--- title: "Public Non-Traded REITs" description: "A public non-traded REIT is a real estate investment trust registered with the SEC and sold through broker-dealers and advisers but not listed on any..." canonical: https://www.getswoopr.com/investments/public-non-traded-reits/ source: "Swoopr Investment: https://www.getswoopr.com" --- ## Direct Answer > A public non-traded REIT is a real estate investment trust registered with the SEC and sold through broker-dealers and advisers but not listed on any exchange, so shares are bought at a sponsor-set offering price and sold back, if at all, through a limited redemption program. The form offers a stable reported value and a high distribution in exchange for illiquidity, high upfront fees and sponsor-set valuations, and its history includes suspended redemptions and distributions funded by borrowing. The sponsor registers an offering, sells shares continuously through brokers at a price it sets, invests the proceeds in property, and pays a distribution that it reports as a yield on the offering price; the share value is updated periodically by the advisor's appraisal process rather than by trading. # Public Non-Traded REITs: Complete Investor Guide ## What Is Public Non-Traded REITs? A public non-traded REIT is a real estate investment trust registered with the SEC and sold through broker-dealers and advisers but not listed on any exchange, so shares are bought at a sponsor-set offering price and sold back, if at all, through a limited redemption program. The form offers a stable reported value and a high distribution in exchange for illiquidity, high upfront fees and sponsor-set valuations, and its history includes suspended redemptions and distributions funded by borrowing. | Item | Detail | | --- | --- | | Registration | SEC-registered; sold under a prospectus through broker-dealers and registered investment advisers | | Pricing | Offering price and periodic net asset value set by the sponsor, not a market | | Liquidity | Share repurchase programs limited to about 2% of NAV a month and 5% a quarter; suspendable | | Fees | Historically 10% to 15% of the offering price in selling commissions and organization costs; newer NAV REITs charge lower upfront loads plus ongoing fees | | Management | External advisor affiliated with the sponsor, paid asset-based and performance fees | | Warnings | The SEC's REIT investor bulletin and Investor.gov describe the distribution, fee and liquidity risks | ## How Does Public Non-Traded REITs Work? The sponsor registers an offering, sells shares continuously through brokers at a price it sets, invests the proceeds in property, and pays a distribution that it reports as a yield on the offering price; the share value is updated periodically by the advisor's appraisal process rather than by trading. Investors who want out submit repurchase requests, which the REIT honours up to its monthly and quarterly limits and may suspend, as several large non-traded REITs did in 2022 and 2023 when requests exceeded limits for months. The SEC's REIT investor bulletin and Investor.gov's REIT page set out the differences from listed REITs: no market price, limited redemption, front-end fees, external management conflicts, and distributions that in early years are often paid partly from offering proceeds or borrowings rather than from property income. The newer NAV REIT structure, with daily or monthly NAV and lower loads, improved on the older form without changing the liquidity limits. **Worked example.** An investor puts $100,000 into a non-traded REIT with an 8.5% upfront load and 1.25% a year of advisory and other fees. If the properties return 6% a year for five years, the investor's shares are worth about $115,900; the same properties held through a listed REIT with 0.5% of costs would be worth about $130,700. The fees cost $18,426 over five years, more than two years of the property return, before counting the redemption limits that may keep the investor from selling when they want to. The inputs are illustrative numbers, not market data. ## What Does Public Non-Traded REITs Cost? Upfront selling commissions and dealer-manager fees, historically 7% to 10% of the offering price, plus organization and offering expenses; annual advisory fees of 1% to 1.5% of NAV; acquisition, disposition and performance fees to the advisor; and the cost of illiquidity, which has no line item. ## How Is Public Non-Traded REITs Taxed? Dividends are reported on Form 1099-DIV like any REIT's: ordinary income (eligible for the 20% section 199A deduction), capital gain distributions and, often a large share in early years, return of capital, which reduces basis and is taxed on sale. IRS Topic 404 and Publication 550 cover the reporting. ## What Are the Risks of Public Non-Traded REITs? - Illiquidity: redemption programs are limited and suspendable, and there is no secondary market beyond deep-discount tender offers. - Fees that consume years of return before the investor is ahead. - Valuation: the reported NAV is the sponsor's estimate, lagging and smoothing the market, so stability on the statement is not stability in value. - Distribution quality: early distributions funded by offering proceeds or debt are a return of the investor's own money. **Common misconception.** A non-traded REIT's stable reported value is not lower risk. The properties behind it move with the same rates and fundamentals as a listed REIT's; the sponsor's appraisal simply reports the move later and more smoothly, and the investor who wants to sell at that value finds a redemption queue. The stability is in the statement, and the price of it is paid in fees and liquidity. ## Where Does Public Non-Traded REITs Fit? **Liquidity.** Poor: limited repurchase programs that can be and have been suspended; no listing; tender offers from third parties at steep discounts. **Who uses it.** Investors who have read the prospectus fee table, will hold for a decade, accept that redemption is not assured, and have a specific reason to prefer a sponsor's portfolio over a listed REIT index at a fraction of the cost; the SEC's bulletin suggests that group is small. **Portfolio role.** A long-term, illiquid real estate holding in the alternative sleeve, sized as money that may not be available for years; for most investors, the listed form does the same job better. ## Frequently Asked Questions What is Public Non-Traded REITs? A public non-traded REIT is a real estate investment trust registered with the SEC and sold through broker-dealers and advisers but not listed on any exchange, so shares are bought at a sponsor-set offering price and sold back, if at all, through a limited redemption program. The form offers a stable reported value and a high distribution in exchange for illiquidity, high upfront fees and sponsor-set valuations, and its history includes suspended redemptions and distributions funded by borrowing. The sponsor registers an offering, sells shares continuously through brokers at a price it sets, invests the proceeds in property, and pays a distribution that it reports as a yield on the offering price; the share value is updated periodically by the advisor's appraisal process rather than by trading. What are the risks of Public Non-Traded REITs? Illiquidity: redemption programs are limited and suspendable, and there is no secondary market beyond deep-discount tender offers. Fees that consume years of return before the investor is ahead. A non-traded REIT's stable reported value is not lower risk. How liquid is Public Non-Traded REITs? Poor: limited repurchase programs that can be and have been suspended; no listing; tender offers from third parties at steep discounts. Who typically invests in Public Non-Traded REITs? Investors who have read the prospectus fee table, will hold for a decade, accept that redemption is not assured, and have a specific reason to prefer a sponsor's portfolio over a listed REIT index at a fraction of the cost; the SEC's bulletin suggests that group is small. What role does Public Non-Traded REITs play in a portfolio? A long-term, illiquid real estate holding in the alternative sleeve, sized as money that may not be available for years; for most investors, the listed form does the same job better. ## References - [SEC: Investor Bulletin: Real Estate Investment Trusts (REITs)](https://www.sec.gov/files/reits.pdf) - [Investor.gov: Real Estate Investment Trusts (REITs)](https://www.investor.gov/introduction-investing/investing-basics/investment-products/real-estate-investment-trusts-reits) - [IRS: Topic No. 404, Dividends and Other Corporate Distributions](https://www.irs.gov/taxtopics/tc404) - [IRS: Publication 550, Investment Income and Expenses](https://www.irs.gov/publications/p550) S Swoopr Editorial Team The Swoopr Editorial Team produces independent investment education, research, and tools for understanding markets, evaluating opportunities, and managing risk. All content is educational only and does not constitute personalized investment advice. 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