While investors have historically been attracted to nontraded REITs because of their higher dividends, this year, the trusts are having a hard time turning a profit for investors. The decline is so dramatic that many financial advisors are no longer recommending nontraded REITs as a viable asset management strategy, according to WSJ.
Following major real estate gains post-financial crisis, property price increases have slowed down. According to real estate firm Green Street advisors, while commercial real estate prices gained 25.5 percent between September 2010 and September 2011, they gained only 8.4 percent between September 2013 and September 2014.
Nontraded REITs are significant for the market because they bring dollars from ordinary investors to the marketplace and are building blocks for acquisition for publicly traded REITs during expansions.
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