Interest in Non-Listed REITs Growing

Ken Betts, attorney with Locke Lord Bissell & Liddell, participated in a roundtable discussion on non-listed REITs during REITWise 2011: NAREIT's Law, Accounting & Finance Conference held last week in San Francisco. Betts said the panel looked at the growing popularity of non-traded REITs and the opportunities and challenges facing those companies.

Betts said that in 2008 and 2009, with the reduction in commercial real estate values and overall liquidity issues, the non-traded space was seriously impacted.

"It went from about a $12 billion aggregate raise in 2007 to as low as $6 billion in 2009," Betts said. "2010 moved upwards closer to $9 billion, and we expect that level in 2011 as well."

Betts said the reasons for the renewed growth stem from the growing understanding and appreciation by sponsors and service providers that transparency, liquidity and overall investor awareness are making non-listed REITs a more popular investment choice.

"These are investors who want to be involved in real estate. These are investors who want their returns tied to real estate. [They] want to have any valuation increases tied to real estate," Betts said.

Helping to improve transparency is the 2009 FINRA notice stating that non-listed REITs could not base per share valuations on data that is more than 18 months old.

"Investors are now able to understand what the real value of their shares is," Betts said.