise. Lot easier to just raise money from investors (LPs) and leverage via bank loans.
You’re an idiot. They do issues bonds. I would estimate that the majority of OCDE funds issue fund level debt
I think the OP is asking about non-traded REITs, compared to publicly traded REITs. I don't think they are asking about OCDE funds, but OP could clarify. An open-end comingled institutional fund is about as polar opposite as a non-traded REIT you are probably going to find in the spectrum of RE fund vehicles.
I always thought ODCE funds were private REITs basically, or am I wrong? Open end, but private none the less..right?
The public can't buy into an ODCE fund...right?
So a REIT is a tax classification, qualifications set forth by the IRS. It really isn't a business type or strategy (even though the "REIT" industry basically makes one by use of the phrase). So there isn't really "public" or "private" REITs.....
The "non-traded REIT" industry, are publicly approved/registered funds (with the SEC) that the public can buy just like any other stock, just they are not listed on an exchange (like NYSE/NASDAQ) and generally sold via broker-dealer network.
ODCE type funds... or open-end comingled funds, are large institutional vehicles that are not open directly to individuals (at least I don't think so). I am not sure their exact structure, they may use partnerships (and thus no need to file for REIT status), or they may file as private REITs (these are meaningless details from a business sense, however claiming REIT status does limit the fund's activities in someways that probably don't matter for those type funds).
I personally would not equate an open-end diversified core fund with any type of "REIT" the way the industry uses that term. I mean, do they all own real estate at the end of the day? Sure, but REITs (at least the big public ones) are full on businesses with service and development lines increasingly (even if operated via a TRS, taxable REIT subsidiary).
The institutional funds have very different mandate and business strategies (more limited), and actually do direct redemption of shares/units (there is an investment queue and a redemption queue, still managing net liquidity based on fund status). REITs hardly ever do this (if so, can be super limited amount per quarter), so a non-traded REIT share holder either has to wait for the liquidity event, or try and sell them on a secondary market (good luck...). Clearly, owners of traded REIT shares can just go send a sell order to a broker whenever the market is open.
Not sure this this made it more confusing or not, but that's the basics as I know them.
I didn't say they don't, just not preferable. Much of their capital comes from individual investors (like a mutual fund). Non Traded Reit X raises 1.5B for a new fund. Wealth mgrs go to their clients to fund the fund. Those are not bonds. They also lever with bank loans, also not bonds. They may include bonds in their cap structure but it is not primary.
Do big ODCE funds like Prudential or JPM issue bonds? I thought the only type of leverage these guys do are like warehouse lines, unsecured term loans, or secured loans at the property level.
I don't think I've ever seen a Pru or JPM or any ODCE fund issue a 10 year bond on their core fund, unless I am wrong?
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