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Differences Between Public and Private REITs

The Differences Include:

  • A Private REIT is not listed on a stock exchange. A Public REIT is listed on a stock exchange
  • Private REIT redemptions and subscriptions are based upon the value of the underlying real estate and not a traded market price which may be substantially different than the value of the underlying real estate.  On a publicly traded stock investors can push values up or down and to extremes very quickly just because of liquidity, and that becomes the new price, regardless of how right or wrong it may be
  • Being public has many additional costs that are paid by the REIT, which reduces returns to investors in a Public REIT
  • Public REIT Units tend to be much more volatile than Private REIT Units
  • Public REIT Units tend to be more highly correlated to stock prices, which in part defeats some of the desirable diversification benefits that you should get from owning real estate as part of your portfolio.  In 2008, according to the IPD, public REIT investors as a group saw REIT prices decline by 34% while non listed property ownership (like in a private REIT) earned a positive 3.7% return.  In other words, private real estate beat out the public real estate by an astounding margin of almost 37%, all the while owning the same kinds of investments
  • Public REITs can be bought by anyone.  Private REITs can only be bought by Qualified Investors via Offering Memorandum

The Similarities include:

  • Both Public and Private REIT's are subject to securities regulations although the statutory requirements imposed on each may be different
  • Both Public and Private REIT's have Boards of Trustees which oversee the REIT and its management team. In the case of Centurion Apartment REIT, the majority of Trustees are independant of management
  • Centurion Apartment REIT, like a Public REIT has independent auditors
  • Centurion Apartment REIT, like most Public REITs is a unitholder democracy (i.e. one unit one vote)
  • Operationally, most Private REITs would be almost identical to Public REITs

Centurion Apartment REIT as a private REIT isn´t exposed to the extreme volatility of the stock market. It is open to investment from qualified investors only via Offering Memorandum