exploring complementary investment opportunities: real estate investment trusts 1

Exploring Complementary Investment Opportunities:Real Estate Investment Trusts

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Traditional Investments:

StocksBondsTreasuriesAnnuities

Common Alternative Investments:Real Estate Investment Trusts (REITs)Private EquityHedge FundsBusiness Development Companies (BDCs)

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Moderate Asset Allo-cation

Stocks 60%Bonds 40%

Risk and Return (1993 – 2013)

Return – 7.8%Std Dev – 12.9%

Source: As of December 31, 2013. Stocks – S&P 500; Bonds – BarCap US Aggregate Bond IndexPast Performance is for Illustrative Purposes Only and Does Not Guarantee Similar Results in the Future

The average return and risk are represented by the arithmetic average return and standard deviation, respectively. Standard deviation measures the fluctuation of returns around the arithmetic average return of the investment. The higher the standard deviation, the greater the variability (and thus risk) of the investment returns. The data assumes reinvestment of all

income and does not account for taxes or transaction costs.

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10% REIT Allo-cation

Stocks 55%Bonds 35%REITs 10%


20% REIT Allo-cation

Stocks 40%Bonds 40%REITs 20%


Risk and Return Regarding REITs (1993 – 2013)

Source: As of December 31, 2013. Stocks – S&P 500; Bonds – BarCap US Aggregate Bond Index: REITs = NCREIF Property IndexPast Performance is for Illustrative Purposes Only and Does Not Guarantee Similar Results in the Future

General Characteristics of Successful Real Estate Investing• Time• Knowledge• Patience• Access to Capital• Property Management Capability

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Barriers to Direct Investment• Capital• Daily Responsibility of Property

Management• Results Tied to a Single Property• Expertise to Identify a Property

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Real Estate Investment Trust (“REIT”)Publicly Traded

Registered, Non-Traded

There is no guarantee an investment in real-estate will meet all or any of these objectives. These are only some considerations. Speak with an Advisor to discuss your individual circumstances and suitability.

Diversification does not assure a profit or protect against losses in a declining market .

What is a Real Estate Investment Trust (“REIT”)?

• A REIT Pools Investor Funds • Purchases and Operates Institutional-Grade

Income Producing Real Estate• Typically Established with a Goal of Providing

Stable Income and Potential for Capital Appreciation

• Investor Owns Stock in a REIT, with the REIT Owning Real Estate

• Not Direct Real Estate Ownership• Typically a Specified “Total Pool” of Investment

Funds

What is a Real Estate Investment Trust (“REIT”)?

• Established by a Real Estate Sponsor Who Will Typically Manage the REIT and All Assets

• Distributes Net Income and Gains to its Investors• Provides Income Tax Documentation to Investors at the

End of Each Calendar Year• Receives Beneficial Tax Treatment if it Meets Strict

Requirements• Like All Investments REITs Have Risks and May Not Be

Suitable for All Investors

There is no guarantee that any REIT will meet it investment objectives and distribute net income and gains to investors. Before investing, speak with a tax advisor/professional regarding special tax circumstances. Each tax situation may be unique.

Office Multi-Family Industrial Retail

Medical Leisure Self Storage

REIT Asset Classes

Publicly Traded REIT

Potential Benefits Include:• Passive Participation in

Commercial Real Estate Market• Liquidity

Potential Risks Include:• Correlation to Non-Real Estate

Oriented Stocks

These are just examples of common possible risks and benefits. There may be others that are not indicated. This information is provided for educational and illustration purposes only.

Publicly Registered Non-Traded REITPotential Benefits Include:• Passive Participation in Commercial

Real Estate Market• Limited Correlation to the Stock

Market• Professional Asset Management• Diversification Amongst Multiple

Properties


Publicly Registered Non-Traded REIT

Potential Risks Include:• Tenant Risk• Distribution Risk• Tax Status Risk• Liquidity Risk


• Few Properties• Track Record

Raise Capital

• Begin Rental Income

• Raise Continues

Property Acquisition

• Stop Raise• Actively

Managed

Portfolio Management

• List on Exchange

• Liquidate

Exit

Non-Traded REIT Life Cycle

Non-Trade REIT Life Cycle – Provided for educational and illustration purposes only. There is no guarantee that all or any non-traded REIT will go through this life cycle.

Limited LiquidityTypical Liquidity Events• Listing of REIT on Public Exchange• Acquisition or Merger• Sell REIT to Institutional Investor• Sell Assets IndividuallyRedemption Programs:• Should Not Be Part of Investment Strategy• Typically Used in Cases of Death or Hardship• Typically Limited to 5% per year• May Be Cancelled by Sponsor Without Notice

Limited Liquidity - These are just characteristics of common potential events. There may be others that are not indicated. This information is provided for educational and illustration purposes only and is not reflective of any particular program. An investment in a non-traded REIT involves a high degree of risk and is not suitable for all investors.

Management & Other FeesManagement Fees:• Incurred in the Ongoing, Active, Day-to-Day Property

ManagementDisposition Fees:• Incurred in the Sale of Property or Liquidation of the REIT• Subordinated Participation

Management & Other Fees. Non-traded REITs generally includes substantial fees, expenses and sales charges that may materially reduce an investor's return

Upfront Fees & ExpensesSelling Expenses:• Organization and Offering Expenses• Commissions and Placement FeesReal Estate Expenses:• Acquisition Fee to Sponsor• Financing Fees & Costs• Third Party Broker Fee• Closing Costs

Is A Non-Traded REIT Right For You?• Need Current Income

• Need to Decrease Tax Liability

• Can Allocate 10%-20% to Alternative Investments

• Looking to Diversify or Exit Self Managed Properties

• Maintain a Long Term Horizon

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There is no guarantee an investment in real-estate will meet all or any of these objectives. These are only some considerations. Speak with an Advisor to discuss your individual circumstances and suitability.

Diversification does not assure a profit or protect against losses in a declining market .

Next Steps

Set AppointmentPortfolio AssessmentMeeting to Review Findings

Exploring Complementary Investment Opportunities:Real Estate Investment Trusts

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exploring complementary investment opportunities: real estate investment trusts 1

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