Non-Traded Real Estate Investment Trusts (REITs)
A REIT provides for the ability to pool money from many investors to create and acquire a diversified, professionally-managed portfolio of commercial real estate investments. The U.S. Congress created REITs in 1960 to make investments in large scale, income producing real estate accessible to retail investors. Investors in a professionally managed REIT may benefit from greater diversification through a portfolio of properties, rather than a single asset.
REITs are legally required to pay 90% of taxable income as dividends and, therefore, have the potential to provide attractive streams of income through cash distributions* to investors.
Potential Benefits of Investing in Commercial Real Estate through Non-Traded REITs
Given the historic uncertainty of the financial markets, we believe adding an investment in commercial real estate to a traditional investment portfolio may provide investors with a number of potential benefits including:
- Capital preservation
- Reduced portfolio volatility
- An alternative source of cash flow
- Lower portfolio risk through reducing the correlation across major asset classes
- Potential hedge against inflation
- Professional management
*There is no guarantee of distributions. Distributions may be paid from sources other than income generated from the REIT’s investments. Investing in non-traded REITs involves various risks including but not limited to loss of principal, limited liquidity and lack of price transparency. Diversification does not eliminate risk or assure better performance.
How Non-Traded REITs Work
Investors interested in diversifying their investment portfolios with an investment in commercial real estate may choose to purchase shares in a non-traded REIT. Non-traded REITs pool investors’ capital to purchase or finance commercial real estate properties and other real estate-related assets. As equity is raised, non-traded REITs endeavor to build a portfolio consistent with its investment strategy. The non-traded REIT’s management team oversees the portfolio and its day-to-day operations. Rent or mortgage payments are collected from the underlying properties or borrowers and together with proceeds from sales or other realization events can be used to pay monthly distributions to investors.
Diversification does not eliminate risk or assure better performance. There is no guarantee of distributions. Distributions may be paid from sources other than income generated from the REIT’s investments. Investing in non-traded REITs involves various risks including but not limited to loss of principal, limited liquidity and lack of price transparency.