RESEARCH CENTER >> REAL ESTATE ESSENTIALS:
TRADED VS. NON-TRADED REAL ESTATE INVESTMENTS
There are several ways to invest in real estate without purchasing a building directly. One way is to purchase stock in a publicly traded company that invests in real estate. Another way is to invest in a non-traded real estate company. Cornerstone Real Estate Funds offers public, non-traded real estate investment programs for investment.
Why invest in a non-traded versus a traded real estate company?
Direct investments in investment grade real estate have historically demonstrated greater stability and lower overall volatility than investments in traded real estate companies such as shares of a listed REIT. According to data from the National Association of Real Estate Investment Trusts (NAREIT) and the National Council of Real Estate Investment Fiduciaries (NCREIF), traded REITS have outperformed direct investments in real estate by 5.25% annually, but have done so with over five times the volatility as measured by standard deviation.
The NAREIT index is an index of publicly traded REITs. The NCREIF index reflects unleveraged returns of investment grade properties, before deducting management fees, as reported by institutional investors. Our management believes that an investment in our stock is more like an investment in a pool of properties than an investment in listed REIT stock and that an investment in our stock will have less volatility in performance than an investment in listed REIT stock. While the NCREIF index is not a measure of non-traded REIT performance, our management believes that the NCREIF index is an appropriate and accepted index for purposes of evaluating the relative volatility of an investment in our stock as compared to an investment in listed REIT shares. The NCREIF index reflects higher returns than our stockholders are likely to experience because the management fees we pay will reduce returns. You should also keep in mind that, because we are a non-traded REIT, you will not be able to realize appreciation in the value of our portfolio, if any, until we liquidate or list our stock for trading.
There is generally no public market for stock of a non-traded real estate company. If you invest in a non-traded real estate company, it may be difficult for you to sell your stock and if you sell your stock, it may be at a substantial discount. You and your investment advisor can determine whether an investment in a non-traded real estate company is right for you.