Many publicly traded real-estate investments (REITs) have had a rough year with rising interest rates and decreasing property prices affecting the market. For example, the MSI US REIT Index, which tracks publicly-traded REITs, is currently down 26 percent this year.
On the other hand, nontraded real-estate investment trusts (REITs) are having a solid year, returning about 10 percent. With non-traded REITs increasing their valuations, many investors are worried. According to the Wall Street Journal, this may lead to issues as investors buying nontraded REITs think they are immune to the market selloff.
Valuations tend to differ between the two investment types. Public REITs are valued at whatever their shares trade for on the stock market. In contrast, nontraded REITs are valued monthly by their sponsors working with independent appraisers to analyze how much their commercial property is worth.
According to Robert A. Stanger & Co., nontraded REITs have raised more than $92 billion over the past five years. Nontraded REITs have been major moneymakers for firms like Blackstone Inc. and Starwood Capital Group. For example, the Blackstone Real Estate Income Trust (BREIT) has raised more than $62 billion. According to Stranger, Starwood Real Estate Income Trust (SREIT) has raised nearly $12.7 billion.
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