PREITs and how they raise capital

Sham Wow's picture
Rank: King Kong | 1,760

Had a chat and realized there is so much I don't know about the PREIT industry

Anyone raised money through PREITs? What has your experience been like?

Comments (19)

Feb 7, 2020

Anecdotal but all the private REITs I've heard of have been where a group of investors amassed a large portfolio, decided they were long term holders / bought out anybody who wasn't, and converted the portfolio to a REIT. So I've only heard of them being used as an exit strategy of sorts, never as the goal from the outset.

Feb 7, 2020

To piggy back on anecdotal with more, the non traded REIT space is widely seen as a way for managers of the portfolio to take outsized fees with wacky corp structures.

https://blogs.wsj.com/experts/2015/11/13/why-inves...
https://www.wsj.com/articles/nontraded-reits-offer...

Feb 7, 2020

Agreed. That said, those fuckers are raising (and deploying) a LOT of capital...

I heard more than a few senior people at some of these private REITs say, "capital flow and not cap rates are really driving the future of our business (multifamily)," at a recent conference.

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Feb 7, 2020

This is more where I hear about it, these guys get a PWM from Edward Jones to pump all his clients into their PREIT with a share price that doesn't change value and he puts out dividends that are 6%. Which is all nice but if someone wants out they convert their stock at the same price, meaning he gets all the residual value along with crazy acq fees/dispo fees ect.

Feb 9, 2020

Yes - evergreen vehicles are becoming popular and are being integrated into more LPAs as potential exit plans for smaller investors that want out after 6-7 yrs.

Array

  • Director in RE - Comm
Feb 7, 2020
    • 1
Feb 7, 2020

All of the big boys are raising them, Invesco, Teachers, etc. The amount of capital getting raised into these vehicles is pretty shocking. Interesting times ahead for the multifamily and industrial worlds.

    • 1
Feb 7, 2020

Liquidity based on Marked to Market rates on Assets that wont trade. I would unload huge chucks of NAV to the market to buy back when rates move. If they don't I can realize some promote today and move on.

Feb 7, 2020

So you can buy into the Hines Class I vehicle at 6% to NAV that have generated returns at 8%? But you have no liquidity to get out?

  • Director in RE - Comm
Feb 7, 2020

The 6% is distributions as share of NAV. Basically dividend yield. The 8% is total returns. The difference between the two is NAV growth.

You buy in exactly at current NAV.

The real drawback is really high fees and commissions to buy in.

  • Investment Analyst in PE - Other
Feb 7, 2020

A good portion of the open ended funds run by the large asset managers are set up as non traded reits. Think LaSalle, CBREGI, UBS, etc... It makes much more sense tax wise with those long term care funds

Positions in these reits are sometimes even traded between investors when someone or another needs liquidity quickly but the structure to redeem takes some time

Feb 8, 2020

I've worked and consulted for a few in my past, each raised several billions over multiple years. It's expensive to raise and operate but it brings in capital from mom and pop investors via financial advisors, so capable of raising funds slowly and consistently, very valuable for a REIT making many acquisitions over time.

Blackstone is one of the recent entrants, with the BREIT. Lots of others will probably join.

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Feb 9, 2020

what the fuck ... "PREIT" is not a thing. and if you're talking about a private REIT, that's very different from the more common nontraded public REIT. pull your heads out of your asses.

    • 2
Feb 9, 2020
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