Skyline Wealth Explains: Public vs Private Real Estate Investment Trusts (REITs)

Skyline Wealth Explains: Public vs Private Real Estate Investment Trusts (REITs)

Real Estate Investment Trusts, or REITs, are portfolios of real estate assets. The portfolio may focus on a single type of real estate asset class (such as apartments, warehouses, hotels, etc.) or may involve more than one type of asset class.

The structure of a REIT investment product allows investors to invest in the entire ‘pool’ or portfolio of properties, which has attracted many investors on the grounds that the structure may be typically less risky than investing in a few select properties or owning and managing properties themselves.

REIT investments can be either publicly traded or private.

Here are the four main differences between public REITs and private REITs:

Purchasing

  • Public REITs are listed on a public stock exchange and their units can generally be purchased through an investment dealer.
  • Private REITs are not listed on public stock exchanges; therefore, they are considered private investments. Their units are purchased through the exempt market.

Valuation

  • As public REIT units are listed on a public stock exchange, they are valuated much more frequently than is typical from their private counterparts. For example, in contrast to a public REIT’s daily valuation on the stock market, private REITs may undergo valuation once per year.
  • Valuation of public REIT units typically sees more fluctuation, as the valuation can be subject to the emotion in the public markets associated with daily trading.
  • Valuation of private REIT units is typically more stable as it is less affected by public market emotion. Valuation is determined by quantifiable metrics, such as the underlying value of the real estate assets and the rental income they generate.

Liquidity

  • As public REITs are publicly listed, they are considered highly liquid, as units may be purchased and sold at any time.
  • By nature, private REITs are typically less liquid than their public counterparts. Investors may experience a hold period after an initial investment and may also be subject to restrictions at any time thereafter when requesting to redeem their units.

Eligibility

  • Public REITs are distributed by way of a prospectus and therefore investors are not subject to eligibility requirements for investing. As they are listed on public market exchanges, investors are not subject to the prospectus exemption eligibility requirements.
  • Private REITs are classified as Exempt Market Products and therefore must rely on prospectus exemptions to offer its investments. Investors looking to invest are then subject to investment eligibility requirements. Exempt market dealers offering these investment products must ensure that investors meet certain criteria in order to be eligible to invest. For example, they may need to qualify as an Accredited Investor or an Eligible Investor.

Which type of Products does Skyline Wealth offer?

Skyline Wealth offers three private REIT investment products, each focusing on a different real estate asset class:

  • Skyline Apartment REIT

    Professionally-managed multi-residential properties in secondary and tertiary Canadian markets

  • Skyline Commercial REIT

    Professionally-managed light industrial properties along major Canadian transportation corridors, with a focus on logistics and warehousing

  • Skyline Retail REIT

    Professionally-managed retail properties in secondary and tertiary Canadian markets, with a focus on ‘everyday essential’ brands

  • Skyline Clean Energy Fund

    A portfolio of professionally-maintained clean energy producing assets across Ontario. Although Skyline Clean Energy Fund is an equity fund, its origins are based in the Skyline[1] team’s experience installing and managing solar assets at its REIT properties.

Each of these investment products classifies as alternative investments.

The Skyline team has been working in the private real estate investment sector for 20+ years. Cumulatively among its three REIT investments, it currently owns and manages approximately $5.2 billion in real estate assets.[2] With our experience and insight, we’d be happy to discuss with you how private REIT investing may be a suitable fit for your investment portfolio. Get in touch with us any time.

[1] Skyline, or Skyline Group of Companies, is an umbrella term used to generally refer to all associated entities.
[2] As at Q3 2020.