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Memos from Howard Marks: The Indispensability of RiskNon-Traded REITs
Diversifying portfolios with private real estate
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What is an NTR?
Non-Traded REITs (NTRs) are private real estate investment vehicles not listed or traded on a public exchange
NTRs are designed to provide access to institutional-caliber private real estate–for example, offices, warehouses, shopping malls, and apartments–that generate income via rents. NTRs encourage long-term investing and provide limited liquidity via repurchase plans, where investors may have to sell their shares at a discount. They give investors exposure to real estate without the volatility of publicly traded REITs, but the lack of a secondary market for NTRs restricts liquidity.
Features
Non-Traded REITs have the following features and potential benefits:
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Stable distributions
REITs generate recurring income and must distribute at least 90% of taxable income to shareholders
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Inflation protection
Property rent increases typically have inflation escalators, mitigating the impact of rising prices
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Lower volatility
NTRs are not publicly traded, so their share prices are not directly affected by stock market volatility
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Diversification1
Invests in various property types (via equity and debt) and locations
1Diversification does not ensure a profit or protect against loss.