Events CPN Dallas/Fort Worth Property Opportunities Conference Tuesday, August 28, 2007 7:15 a.m. to 2:15 p.m. Hilton Anatole Dallas, Texas

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Investment Notes
Record Investment in Non-traded REITs

Investment in non-traded real estate investment trusts (REITs), real estate partnerships and limited liability companies reached $7.33 billion during the first half of 2007, setting an all-time six-month record for these types of direct investment programs.

That amount is an 183 percent increase over the first half of 2006 when $2.59 billion was invested, according to the Investment Program Association (IPA), the national association for the non-traded direct investment industry, and Robert A. Stanger & Co., a Shrewsbury, N.J.-based investment banking firm that specializes in the direct investment securities markets.

Non-traded REITs have fueled the interest, representing 96 percent of total investment this year, according to IPA and Stanger. Leading fundraisers so far in 2007 reflect a mix of established veterans of the non-traded real estate industry and successful newcomers. The industry's largest fundraiser through the first half of 2007 is Inland Real Estate Investment Corp., with a staggering $2.7 billion of equity raised.

Other leading first-half fundraisers include Behringer Harvard Funds ($752 million), Dividend Capital Advisors ($587 million), Hines Advisors LP ($586 million), Apple Hospitality ($572 million), and CNL Investment Company ($530 million). Other sponsors raising in excess of $100 million during the first half of 2007 include Wells Capital ($492 million); KBS Capital ($365 million); Cole Advisors ($282 million); NNN Realty Advisors ($140 million); and CBRE Advisors ($122 million).

The short-term appeal of this investment class during the past few years has been the current yield premium, explains Keith Allaire, managing director of Robert A. Stanger & Co. "But their longer term function is asset allocation – to provide diversification in a portfolio of exchange traded securities – while affording the investor an opportunity for growth."

Investments in non-traded REITs made during the past five to seven years have performed well and delivered respectable total returns while providing stable income to investors, according to Allaire.

A recent study that analyzed the investment performance of seven public, non-traded REITs that had gone "full-cycle" with a liquidity event found that internal rates of return averaged 13.6 percent (with dividend reinvestment) over a five-year holding period, with the best performing program providing an IRR of 18.1 percent. The returns from these programs were generated while providing steady income in the range of approximately 7 percent per year to investors.

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