Non-Traded REIT
A non-traded REIT is a real estate investment trust registered with the SEC and sold to retail investors but not listed on a national securities exchange, resulting in limited liquidity and share prices set by the sponsor rather than open market trading.
Non-traded REITs occupy a middle ground between private REITs (no SEC registration) and public REITs (exchange-listed). They register their securities with the SEC and can be sold to retail investors, but their shares are not traded on any exchange. Investors typically purchase shares through broker-dealers and registered investment advisers who earn upfront commissions that can range from 5 to 10 percent of the investment amount.
Because there is no exchange listing, the share price is set by the sponsor — usually at a fixed offering price, often ten dollars per share, during the fundraising period. After the offering closes, some non-traded REITs provide limited redemption programs, but these are typically capped at a small percentage of outstanding shares per quarter and may be suspended during difficult market conditions.
The SEC has increased scrutiny of non-traded REITs over the years, requiring sponsors to disclose estimated per-share values based on independent appraisals within 18 months of closing the offering. This requirement was introduced after investors in early-generation non-traded REITs discovered that the fixed offering price bore little relationship to the actual value of the underlying properties.
Modern non-traded REITs, sometimes called NAV REITs, price shares based on quarterly net asset value appraisals and offer more frequent redemption opportunities than older structures. Major asset managers now sponsor large-scale NAV REITs that have attracted significant institutional and high-net-worth capital.
For investors, the appeal is real estate income that sidesteps daily market volatility. The risk is illiquidity, high fees, and sponsor-dependent valuations. These products are most appropriate for investors with a long time horizon and a clear understanding of the liquidity constraints.