NON-TRADED REIT LIQUIDITY
How To Sell A Non-Traded REIT:
What Investors Should Understand
Many investors purchase non-traded REIT shares with the expectation that the investment will be held until the sponsor completes a planned liquidity event, portfolio sale, merger, listing, or other exit strategy. Over time, however, circumstances can change. An investor may need access to capital, reevaluate a portfolio, address estate planning needs, respond to changing income requirements, or simply decide that continuing to hold the position no longer fits their objectives.
When that happens, one of the first questions investors often ask is whether non-traded REIT shares can be sold before the sponsor provides a formal liquidity event.
The answer is that liquidity options may exist, but selling a non-traded REIT is very different from selling publicly traded REIT shares, stocks, mutual funds, or exchange-traded funds.
PRIVATE MARKET REALITY
Non-Traded REIT Shares
Do Not Trade On An Exchange
Publicly traded REITs are listed on securities exchanges, which means investors can generally sell shares through a brokerage account at a market price. Non-traded REITs are different. They are registered securities, but they are not listed on a public exchange.
Because there is no centralized public market, investors cannot simply enter a sell order and receive immediate execution. There is usually no real-time bid price, no daily trading volume, and no guarantee that a buyer will be available at a specific price.
This does not necessarily mean that an investor has no options. It means the process is usually more investment-specific and depends on the terms of the REIT, sponsor procedures, transfer restrictions, market demand, and the availability of potential liquidity alternatives.
Investors researching non-traded REIT liquidity should begin by understanding that value, transferability, and liquidity are related concepts, but they are not the same thing.
HOW NON-TRADED REITS WORK
Why The Structure
Affects Liquidity
A non-traded REIT typically owns or finances a portfolio of real estate-related assets. Investors purchase shares in the REIT and may receive distributions if declared by the REIT. The investment may hold properties, loans, real estate securities, or other assets depending on the strategy of the program.
Unlike publicly traded REITs, non-traded REITs are usually designed as longer-term investments. The sponsor may intend to provide liquidity through a future listing, merger, asset sale, portfolio sale, share repurchase program, or other transaction, but the timing and outcome are not always certain.
This structure can create a disconnect between the estimated value of the shares and an investor's ability to sell those shares quickly.
An investor may own shares in a REIT with meaningful underlying assets and still face limited liquidity because the shares are not freely traded on an exchange.
SHARE REPURCHASE PROGRAMS
The First Liquidity Option
Many Investors Review
Many non-traded REITs have, or previously had, some form of share repurchase program. These programs may allow investors to request that the REIT repurchase their shares, often subject to limitations, discounts, eligibility requirements, funding availability, board discretion, and program rules.
A share repurchase program can be helpful for some investors, but it should not be viewed as the same thing as guaranteed liquidity. These programs are often limited in size and may be suspended, amended, reduced, or terminated by the REIT.
Repurchase programs may also prioritize certain requests, such as death, disability, hardship, or other qualifying circumstances, depending on the terms of the specific program.
Investors considering this option should review the current share repurchase program materials, recent public filings, investor communications, and any notices from the sponsor to understand whether the program is active and what restrictions may apply.
SECONDARY MARKET
Can Non-Traded REIT Shares
Be Sold To Another Investor?
In some situations, non-traded REIT shares may be transferable to another qualified investor. This is commonly described as a secondary market transaction, although the term can create confusion.
The secondary market for non-traded REIT shares is not a public exchange. It is usually a private, transaction-specific environment where a potential buyer evaluates the REIT, the share position, transfer requirements, market conditions, and pricing expectations.
Even when a potential buyer exists, the transfer may still be subject to sponsor review, governing document restrictions, investor qualification standards, administrative requirements, and transaction documentation.
This is why selling non-traded REIT shares often involves more than simply finding someone willing to buy them.
TRANSFER RESTRICTIONS
Sponsor Requirements
Can Shape The Process
Non-traded REIT shares are governed by offering documents, subscription agreements, transfer provisions, and sponsor procedures. These documents may restrict when and how shares can be transferred.
Some programs require sponsor approval before a transfer can occur. Others may require specific transfer forms, medallion signature guarantees, investor qualification materials, tax forms, ownership records, or other documentation.
Restrictions may also apply to partial transfers, transfers involving retirement accounts, estate transfers, trust ownership, or entities such as LLCs and partnerships.
Because each REIT may have its own procedures, investors should avoid assuming that the process for one non-traded REIT will be the same as another.
VALUE VS LIQUIDITY
A Valuable Investment
Is Not Always A Liquid One
Investors are often surprised to learn that estimated value and liquidity can be very different.
A non-traded REIT may publish an estimated net asset value, account value, or share value for reporting purposes. That figure may help investors understand how the sponsor values the REIT's assets, but it does not necessarily mean that an investor can sell shares at that amount.
A buyer may evaluate the position differently based on current distributions, property performance, leverage, redemption history, sponsor communications, market conditions, anticipated exit timing, and transfer limitations.
This distinction is important because an investor's account statement may not reflect the price that could be available in a private liquidity transaction.
PRICING FACTORS
Why Non-Traded REIT Shares
May Trade At Discounts
Pricing is one of the most common concerns investors have when exploring how to sell a non-traded REIT.
Many investors assume that their shares should be worth the same amount shown on a statement or the same amount they originally invested. In practice, secondary market pricing may be influenced by several factors beyond the original purchase price.
Potential buyers may review the REIT's current estimated value, distribution history, portfolio composition, debt maturity profile, property type, geographic exposure, occupancy trends, sponsor reputation, repurchase program history, and expected timeline for a future liquidity event.
Market interest rates, real estate capital markets, buyer demand, and the size of the share position can also affect pricing.
Because non-traded REIT shares are not publicly traded, a discount does not necessarily mean the underlying assets have no value. In many cases, discounts reflect limited liquidity, uncertainty, transaction complexity, and the private nature of the market.
HOW TO GET OUT
How Do You Get Out
Of A Non-Traded REIT?
Investors seeking to get out of a non-traded REIT generally begin by identifying which liquidity paths may be available for the specific investment.
The first step is usually to review whether the REIT has an active share repurchase program and whether the investor qualifies under the current rules. If the program is suspended, limited, oversubscribed, or unavailable, the investor may need to consider whether a private transfer or secondary market review is possible.
Some investors may also decide to continue holding the position while monitoring sponsor updates, distribution changes, portfolio performance, and any potential future liquidity event.
The best path depends on the investor's circumstances, the REIT's governing documents, the current market for the shares, and the investor's willingness to accept a potential discount in exchange for earlier liquidity.
DOCUMENTATION
Records That May Be Needed
During A Liquidity Review
Documentation can play an important role when evaluating non-traded REIT liquidity options.
Investors may be asked to provide recent account statements, original subscription documents, ownership information, tax reporting documents, sponsor correspondence, transfer forms, estate or trust documents, and records showing how the shares are currently held.
If the investment is held in an IRA or other retirement account, additional custodian procedures may apply. If the shares are held by a trust, estate, LLC, partnership, or other entity, authority documentation may also be needed.
Having complete records available can help make the review process more efficient and reduce delays caused by missing ownership or transfer information.
SPONSOR DIFFERENCES
Liquidity Considerations
Can Vary By Sponsor
Investors sometimes assume that all non-traded REITs offer similar liquidity opportunities. In reality, transfer restrictions, share repurchase programs, portfolio characteristics, investor demand, and sponsor policies can vary significantly from one investment to another.
As a result, two non-traded REITs with similar asset values may present very different liquidity considerations. Understanding the specific investment is often more important than relying on broad assumptions about the non-traded REIT industry as a whole.
Investors researching specific programs may find additional information in AIL's educational resources covering CIM Real Estate Finance Trust, KBS Real Estate Investment Trust III, Highlands REIT, and Strategic Student & Senior Housing Trust.
RELATED INVESTMENTS
Similar Liquidity Issues
Can Affect Other Private Investments
Non-traded REIT shares are not the only alternative investments that may involve limited liquidity. Similar considerations can arise with DST interests, limited partnership interests, private placements, real estate funds, energy programs, and other privately held investment structures.
While each asset class has its own governing documents and transfer process, many of the same themes apply: limited buyer pools, transfer restrictions, sponsor procedures, valuation uncertainty, and timing considerations.
Investors who own multiple illiquid alternative investments may benefit from reviewing each position separately rather than assuming that one liquidity approach will apply across an entire portfolio.
RISKS TO UNDERSTAND
What Are The Risks
Of Non-Traded REITs?
Non-traded REITs can involve several risks that are especially important when an investor begins evaluating liquidity options.
Liquidity risk is often the most obvious. Because shares are not listed on a public exchange, investors may not be able to sell when they want or at the price they expect.
Valuation risk is also important. Estimated share values may not equal actual transaction pricing, especially in a private secondary market.
Other risks may include real estate market risk, leverage risk, distribution risk, tenant concentration risk, interest rate risk, sponsor risk, and uncertainty around future liquidity events.
These risks do not automatically mean an investor should sell. They do mean that any decision to hold, redeem, or explore a transfer should be based on the specific REIT, the investor's needs, and the available facts at the time of review.
INVESTOR EXPECTATIONS
What Investors Should Know
Before Exploring A Sale
Investors considering a sale should approach the process with realistic expectations.
A non-traded REIT position may not be immediately liquid. A transfer may require sponsor review. A buyer may not be available. Pricing may be different from the investor's statement value. Documentation may need to be gathered before any meaningful review can occur.
At the same time, investors should not assume that no liquidity options exist simply because the REIT is not publicly traded.
The practical answer often depends on the details: which REIT is owned, how the shares are titled, whether the repurchase program is available, whether transfers are permitted, what buyer demand exists, and whether the investor is willing to consider pricing that reflects private market conditions.
CONFIDENTIAL REVIEW
Reviewing Potential
Non-Traded REIT Liquidity Options
Selling a non-traded REIT is usually not a single-step process. It requires an understanding of the investment, the sponsor's requirements, current liquidity alternatives, documentation needs, and market conditions.
For investors who want to better understand their options, AIL reviews non-traded REIT positions and helps investors understand potential liquidity opportunities.
Investors considering a review of a specific position may submit information through AIL's confidential review portal for an evaluation of investment-specific factors, transfer considerations, and potential liquidity opportunities.