REITs
In the middle of 2006, Lichtenstein entered uncharted territory with the launch of a $300 million real-estate investment trust, which allowed Lightstone to raise money from outside investors for the first time. The non-traded Lightstone Value Plus REIT invested in a mix of office, retail and other commercial properties, and by the end of 2009 was fully invested in a total of 30 properties.
Overall investment market instability in the late 2000s led to both non-traded and publicly traded REITs attracting attention from investors. Lichtenstein formed Lightstone Value Plus just before the non-traded REITs reached their first peak. But in 2011, non-traded REITs raised an estimated $9 billion, close to the 2007 high, as investors were drawn to their median 6.5% yield. The regular income stream generated by REITs has been a boon to these investment vehicles, despite their lack of liquidity.
By the end of 2011, Lightstone Value Plus was the 18th largest non-traded U.S. REIT and had generated a dividend stream of 7%, above that of the two largest non-traded REITs in the country, Inland American Real Estate Trust (5%) and Inland Western Retail Real Estate Trust (2.55%).
In the summer of 2010, Lichtenstein went to market again offering Lightstone's second, non-traded REIT (Lightstone Value Plus II), which followed a similar investment strategy to its debut fund, committing capital to the hospitality, retail, multi-family and commercial segments. The Lightstone Group was a significant investor of the fund, committing 10% of the capital raised by the REIT and paying 100% of the front-end costs of the offering.
By December 2011, LVPII had invested in six properties, including the Crowne Plaza Boston hotel, Saxon Hall Rego Park, TownePlace New Orleans Metairie hotel in New Orleans.
Read more about this topic: David Lichtenstein, Expanded Strategy