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Anecdotal but all the private REITs I've heard of have been where a group of investors amassed a large portfolio, decided they were long term holders / bought out anybody who wasn't, and converted the portfolio to a REIT. So I've only heard of them being used as an exit strategy of sorts, never as the goal from the outset.
To piggy back on anecdotal with more, the non traded REIT space is widely seen as a way for managers of the portfolio to take outsized fees with wacky corp structures.
https://blogs.wsj.com/experts/2015/11/13/why-investors-should-think-twi…
https://www.wsj.com/articles/nontraded-reits-offer-high-returns-but-cri…
Agreed. That said, those fuckers are raising (and deploying) a LOT of capital...
I heard more than a few senior people at some of these private REITs say, "capital flow and not cap rates are really driving the future of our business (multifamily)," at a recent conference.
This is more where I hear about it, these guys get a PWM from Edward Jones to pump all his clients into their PREIT with a share price that doesn't change value and he puts out dividends that are 6%. Which is all nice but if someone wants out they convert their stock at the same price, meaning he gets all the residual value along with crazy acq fees/dispo fees ect.
There's shady shit that goes on there. C-suite executives hire their own consulting company to be asset managers. They take their C-suite comp and AM fees along with it. They can get away because ownership is often concentrated among them with a bunch of tiny other investors that cant do anything or don't pay attention (like you said retail investors who dont know whats going on
I mean the only shady part is not disclosing how much money you are making, and how a real estate waterfall should work...But I am sure there are PREIT investors who are just fine with the structure.
https://www.nytimes.com/2011/07/20/realestate/commercial/nontraded-reit…
"Mr. Knott compared the total returns of a Wells Real Estate nontraded office REIT with the publicly traded sector when one of Wells’s trusts went public early last year. Nontraded REITS are required to either liquidate or list their shares on an exchange within a specified period, usually at least seven years. Investors in Wells got no return over the life of the trust, Mr. Knott said, because they paid fees amounting to 16 percent, and the trust paid $175 million to acquire an advisory company made up of its own executives. In the same period, the average total return for traded office REITs was 6 percent, he said."
Yes - evergreen vehicles are becoming popular and are being integrated into more LPAs as potential exit plans for smaller investors that want out after 6-7 yrs.
Hines has a non-traded reit.
https://www.hinessecurities.com/current-offerings/hgit/
All of the big boys are raising them, Invesco, Teachers, etc. The amount of capital getting raised into these vehicles is pretty shocking. Interesting times ahead for the multifamily and industrial worlds.
Liquidity based on Marked to Market rates on Assets that wont trade. I would unload huge chucks of NAV to the market to buy back when rates move. If they don't I can realize some promote today and move on.
So you can buy into the Hines Class I vehicle at 6% to NAV that have generated returns at 8%? But you have no liquidity to get out?
The 6% is distributions as share of NAV. Basically dividend yield. The 8% is total returns. The difference between the two is NAV growth.
You buy in exactly at current NAV.
The real drawback is really high fees and commissions to buy in.
A good portion of the open ended funds run by the large asset managers are set up as non traded reits. Think LaSalle, CBREGI, UBS, etc... It makes much more sense tax wise with those long term care funds
Positions in these reits are sometimes even traded between investors when someone or another needs liquidity quickly but the structure to redeem takes some time
I've worked and consulted for a few in my past, each raised several billions over multiple years. It's expensive to raise and operate but it brings in capital from mom and pop investors via financial advisors, so capable of raising funds slowly and consistently, very valuable for a REIT making many acquisitions over time.
Blackstone is one of the recent entrants, with the BREIT. Lots of others will probably join.
what the fuck ... "PREIT" is not a thing. and if you're talking about a private REIT, that's very different from the more common nontraded public REIT. pull your heads out of your asses.
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