Dive Brief:

• RREEF Property Trust, a public, non-listed REIT, announced on Sept. 18 that its board of directors has approved a plan of complete liquidation and dissolution, according to a press release. The company’s portfolio comprises seven properties across five states in the industrial, retail, residential and office sectors. 
• The two apartment assets listed on its website are the 306-unit The Glenn in Centennial, Colorado, which the firm bought for $128.5 million in 2021, and the 138-unit The Flats at Carrs Hill in Athens, Georgia, which it bought for $27 million in 2015. 
• In the release, RREEF said “a period of heightened redemption activity” and “the challenges of attracting new capital” led it “to a diligent exploration of various strategic alternatives,” despite positive reported returns.

Dive Insight:

Michael Covello, executive managing director at investment banking firm Robert A. Stanger & Co., wasn’t surprised by RREEF's decision to liquidate and said “it did the right thing.” 

“They never got scale and they never gained traction is essentially what it came down to,” Covello told Multifamily Dive. “Without that scale, it's harder for the smaller non-traded REITs to perform. G&A is higher for them relative to larger REITs. They don’t benefit from economies of scale.”

In July, RREEF had paid everyone who submitted a request to get their money, according to Covello. “They were just not growing, not shrinking and just kind of treading water,” Covello said.

As of Aug. 31, RREEF posted since-inception annualized total returns of 6.35% for Class I shares and annualized monthly distributions between 5.1% and 6.9% over the past two years across all share classes, according to the release.

RREEF plans to return net proceeds from the sale of its assets to its stockholders when appropriate and at the board’s discretion, subject to paying or reserving funds for its liabilities, obligations and expenses, per the release. Representatives for the company declined to comment when Multifamily Dive contacted them.

The liquidation plan is still subject to shareholders' approval, and the company plans to convene a special meeting for a vote. It is slated to complete the asset sales within 24 months of shareholders adopting the plan.

Jones Lang LaSalle Securities is RREEF’s financial advisor as it evaluates strategic alternatives, per the release. Alston & Bird LLP acted as counsel to the company, while Venable LLP acted as Maryland counsel, per the release.

A majority of the smaller, nontraded REITs have multifamily exposure, according to Covello. But Cottonwood, which recently announced a deal with Mandel Group, is the only pure-play apartment company in the space with significant scale, he said.

Ultimately, Covello said REITs of all sizes face similar challenges. “The cost of debt is generally higher than cap rates, and that creates challenging economics and puts pressure on total return expectations,” he said. “So I think that's the fundamental issue with all real estate, not specific to non-traded REITs.”

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