Appraisal-based NAV: does the smoother line actually reduce risk, or does it just delay the information?
Been reading offering documents for a few months now and I can't settle this one, so I'll put it to the room.
The pitch for non-traded REITs is that the shares don't swing with daily market sentiment, so you get real estate income without watching a ticker. That's real. In 2025 listed REITs traded well below what their properties were arguably worth, and holders of non-traded vehicles didn't have to look at that gap every morning. Behaviorally that matters, because the single most expensive thing most investors do is sell into a drawdown.
The other reading is that the underlying buildings are worth what they're worth regardless of who's marking them. If the office building in the portfolio has lost a third of its value, the appraisal will get there eventually, on a lag, in increments. The smoother line hasn't removed the loss. It's spread it out and given you a NAV that's stale by some unknown amount, which is a problem specifically at the moment you want to redeem, because you're transacting against a number set by a valuation process rather than by a buyer.
There's a third position I keep bumping into, which is that the smoothing is only a real benefit if you genuinely can't sell. If you're locked in for five years anyway, the mark doesn't affect your behavior, so who cares what the line looks like. And a fourth, that it depends entirely on how often the sponsor revalues and how independent the valuation advisor is.
I don't think there's a clean answer here. Where do people actually land?
Appraisal-based NAV in a non-traded REIT is mostly:
15 votes