Non-traded REITS

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Oct 15, 2009 1:17 pm

Hey everyone,


I was wanting your input about non-traded REITS.  Does a client really benefit from such a product especially if the REIT never goes public?  Thanks.
Oct 15, 2009 1:54 pm

Yes

Oct 15, 2009 4:36 pm

Yes

Oct 15, 2009 5:37 pm

Yes and some of them do go public or get purchase by other public REITs... Also my clients are getting 6.75% right now. Of course some are in a some other ones where they are only getting 5%, but still better than the fixed annuity or CD, but there is always the upside at the end..

Oct 15, 2009 7:41 pm

If the REIT never goes public, you still collect 5-7% with little chance of principle fluctuation... however, most all of the REIT's have the specific goal of capital appreciation from some liquidity event and even have a deadline in the prospectous. 

 
the Non-traded REIT's have been one of the best investments I've used in my career.  Great income and stability for portfolios and realistically a double didget total return once the REIT goes full cycle.  I've sold two REIT's that have had liquidity events and both have provided great overall returns to shareholders.  It's also something your wirehouse/EDJ guys can't sell so just another way to differentiate yourself from them.  And they pay quite nice to boot. 
Oct 15, 2009 8:08 pm

How do you go about buying them as an indie? Do all indie B/D's allow them? Who would you contact?

Oct 15, 2009 8:50 pm

your B/D has to have a selling agreement with each specific REIT company you offer.   Call your b/d and see if/who they may offer.  I'm at a pretty large indy b/d and am amazed by how many of the brokers know nothing of these investments. 


My b/d has selling agreements with all the big names: Inland, KBS, Cole, Hines, WP Carey, Wells, Grub and Ellis, Dividend Capital, and maybe a few others.   I've used most all of these to some degree but most with Inland over the years as they've been around a while.
 
Oct 15, 2009 8:57 pm

I think Ameriprise can do some also.. Most indy's allow, sometimes you need to get a company added to the list... I enjoy Cole, Inland, KBS and occaisionally WP, but they last forever.

Oct 15, 2009 8:58 pm
Sportsfreakbob:

How do you go about buying them as an indie? Do all indie B/D's allow them? Who would you contact?



If I recall, you are with RJFS.  Contact the Alternative Investment Group (AIG) w/ Raymond James.  They have Non-Traded REITS (Hines is the only one I recall), Hedge Funds, and something else I can't remember.  For Hines, they have one that pays you upfront, and one that doesn't (for fee-based business).  Call them.
Oct 15, 2009 9:06 pm

My guess is that RJ can do all of them.

Oct 15, 2009 9:59 pm

They're great, but only for the portion of assets used to generate income, that don't need to be liquid. Shouldn't be a replcement for CD's/savings that you might need to tap. Great income alternative to annuities.

Oct 16, 2009 9:57 am
B24:

They're great, but only for the portion of assets used to generate income, that don't need to be liquid. Shouldn't be a replcement for CD's/savings that you might need to tap. Great income alternative to annuities.

 
Some of the more conservative options allow liquidity. Client's love the steady income.
Oct 16, 2009 12:01 pm

be extra cautious with them right now.  in other words, due diligence is a must in the current commercial market.  you really need to know what they own and how they are structured.

Oct 16, 2009 12:37 pm

I agree. Would look at the underlying properties.. Cole for example has lots of Walgreens, Best Buy, Sams Club.. I like those companies, not concerned about them closing stores.

Oct 16, 2009 12:49 pm
theironhorse:

be extra cautious with them right now.  in other words, due diligence is a must in the current commercial market.  you really need to know what they own and how they are structured.

 
My indy B/D allows a maximum of 25% of a client's total net worth for a reit, with the most aggressive risk, so there are a few backstops in place. Of course it doesn't replace good due dilligence and suitability.
 
Cole right now deserves a solid look (based on their property portfolio) and W.P. Carey does corporate leasebacks of HQ's with a decent dividend. If I were at a wirehouse/jones and couldn't sell REITs, I would kill myself. They're a great solution for some clients, steady income, and steady NAV on the statement before they go public (no annoying phone calls about market fluctuation).
 
plus (not that this should be a consideration when recommending anything), it pays 7 beans to the broker...
Oct 16, 2009 12:51 pm

correction, 25% of liquid net worth

Oct 16, 2009 2:43 pm

If illiquidity is not an issue and income is I would look at an all cash triple net lease private placement instead of a reit.  Typically only for accredited investors.  Single property,  15 plus year corporate lease, A credit rating, large corporation with good debt/equity ratio.  This is very transparent, with stable cash flow and a hard asset (real estate that may hedge inflation). Basically you own part of a building and should get over 7% with 25% tax deferred due to amortized depreciation.


 
Oct 16, 2009 3:10 pm
cobia:

If illiquidity is not an issue and income is I would look at an all cash triple net lease private placement instead of a reit.  Typically only for accredited investors.  Single property,  15 plus year corporate lease, A credit rating, large corporation with good debt/equity ratio.  This is very transparent, with stable cash flow and a hard asset (real estate that may hedge inflation). Basically you own part of a building and should get over 7% with 25% tax deferred due to amortized depreciation.


 
 
Do you have to bang on tenants' doors to get the rent check?
Oct 16, 2009 3:11 pm
Wet_Blanket:
Sportsfreakbob:

How do you go about buying them as an indie? Do all indie B/D's allow them? Who would you contact?



If I recall, you are with RJFS.  Contact the Alternative Investment Group (AIG) w/ Raymond James.  They have Non-Traded REITS (Hines is the only one I recall), Hedge Funds, and something else I can't remember.  For Hines, they have one that pays you upfront, and one that doesn't (for fee-based business).  Call them.
 
Thanks Wet, thats what i was looking for.
 
Whats the advantage of non public vs public REITS - is it just the possibilty of an IPO?
Oct 16, 2009 3:31 pm
Sportsfreakbob:
Whats the advantage of non public vs public REITS - is it just the possibilty of an IPO?
 
I only have casual knowledge of them.  I would let another member chime in.