Real Estate Investments Took on Unlisted REIT's

Friday, February 10 2006 @ 06:52 pm UTC

Contributed by: jron

High up-front fees are bringing trouble, critics said. Main cause probably is a lack of liquidity and limited transparency in investments, which are known to be publicly registered but not listed on any exchange.

There are some that are operated by independent companies, or sponsors, and marketeted by brokers and financial planners, they are called unlisted REIT's.

In 2005 there has been reported that $6 billion was raised, down from it's 2003 peak of $7.2 billion, it is just below 2004's $6.3 billion, That is all according to publisher of Direct Investments Spectrum, Spencer Jeffries.

One of the biggest sponsors with approximately 35 million square feet of space in over 163 buildings is Wells real Estate Funds,Tom E. Larkin, senior vice president of direct investments said that their sales which climbed up to 30 percent in 2005 from the past year.

Ralph L. Block, author of "Investing in REIT's and senior REIT portfolio manager for the Phocas Financial Corporation said
"There has been a significant surge of interest in these types of investments," and added "The main reason is that people are looking for income, especially the baby boomers as they near retirement."

Quarterly dividend tends to be higher than those paid by the traded ones, one source said. Dividends paid by inlisted REIT's have averaged roughly 6 to 7 percent, compared to trade ones' 4 to 5 percent, according to National Association of Real Estate Investment Trusts.

Jeffries explained that "Nonlisted REIT's are looking for income-oriented investors, and they pay out most or more of their cash flow, which is why they have higher dividends," and added "This is a controversial aspect." as he continues expalining.

They have told that there are also other factors to consider, Hank Madden, a money manager from Jacksonville, Fla. said "There are advantages and disadvantages to owning them the key is for the investor to be educated on all of them," he adds
"It's really a matter of personal preference." also he occasionally sells private REIT's to his clients.

Chief executive and president of CNL Retirement Properties, Stuart J. Beebe said "an unlisted health care real estate investment trust, which acquired around $400 million in property last year, said investors should be prepared to hold onto their shares for around 10 years. "It's clearly a much longer time horizon" than other investments,"

By: Dijon Wainwright