Green Street Advisors Say Clients are Better Off with Publicly Traded REITs
In an InvestmentNews.com article, Dan Jamieson writes that Green Street Advisors Inc., says to forget the new breed of nontraded REITs. Investors are far more likely to be better off with publicly traded REITs, the research firm said in a report released Wednesday.
The current regulatory scrutiny has forced sponsors of nontraded REITs to address issues surrounding valuations, illiquidity, high fees, dividend payouts and conflicts, the report said. One crucial change: the introduction of daily net-asset-value estimates by several sponsors, as better pricing transparency might end the illusion of share-price stability, Green Street said.
“Since the shares don’t trade, the share price investors see on their statements every quarter doesn’t fluctuate,” the company said. That stability has been “one of most bizarre ‘advantages’ touted by nontraded-REIT sponsors.”
Jamieson writes that questionable dividend yields of 5% to 10% are likely to fall closer to the 3.3% yield for publicly traded REITs. Green Street said nontraded REITs have gotten something right, however: low leverage. In addition, “egregious” upfront costs of 7% to 10% on nontraded REITs should come down to 1% to 3%, the report said, and management fees of around 1% will drop, as well.
“Very few of them were forced into [taking on] expensive debt [or] selling properties on the cheap [or] issuing equity on an NAV-dilutive basis” during the financial crisis, the research firm said.
Nevertheless, “for most investors under most circumstances, publicly traded REITs will represent a superior investment vehicle, compared to even the ‘new breed’ nontraded REITs,” the report said.
The InvestmentNews.com article concludes that Green Street counts approximately 70 public nontraded REITs that own $85 billion in assets.
Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: www.securitieslawyer.com.
Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.
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