Yield of Dreams

Non-Traded REIT Seeks to Stem Investor Concern

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Non-traded REITs have been under the microscope in the industry lately, given news of a few prominent blow-ups, such as David Lerner & Associates, and increased FINRA scrutiny of the investment’s risks (in September, we wrote about how distributions are paid out). But Cole Real Estate Investments just launched a new non-traded REIT that’s meant to be more palatable for the skeptics and address concerns around liquidity, fees and transparency.

The Cole Real Estate Income Strategy (Daily NAV) will not charge upfront selling commissions, and it will offer daily NAV and daily liquidity, benefits that are virtually unheard of in non-traded REITs. Clarion Partners and American Realty Capital have already launched non-traded REITs that offer daily NAV.

“There are good actors and bad actors,” said Jeff Holland, executive vice president and head of capital markets at Cole. “Bad actors lead to the entire industry being tarred with the same brush, and that’s frustrating for us.”

Hopefully this new strategy will paint a better picture of the non-traded REIT industry. Many advisors and broker/dealers have been re-evaluating their exposure to this asset class, based on some of the red flags. I think the non-traded REIT industry has a long road ahead of it to get passed the negative press, but this is a good start.

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Casting a gimlet-eye on asset management issues.

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