Non-traded Real Estate Investment Trusts are public companies, but their shares are not listed on any stock exchange. This makes non-traded REITs a very private market with less liquidity but also less volatility than there public counterparts.. When investigating non traded Real Estate Investment Trusts investors need to be careful that the non traded REIT are not paying dividends from borrowings and capital as opposed to funds from operations like they should be.
Non-traded public REITs are proving to be a popular new source of investment capital for the commercial real estate industry. Created more than 30 years after the REIT Act of 1960, non-traded REITs were born out of the limited partnership industry. Shares in these firms are marketed to individual investors via financial intermediaries, including registered broker/dealers and financial advisers. It is estimated that that the total assets under management for all non-traded REITs represented 20-25% % of the total market capitalization for all publicly registered REITs. This is up from just 3% 10 years ago so clearly this is a rapidly growing market.
While one of the drawbacks of non-traded REITs is that they have relatively limited liquidity, they do still offer some of the same benefits as their publicly traded counterparts. In fact many investors view a benefit of non-traded REITs is that they are not yet publicly traded. Subsequently, they offer the reasonably predictable cash flow of publicly traded REITs with less of the volatility expressed the public markets.
Non Traded REIT’s
Non-traded REITs also do receive the same tax benefits as publicly traded Real Estate Investment Trusts. By meeting certain requirements for taxable income distribution to shareholders, the Real Estate Investment Trust itself is not taxed, thereby reducing tax on the potential return on the investment, unlike traditional stock investing.
Since there is less volatility in non traded REIT’s investors also have a greater potential for gains. The other advantage of purchasing a non-traded REIT is the hope that the after the initial purchase the REIT company may eventually do a public offering on a stock exchange. In this event it gives the investor a chance to sell shares with out paying a recapture tax on the dividends. This is particularly key for a high net worth investor. The other big benefit for traditional real estate investors is that a non-traded REI also will allow 1031 investment property exchanges to fund the investment.
For real estate investors seeking ways to diversify traditional stock or real estate portfolios, REITs offer an attractive alternative. But diversification is only part of a well-designed financial plan. Risk management, or reducing portfolio volatility, is just as important. Non-traded REITs can achieve both of these goals. One reason is investor demand for non traded REIT’s is is forecast to remain strong is steady returns. Yields from non-traded REITs have performed better than publicly traded offerings.
Non Traded Real Estate Investment Trusts – Publicly Registered
Apple REIT Six, Inc.
Apple REIT Seven, Inc.
Apple REIT Eight, Inc.
Apple REIT Nine, Inc.
Behringer Harvard REIT I, Inc.
Behringer Harvard Multifamily REIT I, Inc.
Behringer Harvard Opportunity REIT I, Inc.
Behringer Harvard Opportunity REIT II, Inc.
CNL Lifestyle Properties, Inc.
Cole Credit Property Trust, Inc.
Cole Credit Property Trust II, Inc.
Cole Credit Property Trust III, Inc.
Grubb & Ellis Apartment REIT, Inc.
Healthcare Trust of America, Inc.
Hines REIT, Inc.
Inland American Real Estate Trust, Inc.
Inland Western Retail Real Estate Trust, Inc.
KBS Real Estate Investment Trust I, Inc.
KBS Real Estate Investment Trust II, Inc.
Piedmont Office Realty Trust, Inc.
Steadfast Income REIT, Inc.
Wells Real Estate Investment Trust II
Private Real Estate Investment Companies
Anderson-Tully Company
Archstone
Beacon Capital Partners, LLC
Blackstone Real Estate Advisors
Fairfield Residential LLC
Federal Capital Partners
Forest Capital Partners LLC
Gables Residential Trust
INREIT Real Estate Investment Trust
RREEF America REIT II, Inc.
RREEF America REIT III, Inc.
Spirit Finance Corporation
The Community Development Trust
Verde Realty
Watson Land Company
Wereldhave USA, Inc.