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Co-produced with Philip Mause
Before beginning Part 3 of this series, we should note a recent development that underlines one of the concerns expressed in Part 2. Two of the largest non-traded REITs, Blackstone (BX) and Starwood (STWD), implemented caps on withdrawal requests for their non-traded REITs: BREIT and SREIT.
Both managers are very well-regarded, and this doesn’t fall under a “scam” category. However, as we pointed out in Part 2 concerning private deals (including private REITs), liquidity (or the ability to convert one’s holding into cash quickly) is almost always a potential issue. In contrast, holdings of a publicly traded REIT can be sold on the market and converted into cash quickly. To be sure, that conversion may occur at a discount to net asset value in a down market. But at least there is a path to liquidity. Before entering into a private deal of any kind, an investor should examine the path to liquidity or exit and should determine whether the unavailability of the funds involved will create a problem for him.
Some Definitions
For the purposes of this 3rd Part, “business opportunities” will include offers to participate in a business venture in which the investor is requested to put up funds on the front end as well as to engage in work or effort to further the venture. Situations in which only funds are required are covered in Part 2 as “private deals.” Situations in which only work (and no funds) are required are…
