James Sprow, Sr. VP – Research at Blue Vault, quoted in FundFire Article

Mach 17, 2020 | Blue Vault Staff Writer

In the FundFire article “Advisors Flock to Real Estate Funds, But Do They Grasp Fees?” author Tom Stabile takes a deep dive into the Blue Vault Nontraded REIT Fee Study (3rd edition).

The study is a thorough report of all the fees associated with nontraded real estate investment trust (REIT) offerings that were effective as of Sept. 30, 2019. It covers 21 nontraded REIT common stock offerings, including 11 perpetual-life REITs. All the open REITs have multiple share classes, with different fees associated with each common share class. The study also includes a sensitivity analysis that illustrates the effects of different types of fees on eventual shareholder returns.

As James Sprow, Sr. VP – Research at Blue Vault, points out in the FundFire article, “You might think the fees are spelled out clearly, but they’re not. Then, once you find a fee, you have to understand how it’s applied … We might pull out 20 metrics for all the [possible fees].”

According to the Blue Vault report:

Sometimes the fees which tend to be most visible to the investor, such as the selling commission, do not have the impact on their average rates of return they may expect.

This may be counterintuitive to the investor who is concerned about selling commissions and their impact on “assets in the ground,” but asset management fees reduce the investor’s equity each year.

To access the full article, click here. (A FundFire subscription is required.) To access the Blue Vault Nontraded REIT Fee Study, click here. (A Blue Vault subscription is required.)