Learn About How Non-Traded REITs Work

NOTE:  Hines REIT and Hines Global REIT are closed to new investors.

Lifecycle of a typical non-traded REIT

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May act more like direct real estate, but there are differences

Since they don’t trade on a stock exchange, non-traded REITs may act more like a direct real estate investment and be less likely to move up and down in response to stock market forces than traded REITs. Please be aware that because non-traded REITs do not trade on exchanges, you cannot easily sell shares or get your money back. While not subject to daily price changes, non-traded REIT share prices are impacted by other forces, such as changes in economic, demographic, capital and real estate market conditions. Non-traded REIT share prices are typically determined arbitrarily when the offering is launched and those prices may be more or less than the value of the properties within the portfolio at any given time. Also, non-traded REIT share prices include a sales charge, which reduces the amount available for investment and reduces overall return. Unlike a direct real estate investment, an investment in a non-traded REIT is subject to significant upfront and ongoing expenses which can reduce the amount available for investment and reduce an investor's overall return.

A non-traded REIT provides pooled access to the real estate held in the portfolio, not direct ownership in properties. An investment in direct real estate pays income from the cash flow from the properties; a non-traded REIT pays distributions from cash flow from operations, as well as from other sources, including borrowings and offering proceeds, which may lower returns. A non-traded REIT’s distributions are not guaranteed and may be reduced. Additionally, a non-traded REIT is subject to significant fees and expenses, which may lower returns.

Potential for tax-deferred distributions

REIT investments may be partially tax deferred since part of the distribution is not taxed in the year you receive it. Rather than paying taxes on that portion at your ordinary income rate, you can defer it and pay at the capital gains rate when you sell your shares. This is not intended as tax advice. Contact a professional financial, tax or legal advisor about your situation. Please note that an investment in a non-traded REIT involves certain tax risks more fully described in the prospectus. Distributions cannot be assured.

Please note that investing in direct real estate is not the same as investing in a non-traded REIT, though both lack ready liquidity. Share prices of non-traded REITs generally are determined arbitrarily when they are launched, and those prices may be more or less than the value of the properties within the portfolio. Please see the prospectus for more information and talk to your financial advisor.

Lifecycle of a non-traded REIT

Fund-raising and property acquisition

  • Investors buy shares
  • REIT acquires properties

Portfolio management

  • Collect rental income (minus expenses) from properties
  • Pay distributions to shareholders
  • Manage properties to add value

Exit

  • REIT managers determine exit strategies
    • Sell properties
    • List
    • Merge