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Just over a year after launching its first real estate investment trust (REIT) exchange-traded fund, Armada ETF Advisors has formed a new investment vehicle geared toward targeting the most successful private REITs in the public markets.
The REIT-focused asset manager launched its Private Real Estate Strategy via Liquid REITs ETF (PRVT) in partnership with Tidal Financial Group. The fund, which debuted on June 12 on Nasdaq, invests in a portfolio of publicly traded REITs that have similar exposure to some of the leading nontraded REIT funds.
“We are taking the allocations of the smartest, largest private REIT sponsors like Blackstone (BX) and Starwood (STWD) and using publicly traded REITs to best approximate the portfolios in terms of sectors and geography,” said David Auerbach, managing director at Armada. “We are trying to bring the private REIT allocation to the public markets using an ETF wrapper. The ETF provides a lower cost, more liquid product at current market valuations.”
The PRVT ETF is largely mirroring the geographic exposure for 50 of the top-performing publicly traded REITs with about 60 percent aimed at Sun Belt markets, 20 to 30 percent on the coasts and 10 percent in the Midwest and Mountain West regions. In terms of property sectors, the portfolio consists of about 53 percent in residents assets like multifamily and single-family rental assets along with 25 percent in industrial properties. Roughly 5 percent of the ETF will allocate toward gaming and net-lease retail investments.
Auerbach said he is looking to learn from the investment strategies of successful private REITs like Blackstone and Starwood, while also providing more timely valuation data as a daily traded ETF. He added that the ETF is also positioned well to capitalize on sophisticated investors seeking value from REITs while others avoid the vehicles because of negative headlines from higher interest rates and headwinds confronting the office sector.
“People who are lumping in REITs as interest rate plays I think are missing the bigger picture and that — by and large with the exception of New York office and a couple other stories — fundamentals are pretty solid across the industry,” Auerbach said. “The revenues are going up, the profits are going up, dividends by and large are going up, and the companies are very well capitalized.”
Armada also launched the Residential REIT ETF known as HAUS in February 2022, as first reported by Commercial Observer. HAUS, which is also actively managed, invests in publicly traded REITs that derive their revenue from ownership or management of multifamily and single-family rental properties. The Connecticut-based company merged this past winter with Arialgo, an upstart machine-learning data analytics firm founded in 2021 that specializes in valuations REITs.
Andrew Coen can be reached at acoen@commercialobserver.com
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