tag:blogger.com,1999:blog-21846828.post5836170636283350766..comments2024-01-14T16:01:08.962-08:00Comments on The Rational Realist: Rational Realisthttp://www.blogger.com/profile/08886526093283532105noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-21846828.post-11895601353391204422010-02-03T18:59:18.083-08:002010-02-03T18:59:18.083-08:00I appreciate the critical analysis of this indictm...I appreciate the critical analysis of this indictment by innuendo. We always need to be reminded to look carefully at the omissions in such articles.sealbchlindahttps://www.blogger.com/profile/01620292806876988638noreply@blogger.comtag:blogger.com,1999:blog-21846828.post-1242313464811149412010-02-01T09:23:46.036-08:002010-02-01T09:23:46.036-08:00It is expensive capital, too. If you compute the ...It is expensive capital, too. If you compute the cost of capital for non-traded REITs and compare to the IRRs or expected returns on the properties acquired, the cost will exceed the return. Non-traded REIT sponsors don't like when this analytic viewpoint is raised.Rational Realisthttps://www.blogger.com/profile/08886526093283532105noreply@blogger.comtag:blogger.com,1999:blog-21846828.post-51045405443719412062010-01-30T23:00:06.265-08:002010-01-30T23:00:06.265-08:00The big issue with non-traded reits is that they a...The big issue with non-traded reits is that they are a bad investment, and that stockbrokers are greatly compensated for selling them. Figure in a typical non listed offering, an investor is getting $8.50 in real estate for every $10 invested. Meanwhile the broker gets a 7% commission on the sale. <br /><br />Further the non-traded reit continuously offers new shares (at an effective price of $8.50/share) which leads to dilution of NAV, should it ever grow above $8.50.<br /><br />That much could be avoided if the REITs would adjust their offering prices over time. <br /><br />Most of the people sold shares of non-traded reits are unsophisticated investors, would not understand anything in the S-11, much less the subtleness of the non-traded reit model. <br /><br />The whole thing is a giant annuity for the sponsor of the reit, and the 7% commission is merely the cost of acquiring passive and gullible capital.Market Participanthttp://gewinnvortrag.blogspot.comnoreply@blogger.com