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Secondary Market May Provide Liquidity For Non-Traded REITs

As investors are sadly learning, many of the promises made at the time they purchased non publicly traded REITs are not coming true.

Net asset values have dropped, in some cases precipitously, and in many cases, distributions have ceased. Since these investments are not traded on any exchange, turning the soured investment into cash to pay living expenses, health costs, etc is a difficult task.

Doing a websearch for "REIT auction" yields a number of results including Central Trade & Transfer a company that conducts EBay-style auctions for the sale of non publicly traded securities such as REITs and limited partnerships.

Their website indicates the following REITs have recently been listed for sale:

  • Inland American Real Estate Trust
  • Inland Western Retail Real Estate Trust
  • Wells Real Estate Investment Trust II
  • Behringer Harvard REIT I
  • KBS Real Estate Investment Trust

In a call with a company representative, I learned that the ability to sell these non tradeded REITs, at any price, is dependent upon whether the limited group of buyers has confidence in the company behind the REIT. Some REITs are sold in the first auction (auctions last 3 days and the seller can establish a reserve), others require multiple auctions to generate any bids. Selling prices vary widely, but are usually at a price which is a 10- 20% discount to the current net asset value of the REIT.

While holding your REIT may be a better long term investment, if you need liquidity, this looks like one option.

Again, I have no personal experience with this company or this process and pass this information along with the recommendation that you seek someone more knowledgeable than I when deciding what to do.

For more information on the non-traded REITs we are investigating, visit our Current Investigations page.