Nontraded REIT Fundraising Slows as Redemptions Outpace Inflows
After two quarters of strong growth, the nontraded REIT industry saw fundraising slow in Q2 2025, with redemptions once again outpacing inflows, according to the latest data from Blue Vault Partners. The industry raised $1.63 billion in the quarter, down from $2.1 billion in Q1 2025 and below the $1.7 billion raised in Q2 2024. Redemptions totaled $2.0 billion, continuing a trend of net outflows that has persisted since mid-2024.
The slowdown coincides with rising investor interest in private credit, where nontraded BDCs are now outpacing REITs in assets under management. Nontraded BDC AUM reached $212.2 billion at the end of Q2 2025, overtaking the nontraded REIT sector, which declined to $178.0 billion, down from $184.3 billion in Q1.
Blackstone Real Estate Income Trust (BREIT) continues to dominate the market, raising $871.6 million in Q2—53.6% of industry inflows—and managing $109 billion in AUM, or 61.2% of the sector total. Since inception in 2016, BREIT has raised approximately $82.5 billion. Starwood REIT remains the second-largest vehicle, with $19.4 billion in assets (10.9% of industry AUM). FS Credit REIT ranks third at $10.8 billion, followed by Hines Global Income Trust, J.P. Morgan REIT, and Apollo Realty Income Solutions.
Despite fundraising challenges, nontraded REITs continue to offer competitive payouts. The median distribution yield held at 5% in Q2, compared to the 8.95% average yield for nontraded BDCs. However, coverage remains a concern: the median FFO payout ratio rose to 127%, indicating many funds are relying on sources beyond operating cash flow to sustain distributions.
Only four public nontraded REITs fully covered their distributions in Q2: Cohen & Steers Income Opportunities REIT (60%); Apollo Realty Income Solutions (85%) J.P. Morgan Real Estate Income Trust (87%); and EQT Exeter Real Estate Income Trust (88%); Separately, ExchangeRight Essential Income REIT, a privately offered vehicle, fully covered its 6.4% yield with cash flow.
Debt ratios have improved, with the median leverage ratio at 41%, down from 47% in Q1 and nearly 50% in late 2024, providing a healthier balance sheet footing for the sector.
REIT sponsors remain active in both acquisitions and dispositions, signaling continued opportunities for long-term investors despite near-term fundraising challenges. Citing data from NAREIT, Blue Vault noted that U.S. public REITs collectively own 570,000 properties and 14.6 million acres of timberland, underscoring the sector’s scale and reach.
Blue Vault CEO Stacy Chitty struck an optimistic note about the outlook for nontraded REIT fundraising. “There’s no doubt that capital raise will rise again. Real estate is a formidable asset class, and nontraded REITs deliver substantial investor value. But when? Nobody knows, but I don’t think we’re too far away. It will at least begin the process of normalizing in early 2026.”
