# Private REITs?



## Chris L (Nov 16, 2011)

Under any circumstances would you invest in a private REIT such as http://www.skylineonline.ca/.

They have a minimum buy-in of $150k unless you qualify as an accredited investor (min of 1 mil liquid assets). If you are accredited then you can qualify for having a smaller buy-in amount.

Their payout is 9% monthly.

I know the organization on a more or less personal level. Have followed them for years and otherwise "trust them" as much as you can trust any investment or company.

On the downside, it's a lot of money parked in one asset, but as a comparison, is less risky than say investing in a single family home or duplex as they own property in several provinces and cities. Seems like it would be a stable, low hassle way to generate passive income versus owning a rental property.

Any thoughts?


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## zylon (Oct 27, 2010)

The way I see it, the people involved in running a business, is the number one consideration. You can lose money in an excellent venture if the owners are crooks; and you can make money in a mediocre business if the people are competent and honest.

Concerning the amount of investment: my limit is 10% to any one company. I would in no way invest more than 10% of my net worth in any one company, even if it was run by the mother of god herself.

I know nothing about the REIT mentioned above, but in general, I like the idea of private investments.


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## Mall Guy (Sep 14, 2011)

Chris L said:


> Under any circumstances would you invest in a private REIT such as http://www.skylineonline.ca/.
> 
> Their payout is 9% monthly.
> 
> Any thoughts?


Pretty sure that would be 9% per annum, paid monthly. No biggie.

The big issue with the private REITs is liquidity. Can you park your money for the mid to long term ? On the Canadian scene they are probably better than say the one that is located on the left coast which is in a league of it's own. As I recall, Skyline's actually discloses what properties they own (or maybe that's Centurian - can't remember, been a while since I looked at them), and I like that their president is a no BS kinda guy.

The other issue is that you maybe be giving up shorter term capital appreciation, which the open market gives (and yes, takes away). If you want your money out, management is the one who does the unit price valuation, and I don't think you have much recourse. 

To get the big capital appreciation hit, the privates have to wait for a "liquidity event" (be take out by a bigger play, or issue an IPO). This is certainly the US private REIT model. 

Still, if you know them, think they are aligned with unit holder's interest, and can park money for the longer term, not a bad choice, just one that didn't work for me.

P.S. are you sure about the definition of "accredited investor", as I thought there was a variety of ways to qualify (minimum investments, minimum income, other asset levels, all of which are requirements of the OSC).


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## Chris L (Nov 16, 2011)

Sorry, yeah it's 9% per year  

I've read their memorandum (90 pages). It does disclose all the information about properties. And yes a no B.S. company.

You can keep money with them over a long period, although I think they don't like you to buy in and out on the short term. I think 3 months is their minimum for liquidating, but they offer to buy back your units. I don't think I can say much about the memorandum, but any investor can ask for it.

You can put in lessor amounts if you have a high net worth. If you earn more than 250k by example. But that's all spelled out through the accredited investor status as determined by the government. So you are right, but if you don't qualify for the status the OSC requires you to put up $150k.

I'm looking at 5% yields for publicly traded companies and weighing the pros and cons. 9% sounds a lot better and while perhaps not as closely regulated, seems to outweigh the cons. 

A bit of risk here on the management might get me close to my goals? It's the big question.

I'm also looking at the dividend yields for other stocks/etfs, etc. and at 2-3% after inflation can't wrap my mind around achieving any sort of comfortable retirement for myself sans 1-2 mil in assets.

I'm coming from a real estate background where I can get 10% plus returns. I just recently sold off one of my duplexes....

Any other thoughts are welcome.


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## andrewf (Mar 1, 2010)

I was thinking about doing this with Centurion, buying $150k against an investment loan, in lieu of buying a house/condo. I could make principle payments of >$1000/ month and the cash flow would easily cover interest payments. I'm just stuck on the exposure to one company. It's an idea I've toyed with but I'm not ready to commit to it.

Speaking of private REITs, is there a good list of them out there? I only knew of Centurion and League. I have never even heard of the above one.


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## Chris L (Nov 16, 2011)

andrewf said:


> I was thinking about doing this with Centurion, buying $150k against an investment loan, in lieu of buying a house/condo. I could make principle payments of >$1000/ month and the cash flow would easily cover interest payments. I'm just stuck on the exposure to one company. It's an idea I've toyed with but I'm not ready to commit to it.
> 
> Speaking of private REITs, is there a good list of them out there? I only knew of Centurion and League. I have never even heard of the above one.


You might want to give Skyline a shot and talk to the management. They are a very friendly/homegrown REIT. I wouldn't mind getting another perspective.

You're right though, it's a lot of exposure. The only CON I've heard is the undiversified aspect, but what do you get with wide diversification? Lower yield...I doubt that a public REIT will be growing much over the next little while and spitting off 5% or so is about half what Skyline aims to spit off.


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## Mall Guy (Sep 14, 2011)

Just reading the last couple of threads. Just remember, higher yield = higher risk. Your point on "what do they own" that would need an answer.

IMHO, unless you are a high net worth individual (who can whether a few storms, and launch a few lawsuit if necessary), stay with the public REITs. Yes, the Private REITs will redeem the units, but in a "run on the bank" scenario they don't have too, and they are your only alternative.

Take a look at Holloway Lodging REIT (it was public but a small float). Every investor just got diluted by the conversion of DBs to equity . . . 39 m units O/S last week, 700 m this week. My point, when things go wrong, they really go wrong. 

As well, the private REIT market is much more developed in the US, so read those horror stories. My point, you can get close to a 7% yield with a couple of different public REITs, and own banks, liquor stores, grocery stores, etc., and trade when you need to.


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## CanadianCapitalist (Mar 31, 2009)

Why would anyone invest in a private REIT when so many publicly-traded REITs are available?


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## andrewf (Mar 1, 2010)

I would guess the attraction might be the ability to buy a REIT at NAV. A lot of the public REITs trade at hefty premiums to NAV.


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## CanadianCapitalist (Mar 31, 2009)

andrewf said:


> I would guess the attraction might be the ability to buy a REIT at NAV. A lot of the public REITs trade at hefty premiums to NAV.


Just wait for a fat pitch then... Not too long ago the same public REITs were trading at hefty discounts to NAV!


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## Mockingbird (Apr 29, 2009)

I don't have problem with the private investments. As I see it, just another way to diversify into the real estate market without being tied to the stock market. The private real estate investments could involve REITs, RELPs, MICs, Bond or even a direct ownership.

OP: With any private REITs, you need to your due diligence since no two offerings are alike. There are vast array of investments with various set of risk and reward. As Zylon stated, just don't put all your eggs in one basket.

MB


PS: Here is a list of some private REITs/RELPs.
Centurion Apartment REIT
League Assets Corp
Skyline REIT
Prestigious properties
Parkhurst Asset Corp
IGRI
Aspen Properties


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## Chris L (Nov 16, 2011)

I wouldn't mind grabbing some public REITs but it would seem like a bad time to buy in? 

Private REITs don't seem all that volatile and emotionally driven like stocks, at least to me.

What if I bought into a public REIT and it lost 10% of it's value and only put off 5% yield? When a private REIT does 9% and is pretty stable as far as value as it's tied directly to it's cashflow and rents. I don't see rents/expenses being too volatile moving forward.

Just seems to be a very stable way to invest for income without having to do any work myself.


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## Mall Guy (Sep 14, 2011)

Chris L said:


> I wouldn't mind grabbing some public REITs but it would seem like a bad time to buy in?
> 
> Private REITs don't seem all that volatile and emotionally driven like stocks, at least to me.
> 
> Just seems to be a very stable way to invest for income without having to do any work myself.


They aren't volatile, because the only people you can trade with are the people who sold you the investment (sure, some over counter stuff as well). It's not volatile because they don't mark to market, and you take their word for market!

Unlike a Real Estate LP, where most investor/promoters are well know to each other, you need to know what managements objectives are, that means you need to know management ( in a "get in the car, show me your new building and tell me the plan" kinda way).

Does anyone remember the commercials that ran on BNN for Concrete Equities ? Google for the fall out from that (although not a private REIT). And again, Google private REITs in the US . . . widows and orphan be warned.

Last point, the big payout is when the privates have a liquidity event (get taken public or bought out) . . . not sure that has happened yet in Canada


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## CanadianCapitalist (Mar 31, 2009)

Mall Guy said:


> They aren't volatile, because the only people you can trade with are the people who sold you the investment (sure, some over counter stuff as well). It's not volatile because they don't mark to market, and you take their word for market!


Hear! Hear! Not to mention private REITs could become illiquid at the most inopportune times.


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## Chris L (Nov 16, 2011)

Okay humour me! I'm listening to every word!

What scenarios would make the crap hit the fan for a private REIT (catastrophic)?

- bad management (ponzi type investment) 
- skyrocketing interest rates
- dramatic government policy changes
- meteorite 
- other?

What would cause investors to panic and sell out dragging the thing to it's knees?

Googling US REITs right now.

Here is a decent read on private REITs: http://www.investingthesis.com/inte...ting-in-a-private-reit-alternative-investing/


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## andrewf (Mar 1, 2010)

Well, at least some of them use NAVs based on the appraised value of their properties used by their lenders (commercial banks). It is certainly not without risk, though. I think that when you invest in a private REIT, you should not count on there being liquidity when you want it.

As far as what could go wrong, I think the likeliest problem with be a rise in interest rates causing a rise in cap rates, which has a pretty strong effect on building values (if the cap rate goes from 5% to 10%, the building value just fell in half, all else equal), which is magnified by the leverage used. Some REITs are quite levered, so it doesn't take much of an increase in their cap rates to put a decent dent in the equity of the trust. That is why you saw the public REIT market crater spectacularly in 2008. When the recession turned out to be moderate rather than catastrophic, they bounced back.


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## Beaver101 (Nov 14, 2011)

How is this different from a private REIT? 
*
Property crowdfunding comes to Canada with Mississauga mall*

http://www.thestar.com/business/2015/09/08/property-crowdfunding-comes-to-canada-with-mississauga-mall.html



> ...
> 
> Canadians are gaining access to such investments after crowdfunding for small startups was approved in May by financial-services regulators in six provinces. The Ontario Securities Commission is developing its own set of standards, due later this year.
> 
> ...


 ... other than a faddy new name of "crowd funding" where you hand over your money for a slice of the pie or some crumbs? And will be interesting of what kind of 'standards' the OSC can come up with.


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## gibor365 (Apr 1, 2011)

What is the most popular Private REIT? Skyline REIT?

anyone investing?


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## tkirk62 (Jul 1, 2015)

I know someone who is very happy with SkyLine REIT. My dad asked me to look into it. I believe one of the funds had a 8% yield, about $12 unit price and the unit price went up about 50 cents every year or two. I didn't see any compelling reason for him to own it. From what I un

To me the public market offers many advantages to REITs. First the liquidity is nice for us shareholders. Second it gives them easier access to capital by issuing shares than a private REIT can do. Third is the regulation and the information that us shareholders have easily available to us. SkyLine I remember prided themselves on how they were very open with information even though they didn't have to be. A quick Google search reveals this story on another of Canada's largest private REITs. http://www.theglobeandmail.com/repo...league-of-their-own/article16583968/?page=all

I think it would be very easy for SkyLine to hide some bad news if it ever felt the need to in spite of them saying they wouldn't. 

Public REITs offer enough variety and yield for me that I don't feel the need to go scouring the private ones. From what I understand the supposed value is that the price is not subject to the fluctuations of the stock market. Maybe others value that enough to buy but I don't.


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## gibor365 (Apr 1, 2011)

> Public REITs offer enough variety and yield for me that I don't feel the need to go scouring the private ones.


 True. Now you can buy big reputable public REITs like AX.UN or CUF.UN and get 9% yield, and also DRIP with discount...


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## willow1044 (Jan 30, 2012)

A 9% yield when some other investments such as German bunds are offering a negative return seems unrealistic to me. More generally the S&P is returning ~2% yield I think. And if I recall my public REITs are offering 4-6%. So what's their secret sauce?

I like Buffet's warning not to invest in something that you don't understand. And having owned a couple of properties and run the numbers for years now I don't see how it's possible to generate a 9% return in todays RE market. I'm not saying that to rain on idea but to ensure I / you aren't being scammed.

Here's a couple of links to consider: 
http://www.timescolonist.com/business/league-group-likened-to-ponzi-scheme-1.1193369

and 

http://www.vancouversun.com/Victori...b+more+than+million+losses/9975178/story.html


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