NON-TRADED REIT SECONDARY MARKET
What Is The Secondary Market
For Non-Traded REITs?
Many investors purchase non-traded REIT shares with the expectation that the investment will be held until a future liquidity event occurs. Depending on the program, that event may involve a listing, merger, liquidation, portfolio sale, or another sponsor-led transaction designed to provide investors with an exit opportunity.
Over time, however, circumstances can change. Investors may need access to capital, rebalance a portfolio, address estate planning matters, or simply decide that they no longer wish to hold the investment.
When that happens, one of the most common questions is whether non-traded REIT shares can be sold before the sponsor's planned liquidity event.
The answer is that transfer opportunities may exist, but the process is typically very different from selling publicly traded stocks, exchange-listed REITs, or other securities that trade on a public market.
PRIVATE MARKET REALITY
A Secondary Market Exists,
But It Is Not A Stock Exchange
Publicly traded REITs are listed on securities exchanges where buyers and sellers interact continuously throughout the trading day. Non-traded REITs operate differently.
Because the shares are not listed on a public exchange, investors generally cannot log into a brokerage account and sell their position at a publicly quoted market price.
Instead, potential transfers typically occur through private secondary market transactions where the specific investment, transfer requirements, buyer demand, and market conditions are evaluated individually.
Similar liquidity considerations may also arise with DST interests and limited partnership interests, both of which often involve private market transfer considerations rather than public exchange trading.
HOW TRANSFERS WORK
Non-Traded REIT Shares
Are Evaluated Individually
A secondary market transaction generally involves an existing shareholder seeking to transfer ownership to another qualified investor.
Unlike a public stock transaction, there is usually no centralized marketplace displaying real-time prices or large numbers of competing buyers. Instead, each opportunity is typically evaluated based on the characteristics of the specific REIT and the circumstances surrounding the transaction.
Investors researching how to sell a non-traded REIT often discover that the process is highly investment-specific and may involve multiple layers of review before a transfer can occur.
The structure of the REIT, ownership records, sponsor procedures, account registration, and available documentation can all influence how a transfer opportunity is evaluated.
BUYER DEMAND
Some Non-Traded REITs
Attract More Interest Than Others
One of the most important factors affecting secondary market activity is buyer demand.
Not all non-traded REITs are viewed the same way by potential buyers. Characteristics such as property quality, asset type, geographic diversification, distribution history, sponsor reputation, leverage levels, and anticipated liquidity timelines can all influence market interest.
A mature REIT approaching a potential liquidity event may generate different levels of interest than a program with an uncertain timeline or limited operating history.
These differences help explain why two investments that appear similar on the surface can experience very different secondary market activity.
VALUE VS LIQUIDITY
Statement Values And
Market Prices Are Not Always The Same
Investors are often surprised to learn that value and liquidity are not necessarily the same thing.
Many non-traded REITs publish estimated share values or net asset value calculations that help investors understand the sponsor's view of the underlying portfolio. Those figures can be useful, but they do not necessarily represent the amount an investor could receive in a private transaction.
Potential buyers may consider a variety of factors, including transfer restrictions, expected holding periods, future liquidity uncertainty, current market conditions, and overall demand for the investment.
As a result, transaction pricing may differ from both the investor's original purchase amount and the value shown on account statements.
TRANSFER RESTRICTIONS
Sponsor Approval
May
Be Required
Non-traded REIT shares are governed by offering documents, subscription agreements, transfer provisions, and sponsor procedures that can affect whether a transfer is permitted.
Some REITs require sponsor approval before a transfer can be completed. Others may require qualification reviews, transfer forms, medallion signature guarantees, tax documentation, or additional administrative steps.
Even when a willing buyer and seller exist, sponsor requirements may influence the timing and complexity of the transaction.
Understanding those requirements is often an important part of evaluating whether a secondary market opportunity may be available.
SEC REGISTRATION
Are Non-Traded REITs
Registered With The SEC?
Many non-traded REITs are registered with the U.S. Securities and Exchange Commission and provide ongoing disclosures through public filings.
Investors sometimes assume that SEC registration means the shares can be easily bought and sold. In reality, SEC registration and liquidity are separate concepts.
A non-traded REIT may be fully registered and still have limited liquidity because its shares do not trade on a public exchange.
Understanding this distinction can help investors better evaluate both the benefits and limitations of non-traded REIT ownership.
MARKET CONDITIONS
Secondary Market Activity
Can Change Over Time
Secondary market demand is not static. Market conditions can influence how investors view specific REITs and whether potential buyers are actively seeking opportunities.
Interest rates, real estate market performance, capital market conditions, financing availability, and broader economic trends can all affect buyer sentiment.
Because of these factors, liquidity opportunities that appear limited during one period may differ from opportunities available at another time.
This is one reason why investment-specific reviews are often more useful than relying on broad assumptions about the market as a whole.
SPONSOR DIFFERENCES
One Non-Traded REIT
May Differ Significantly From Another
Investors sometimes assume that all non-traded REITs operate under similar rules and offer similar liquidity opportunities. In practice, significant differences can exist between programs.
Sponsor policies, portfolio characteristics, share repurchase programs, transfer restrictions, investor demand, and anticipated liquidity timelines may vary considerably from one REIT to another.
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.
These differences reinforce the importance of evaluating each investment individually rather than relying on broad assumptions about the non-traded REIT industry.
NON-TRADED REIT REVIEW
Understanding Potential
Liquidity Opportunities
Investors exploring the secondary market are often seeking a clearer understanding of what options may exist for their specific position.
Those options may depend on transfer restrictions, sponsor requirements, buyer demand, ownership structure, documentation, account registration, and broader market conditions.
Investors seeking information about broader liquidity alternatives may also benefit from reviewing AIL's educational resources on how to get out of a non-traded REIT and other non-traded REIT liquidity topics.
Understanding these factors can help investors approach potential transfer opportunities with realistic expectations and a more informed perspective.
FREQUENTLY ASKED QUESTIONS
Common Questions About
The Non-Traded REIT Secondary Market
How do you get out of a non-traded REIT?
Investors may explore several potential liquidity options, including sponsor share repurchase programs, secondary market transactions, or future sponsor-led liquidity events. Available options depend on the specific REIT, sponsor policies, transfer restrictions, and current market conditions.
Is there a secondary market for REITs?
Publicly traded REITs trade on securities exchanges, while many non-traded REITs may have private secondary market opportunities where investors can potentially transfer shares to qualified buyers. These transactions are generally evaluated on a case-by-case basis and are often subject to sponsor requirements.
How do you sell non-traded REITs?
Selling non-traded REIT shares typically involves reviewing available redemption programs, transfer provisions, sponsor requirements, and potential buyer interest. Because non-traded REITs are not listed on a public exchange, the process is usually different from selling publicly traded securities.
Are non-traded REITs registered with the SEC?
Many non-traded REITs are registered with the U.S. Securities and Exchange Commission and file periodic reports. However, SEC registration does not mean the shares trade on a public exchange or guarantee liquidity for investors.
Why do non-traded REIT shares sometimes trade at discounts?
Secondary market pricing may reflect liquidity limitations, buyer demand, transfer restrictions, market conditions, expected holding periods, and uncertainty surrounding future liquidity events. As a result, transaction pricing may differ from statement values or original purchase amounts.
Does sponsor approval affect a transfer?
In many cases, yes. Certain non-traded REITs require sponsor review or approval before a transfer can be completed. Documentation requirements, investor qualification standards, and administrative procedures may all be part of the process.
CONFIDENTIAL REVIEW
Reviewing A Specific
Non-Traded REIT Position
The secondary market for non-traded REITs is not a guaranteed exit mechanism, nor does it function like a public stock exchange. Transfer opportunities depend on investment-specific factors, sponsor requirements, buyer demand, and market conditions.
AIL reviews non-traded REIT positions and helps investors understand potential liquidity opportunities based on the characteristics of the specific investment.
Investors considering a review may submit information through AIL's confidential review portal for an evaluation of investment-specific factors, transfer considerations, and potential liquidity opportunities.