Non-traded REITS
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.Yes
Yes
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…
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.How do you go about buying them as an indie? Do all indie B/D’s allow them? Who would you contact?
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.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.
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.How do you go about buying them as an indie? Do all indie B/D’s allow them? Who would you contact?
My guess is that RJ can do all of them.
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.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.
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.
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.
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...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.
correction, 25% of liquid net worth
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.
[quote=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.
[/quote] Do you have to bang on tenants' doors to get the rent check?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.[/quote] 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?[quote=Sportsfreakbob]How do you go about buying them as an indie? Do all indie B/D’s allow them? Who would you contact?
[quote=Sportsfreakbob]
Whats the advantage of non public vs public REITS - is it just the possibilty of an IPO?[/quote] I only have casual knowledge of them. I would let another member chime in.The lack of fluctuation of the principal… The principal will remain steady(or increase if reinvesting) until the offering closes… Then the price/share will remain constant for another 12months(i think) and then it is reevaluated on an annual basis.
The IPO just sweetens the pot, but I don’t count on it(most of the time they get bought out by one of those public REITS)
No door banging. Your client gets a monthly check into their account. Triple net means the corporation covers everything including maintainance, insurance, upkeep etc. Your client does nothing except collect a check. The Syndicator sends a K-1 every year. The risk is the company goes out of business which is why you want a large A rated corporate lease. In the worst case instead of owning a bond and settling for cents on the dollar or have an equity swap, you can re-lease the property or try to sell, and dont have to wait years for attorneys to settle. All cash means no debt service in a worst case situation.
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.[/quote] 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?[/quote] The main advantage of Non traded REITs is the price stability as mentioned before by a few people. The NAV stays constant (but can change but not all that common going forward) so you don't deal with day to day principle fluctuation as you do with bond funds or public stocks. It doesn't mean Nontraded Reits are far better than traded ones but it's nice to have a stable income producing investment. you don't have the liquidity like the traded REITs and obviously with traded REITs so depressed, you may have more upside potential with them. However, I'll keep selling nontraded ones any day over a stock REIT.[quote=Wet_Blanket][quote=Sportsfreakbob]How do you go about buying them as an indie? Do all indie B/D’s allow them? Who would you contact?
Here is a timely article.
http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20091018/REG/310189969/1009/INIssueAlert01[quote=Wet_Blanket] Here is a timely article.
http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20091018/REG/310189969/1009/INIssueAlert01[/quote]
Wouldn’t really call it timely…
It only makes sense that real estate bought at the height of the market would go done(Inland Western), but I own inland american and the dividend is still at 5% and they were picking up some nice properties… Sometimes it’s about timing. Anyone who bought internet stocks before the crash had the same thing happen. But the advantage is that there are “real” assets behind these(building/land(god stopped making land a long time ago(except in Dubai)). So you still have a real asset at the end of the day(as opposed to a company that sold 200lb bags of dog food).
Timely as in we were discussing it and an article came out.
I was just getting ready to ask this…
How much do you get paid on a typical REIT - say on a $100k acct ?
[quote=IndySouth]
[quote=gettingstarted] I was just getting ready to ask this…
How much do you get paid on a typical REIT - say on a $100k acct ?
[quote=IndySouth]
$5k on a $100,000 investment ain’t bad…
Is that typical with Inland, etc…? Or does it depend on the b/d ?
Just to clarify - you are saying 5% so on an investment of $300,000 you would put $15k in your pocket…???
[quote=3rdyrp2][quote=gettingstarted] I was just getting ready to ask this…
How much do you get paid on a typical REIT - say on a $100k acct ?
[quote=IndySouth]
It may depend on the B/D and the REIT company. I know that Cole Capital pays me 7% gross, and my firm nets me 90%. So I net $6300 ($7K gross) on a 100K sale. It gets paid by the REIT so the client doesn’t see it come out of their principal.
[quote=gettingstarted] $5k on a $100,000 investment ain’t bad…
Is that typical with Inland, etc…? Or does it depend on the b/d ?
[quote=3rdyrp2][quote=gettingstarted] I was just getting ready to ask this…
How much do you get paid on a typical REIT - say on a $100k acct ?
[quote=IndySouth]
[quote=3rdyrp2] [quote=gettingstarted] I was just getting ready to ask this… How much do you get paid on a typical REIT - say on a $100k acct ?[quote=IndySouth]
plus (not that this should be a consideration when recommending anything), it pays 7 beans to the broker…[/quote][/quote]
5% at my firm, no matter what amount is invested.[/quote]
Why only 5% when everyone else gets 6 & 7 depending on the REIT?
Damn
I’m thinking, why in the heck would you sell anything else…???
One $100k acct a month would be great…
[quote=IndySouth]It may depend on the B/D and the REIT company. I know that Cole Capital pays me 7% gross, and my firm nets me 90%. So I net $6300 ($7K gross) on a 100K sale. It gets paid by the REIT so the client doesn’t see it come out of their principal. [/quote]
[quote=Squash1] [quote=3rdyrp2] [quote=gettingstarted] I was just getting ready to ask this… How much do you get paid on a typical REIT - say on a $100k acct ?[quote=IndySouth]
plus (not that this should be a consideration when recommending anything), it pays 7 beans to the broker...[/quote][/quote]
5% at my firm, no matter what amount is invested.[/quote]
Why only 5% when everyone else gets 6 & 7 depending on the REIT? [/quote] The Firm is taking a haircut to the broker.....
Why are insurance guys who sell annuities with a 6% commission greedy, and a 7-10 year surrender is considered criminal by some on here, but brokers who sell non-public REITs for a 7% commission and forever high costs to exit, if exiting is even available, are doing right by their clients?
Things that make you say Hmmmmmmmmmm???
Dateline NBC hasn't caught wind of REIT's yet. They've gone hog wild with annuities and VUL's. REIT's are probably next in line.
None of the REIT’s I’ve seen or used (which is all the major ones that all of them are modeled after) pay trails. KBS does pay some commission on reinvested dividends tho so that kinda works like a trail.
Berkshire- i totally agree with you. To the point that insurance guys should NOT get grief for their sales and commissions. The important thing regardless of the investment sold is that it is appropriate for the client, is an appropriate % of their portfolio, has been fully explained to the clients, and is in their best intrest. If all those things are met, the more you make the better. Sometimes it will be a 1% bond, a 2-5% mutual fund, a 7% REIT or EIA, or whatever. The only difference between the REIT and EIA though is the REIT is a security and b/d's have set compliance guidelines on how much you can allocate where most peoples gripe is some agent/advisors that put LARGE %'s of clients investable assets in fixed annuities.A couple reasons.. Surrender charges don't start at 16%. All advisors have to have a 7 or be an RIA Only certain firms offer (Indys, Ameriprise) Main reason is that they have to qualify, 75&75 or 250. Also most firms restrict how much of a persons liquid networth you can put in(most cases 25%)Why are insurance guys who sell annuities with a 6% commission greedy, and a 7-10 year surrender is considered criminal by some on here, but brokers who sell non-public REITs for a 7% commission and forever high costs to exit, if exiting is even available, are doing right by their clients?
Things that make you say Hmmmmmmmmmm???
[quote=Squash1]
Main reason is that they have to qualify, 75&75 or 250. Also most firms restrict how much of a persons liquid networth you can put in(most cases 25%) [/quote] Wow, I'd like a piece of that action. We're only allowed to do up to 10%. Of course we can have the client initial the application waiving the 10% rule, but the compliance is too much of a headache to be worth the hassle.So you are haircut on the payouts by 1-2% and you can’t use more than 10%?? You should leave…
I usually just throw the difference into an annuity
Seriously though, I don't think I'd want to put much more than 10% of a clients portfolio into REIT's anyways. Trying to go more fee-based, and there are some good preferred stock and other tactical strategies to generate high income over and above the REIT limit.Can’t you put the REIT in a fee account?
I think I heard you can put Hines into a fee account, but Hines is like 4th or 5th place on our list of REIT’s we’d use for someone. The primary ones we use are only commission based.
I have done it both ways… Either hold it below the line(no charged in a fee based account… can do this at pershing. Or buy in at nav and hold… qualified is the only way i have done it.
3rdyrp2- Hines is coming out soon with a global REIT that may be worth a look at if it fits in your fee accounts. Not sure when but the wholesaler told our office about it a week ago. Ofcourse he had a raging boner about it but Hines is a good company. I did a due dilligence trip there a few years ago and was impressed. I just don’t like their lack of motivation to liquidate the REIT down the road compared to some of the others.
WP Carey is another one that takes forever to liquidate… Good track record, just long…
This is a funny thread. How are those REITs you sold in 2009 looking now boys?
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