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Further on the Returns to Non-Traded REITs

Joshua Mallett and Craig McCann
The Journal of Wealth Management Winter 2021, jwm.2021.1.153; DOI: https://doi.org/10.3905/jwm.2021.1.153
Joshua Mallett
DERA, Securities and Exchange Commission, Washington, DC
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Craig McCann
Securities Litigation and Consulting Group, Inc., McLean, VA
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Abstract

In this article, we expand our prior research on 89 non-traded REITs with 51 nontraded REITs that first updated their NAVs after May 1, 2015 or came into existence after May 1, 2015, and had either had a liquidity event or updated their NAVs by December 31, 2019.

We document significantly lower returns earned by investors in 140 non-traded REITs compared to the returns they would have earned in a portfolio of traded REITs. Non-traded REITs as a group underperform traded REITs by approximately 8% annually. The dollar losses from investing in non-traded REITs instead of traded REITs exceed $75 billion as of December 31, 2019. The underperformance has not decreased over time; non-traded REITs that broke escrow in 2015-2019 underperform traded REITs to the same degree as earlier non-traded REITs. We show that non-traded REITs’ aggregate underperformance is observed for capital raised in every calendar quarter.

TOPICS: Exchange-traded funds and applications, real estate, risk management, performance measurement

Key Findings

  • ▪ Non-traded REITs continue to significantly underperform traded REITs.

  • ▪ This aggregate underperformance was $75 billion as of December 31, 2019 and is observed for capital raised in every calendar quarter.

  • ▪ Despite real estate risk and illiquidity, aggregate non-traded REITs returns approximately equal returns to short term Treasury securities.

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The Journal of Wealth Management: 25 (1)
The Journal of Wealth Management
Vol. 25, Issue 1
Summer 2022
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Further on the Returns to Non-Traded REITs
Joshua Mallett, Craig McCann
The Journal of Wealth Management Sep 2021, jwm.2021.1.153; DOI: 10.3905/jwm.2021.1.153

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Further on the Returns to Non-Traded REITs
Joshua Mallett, Craig McCann
The Journal of Wealth Management Sep 2021, jwm.2021.1.153; DOI: 10.3905/jwm.2021.1.153
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