IPA Investor Survey Finds Strong Demand for Non-Listed REITs and BDCs

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ELLICOTT CITY, Md., April 24, 2013 (GLOBE NEWSWIRE) -- In a sign of strong confidence in real estate investing, a recent survey of over 500 high-net-worth investors found that 80% believe that commercial real estate will perform the same as or better than the equity market over the next five years.

Conducted by the Investment Program Association (IPA), a trade association for non-listed direct investment vehicles, the survey asked high net worth investors about their current investments in and outlook for non-listed real estate investment trusts (REITs) and business development companies (BDCs).

Key findings of the IPA's Investor Survey uncovered strong expected demand for these vehicles from high-net-worth investors surveyed:

  • More than two in five (45%) expect to include non-listed REITs in their future portfolio;
  • About one quarter (24%) plan to include BDCs in the future.

Based on the self-reported holdings listed below, these findings imply a 15 percentage-point increase in future ownership of non-listed REITs and an 11 percentage-point increase in future holdings of BDCs.

"After the significant downturn in the real estate market, investors are now saying that the market has turned a corner," said Kevin M. Hogan, President and CEO of the Investment Program Association. "In today's low-interest-rate environment, these ownership levels can help provide investors in non-listed REITs and BDCs with significant current income potential over a multi-year investment horizon."

While every non-listed REIT is different, generally speaking they are designed to be held for five to seven years from inception to exit strategy (liquidation, merger or listing). And while distributions from operations to shareholders can vary widely, many non-listed REITs pay annual distributions of between 4% and 6% and have a favorable tax status. Many BDCs typically have a similar payout ratio.

The past two years have seen record sales of non-listed REITs and BDCs. In 2012, total sales of non-listed REITs were estimated to be $10.3 billion and sales of BDCs were estimated to be $2.8 billion. In the first quarter of 2013, total sales of non-listed REIT sales were estimated to be $3.9 billion and BDC sales for the quarter were estimated to be $655.7 million. (Source: Robert A. Stanger & Co., LLC)

In current allocations, three in ten investors (30%) surveyed are currently investing in non-listed REITs, of which one-quarter (24%) have between 1% and 5% of their portfolios currently invested in non-listed REITs. Thirteen percent of those surveyed say they are now investing in BDCs, with 11% holding between 1% and 5% of their portfolio in BDCs.

Of the investors surveyed who own either non-listed REITs or BDCs, 20% of those surveyed indicated that they invest only in non-listed REITs, while 33% currently invest in REITs, BDCs or both, demonstrating a robust intersection of investment choices.

Considering future investments, 49% of those surveyed indicate they expect to invest in either REITs or BDCs, with 20% of respondents saying they expect to invest in both instruments, and 25% saying that they expect to make future investments in non-listed REITs.


The survey also inquired into the retirement strategies of high net worth investors. Demonstrating the robust need for investment income, 33% of those in retirement say it's essential or very important that they own investment vehicles that provide regular current income. Of those within five years of retirement, 41% say it's essential or very important that they own investment vehicles that provide regular current income. Lastly, 86% of those in retirement say that they have diversified their portfolios against possible inflation, and 93% of those within five years of retirement say they have diversified their portfolios against possible inflation, illustrating the investment strategies of the retirement demographic.

Market Expectation and Portfolio Construction

Nearly nine in ten (89%) investors surveyed think the equity market will rise in the next five years, with 47% believing it will rise 1 to 5% annually, 40% thinking it will rise 6 to 10% annually and 2% foreseeing a rise of greater than 10% annually.

Asked to self-characterize the overall risk profile of their portfolios, 43% of respondents said "balanced," 22% said "growth," 15% said "moderate," 13% said "conservative" and 7% said "aggressive."


The survey was conducted by Echo Research from March 12 to March 20, 2013, and polled 501 high-net-worth investors chosen at random and who have an annual household income of at least $150,000 and net investable assets of $250,000 or more. The margin of error is ±4.4% at the 95% level of confidence. The survey was geographically balanced to represent the U.S. population.

For the complete survey results, please visit: http://www.ipa.com/?wpdmact=process&did=MzA0LmhvdGxpbms=

About The Investment Program Association

Formed in 1985, The Investment Program Association (IPA) was formed to provide effective national leadership for the Direct Investment industry, including non-listed REITs (NLREITs), Business Development Companies (BDCs), Oil and Gas, and Equipment Leasing Programs. For the last 28 years, the IPA has successfully championed the growth of such products, which have increased in popularity with financial professionals and investors alike. It is estimated that by year end 2012, direct investments accounted for more than $100 billion in assets under management in the accounts of more than 1.5 million investors. Some $93 billion in assets under management are estimated to have been invested in non-listed REITs. The mission of the IPA is advocating direct investments through education. Request your free copies of the Guide to Understanding Direct Investments and take the free IPA e-learning course today, or visit the IPA online for more information about becoming a member.

To stay up-to-date with IPA news, follow @IPADirectInvest on Twitter.

CONTACT: MEDIA CONTACT: John McInerney Makovsky 212.508.9628 jmcinerney@makovsky.com

Source:Investment Program Association