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Nontraded REIT sales rise 9.5% in 2018, boosted by Blackstone's efforts

Sales of nontraded real estate investment trust products increased 9.5% year over year in 2018 to $4.59 billion, according to investment banking firm Robert A. Stanger & Co. Inc.

The uptick in sales shows positive momentum is building in the space, though the 2018 sales total fell short of the firm's earlier projection of $5.6 billion for the year. The fourth quarter was the strongest quarter of the year, with sales totaling $1.39 billion, representing a 20.9% increase relative to the third quarter.

"Stanger expects the upward trend in fundraising to continue in 2019," Kevin Gannon, the firm's chairman, said in a release.

Nontraded REIT sponsors on the whole have struggled in the last few years as new regulatory scrutiny was brought to bear on the space and as new rules around fee transparency took effect. At the high point, in 2013, nontraded REIT sales totaled $24.6 billion.

Gannon credited the arrival of Blackstone Group LP, the top sponsor in 2018 by a wide margin, and other institutional money managers for the turnaround. Blackstone, via its so-called daily net asset value, or daily NAV, REIT, Blackstone Real Estate Income Trust Inc., was responsible for $2.88 billion in sales in 2018 — a 62.7% market share. Sales of daily NAV products, "perpetual life" entities that offer liquidity and regularly updated valuations, represent a growing percentage of quarterly sales totals.

"Stanger expects these new entrants will propel the acceptance of real estate investment products structured as NAV REITs," Gannon said of the institutional money managers.

Black Creek Group LLC was the second-highest-selling sponsor in the space in 2018, with $374.3 million of sales, representing an 8.2% market share, followed by Griffin Capital Co. LLC with $264.0 million of sales, or a 5.8% market share.