Great article highlighting the great diversification available to investors who have REITs in their portfolio.
However, the real estate LLCs that are structured by Prudent Growth Partners provide something even more attractive – cash-on-cash distributions that are, on average, 2 or even 3 times higher than a typical REIT.
This is mainly due to the fact that we only buy true “value properties” with strong cash flows. It is also due to the “illiquidity premium” associated with a private investment: since your capital is tied-up longer, an investor should expect a higher return.
Is illiquidity always a bad thing? Not necessarily – frequently the inability to access funds will force an investor to stay in a deal for a longer-than-typical time horizon, thereby maximizing returns. It also forces discipline in investing, and it can lead to substantially higher payouts than those associated with publicly traded REITs.
From the article:
Stephen Manaker, senior REIT analyst at Oppenheimer, said he expects REITs to continue to outperform the broader market because real estate is “relatively attractive in a land with very little inflation.”
Returns for shopping center REITs rose 3.0 percent in January, returns in the self-storage sector gained 2.7 percent, and returns for data center REITs gained 3.8 percent.
The retail segment was slightly higher in January, Langbaum said, which was less about fundamentals and more about mergers and acquisitions activity.
According to Kim, the REIT market has seen a “pretty significant” flight to safety during the last two months. Manaker added that the combination of growth and value make defensive REIT stocks attractive, “almost irrespective of the broader environment.”
Full Article here: https://www.reit.com/news/articles/reits-outpace-broader-market-january