Since last year, redemption requests for non-traded Real Estate Investment Trusts (REITs) have been rising. In response, Blackstone, Starwood, and KKR partially have blocked such investor withdrawals, claiming that the requests have exceeded the amount they would be able to grant under the operating rules of their trusts.
Some investors have reacted by turning to secondary markets to sell their non-traded REIT shares. Those markets allow investors to sell their shares to others. WealthManagment.com notes that this trend has been facilitated by the emergence of specialized brokers and trading platforms focusing specifically on non-traded REITs.
But there are risks. Brian King, CEO of LODAS Market, discussed the risks of trading non-traded REIT shares on secondary markets. For example, the shares typically are not as liquid as publicly traded securities, and investors may have difficulty finding buyers for their shares, thereby causing a discount. In addition, King notes that trading on secondary markets may be subject to regulatory scrutiny, particularly if the platforms are not registered as broker-dealers.
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