BGO Industrial Real Estate Income Trust, a nontraded REIT formed by investment management firm BentallGreenOak, acquired an interest in a 9.4M SF industrial “seed portfolio” of 29 buildings in the Midwest.
BGO IREIT launched July 12 with an initial stock offering of $5B in common stock shares of various classes. The company will be an industrial REIT, though not publicly traded, that will invest mostly in warehouse and logistics assets in the United States, though it will also invest in real estate debt and real estate-related securities.
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"Over the last five years, total return from nontraded REITs has been superior to the traded REITs, which have been more volatile — when they're hot, investors drive prices over consensus [net asset value], and when it's not, they drag prices below consensus NAV,” Robert A. Stanger & Co. Chairman and CEO Kevin Gannon told Bisnow.
BGO was unable to comment for this story, citing regulatory restrictions.
The launch of BGO's nontraded REIT reflects two shifts in the CRE market, namely more interest from investors and the increasing market share of alternative lenders, Real Estate Capital USA reports.
Alternative investment fundraising totaled a record $104B in 2022, a 23% increase over 2021, according to Robert A. Stanger & Co. data, with the increase led by nontraded REITs at $33B, though that total was down 3% year-over-year.
Stanger helped structure BGO IREIT, and Gannon said that its seed portfolio represents a diversification strategy within the industrial sector.
"There's a billion-plus-dollar portfolio with institutional partners with institutional underwriting," Gannon said. "They did a great job and put together some institutional sponsorship."
BGO IREIT's seed portfolio includes multiple assets in greater St. Louis, Cincinnati and Kansas City, plus one standalone industrial property in Kenosha, Wisconsin. The assets were developed by NorthPoint Development and Northwestern Mutual between 2012 and 2023.
Besides BGO, a number of major capital market players have formed nontraded REITs, including Invesco and Apollo, Gannon said.
“These are big names in real estate, meaning they've managed lots of real estate for pension funds and sovereign wealth funds, and now retail investors have access to those management companies' products, and that's pretty cool,” Gannon said. “They created both as nontraded REITs but also private placements.”
These structures aren't without their challenges, as shown by the demand for redemptions outstripping their caps.
“People are hitting that redemption thing pretty hard,” Gannon said. “It's a bit of a hiccough, but when it's over and we've met those redemptions for a couple of years, everyone's going to say, 'That worked out. We didn't have to wait 15 years to get a liquidation event.'”
The BGO entity is the latest nontraded REIT to launch, in contrast to the dearth of publicly traded REITs. Last year, no publicly traded REITs were formed for the first time since 2001, as underlying valuations dropped and so did REIT stocks.
Late in June, Invesco Real Estate launched the credit-focused Invesco Commercial Real Estate Finance Trust, which will originate, acquire and manage a portfolio of loans and debtlike preferred equity interests linked to commercial real estate.
Late last year, Apollo Global Management formed Apollo Realty Income Solutions, a $5B nontraded REIT. Its primary offering was $4B, with an additional $1B in shares available via a distribution reinvestment plan. Apollo didn't specify a property type, instead saying that it will invest in a diversified CRE portfolio.
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