Читать книгу The Intelligent REIT Investor Guide - Brad Thomas - Страница 28

Beginning in 2000, another real estate alternative to public REITs burst onto the scene – non‐publicly‐traded, or private, REITs. Exactly as their names suggest, these entities comply with U.S. REIT laws but don't trade in public markets. Sponsored by various real estate organizations, they're usually sold to small investors by financial planners and investment advisers.

Like their public counterparts, private REITs will own a collection of commercial properties and distribute the resulting income to their shareholders as dividends. But they operate more as accumulators and aggregators of assets than vertically integrated operating companies. Their yields can be fairly high, though that doesn't make them automatically superior.

These investments actually come with a number of drawbacks. Perhaps most important is their lack of liquidity. And that's true even when they make offers to repurchase certain amounts of shares at certain times under certain conditions, as some of them do. Shares still can't be quickly sold by calling one's broker or pressing a button.

Furthermore, nonpublic REIT shares are usually sold with large commissions – often over 10% – that go to the selling agent. That means fewer investment dollars are available for real estate investment. Or for real estate investors. Too often, the corporate sponsor also earns significant additional revenue via property acquisitions and management fees. So there can easily be conflicts of interest and attempts to grow the REIT for exclusive gains instead of mutually shared benefits.

Investors should therefore carefully analyze these entities’ organizational structures, balance sheets, acquisition criteria, operating costs and fee payments, prospective cash flows, and dividend coverage from recurring free cash flows.

Privately held REITs, privately held property, bonds, preferreds, utilities, MLPs, and the like can and do provide alternatives to REIT investing. But that doesn't make them replacements.

Publicly traded REITs focus entirely on commercial real estate, and their stocks have both liquidity and reasonable prospects for capital appreciation over time. Because of their structure, their management teams tend to hold closely aligned interest with shareholders. And their financial conditions and operating results are quite transparent via Securities and Exchange Commission (SEC) disclosure requirements and industry practices.

The key point is this: Publicly traded REIT shares are unique and distinguishable from other higher‐yielding investments, including other forms of commercial real estate ownership. As such, it doesn't need to be an either/or choice. A wise investment strategy is to own both REITs and other higher‐yielding stocks along with other investments. You should always strive for the right investment mix for your personal financial situation, tolerance, and goals … all of which we'll discuss going forward.