What is a Real Estate Investment Trust (REIT)?
A Real Estate Investment Trust (REIT) is an entity that owns, operates, and finances income-generating real estate on behalf of unitholders (investors). REITs pool capital from multiple investors, providing them with the opportunity to earn returns from real estate investments without directly owning or managing properties.
REITs are structured to deliver consistent income as they are required to distribute a significant portion of their profits to shareholders. They primarily come in two forms: public REITs, which are traded on stock exchanges like the TSX, and private REITs, which are not publicly listed but offer unique opportunities for diversification and long-term growth as they are often aligned with proven entrepreneurs.
Investing in a REIT allows individuals to access the real estate market while benefiting from professional management and a diversified property portfolio.
4 Common Misconceptions of Private REITs
Private REITs are a powerful tool for building wealth through real estate, yet several misconceptions prevent investors from exploring their full potential.
1. REITs Are Tied to the Stock Market and More Volatile Than Owning Real Estate Directly
Private REITs are not traded on public markets, which means they are not subject to the daily fluctuations of stock prices. Instead, their value is linked to the performance of the underlying real estate assets which are often sector focused like A+ REIT, making them less volatile and better aligned with long-term investment objectives.
2. Private REITs Are Difficult to Understand & Evaluate
Some private REITs like A+ REIT offer a similar level of transparency as their public counterparts and are not inherently more complex. Many private REITs provide regular updates, including comprehensive reports on portfolio performance, market conditions, and property valuations. These updates are often more detailed and tailored, offering investors clear insights into the asset performance within the portfolio. Additionally, private REITs often grant investors direct access to aligned management teams, fostering open communication and personalized answers to specific inquiries. This enhanced engagement and transparency help investors make informed decisions, making well-run private REITs generally more accessible and understandable than their public competitors.
3. Private REITs Are Illiquid/Inaccessible
Most private REITs offer regular redemption opportunities, allowing investors recurring rights to access their capital. Well-managed private REITs carefully structure liquidity provisions to balance investor needs with the fund’s strategic goals, and unlike public REITs, private REITs are not affected by the daily volatility of the stock market, offering a more stable and predictable investment experience.
4. Private REITs Are Unregulated
Private investment offerings, including private REITs are very much governed by Canada’s securities laws and must comply with regulations set by provincial securities commissions. These regulations include requirements for investor qualifications, disclosure, and financial reporting, ensuring that private REITs operate within a secure framework that protects investors. Moreover, private REITs are typically managed by seasoned and aligned management teams with expertise in real estate and investment management. This regulatory oversight, coupled with professional management, helps mitigate risks and safeguards investors.
Conclusion
Private REITs combine the benefits of real estate investing with the ease of professional management, providing a compelling option for accredited and institutional investors. By addressing these misconceptions, investors can approach private REITs with greater confidence and clarity.
To learn more about the benefits of investing in a private REIT you can contact a member of our team at https://privatepensionpartners.com/contact/
Disclaimer: The information on this website does not constitute, and should not be construed as, an offer to sell or a solicitation of an offer to purchase securities of any entity. Private Pension Partners Investments Inc. (“P3I”) is an exempt market dealer in all provinces of Canada (other than Quebec), was formed for the purpose of marketing and offering securities of real estate entities managed by the Private Pension Partners group of companies on a private placement basis. Securities will only be offered by P3I in jurisdictions in which such securities may be lawfully offered and sold and only to persons who make appropriate representations to P3I and the applicable issuer of the securities that they qualify as “accredited investors” within the meaning of applicable securities laws and who are resident in one of the provinces of Canada, other than the province of Quebec (and any other jurisdictions in which P3I may become registered in the future).
