A case worth studying: testing a non-traded REIT redemption before committing the full position

So you proved the pipes work when nobody else is turning on a tap. That's still worth 56 dollars to know, I'm not knocking it. But the quarter you want data on is the one where the sponsor's other investors all need cash in the same eight weeks, and by definition you can't test that one on purpose. Did you look at what the same plan did in the worst quarter it has on record?

Who's collecting the rent matters more than who's processing the redemption. Worth getting down to the property list. A NAV REIT that's mostly newer industrial and residential behaves differently from one carrying a couple of half-empty office towers at appraised value, and the redemption plumbing looks identical in both cases.

Kestrel your $56 is the smallest number in this post. 1.25% on 60k is 750 a year, every year, and that's before whatever performance participation the sponsor takes. I'd rather see the total annual drag than the exit friction. Do you have the all-in number written down anywhere?

What's a repurchase plan? I've read the phrase three times in this thread and I'm guessing it means the fund buying your shares back, but is it a promise or a maybe?

On the redemption question, it's a maybe. That's the whole thing. The board can prorate or suspend it, and the 5% cap applies across every holder, so in a heavy quarter an investor gets a slice of what was requested and goes back in the queue with no priority next time. Nobody is owed a full fill.

Honestly the illiquidity part shouldn't bother most people. Plenty of rentals in smaller counties take four months to sell on a good day. What should raise an eyebrow is a NAV that sits flat for five quarters straight while every comparable public REIT trades down 20%. One of those two numbers is wrong, and it's not always obvious which.

Kestrel, when it prices at quarter-end NAV, is that always how it works? There's a version worth checking where the repurchase price is the transaction-day NAV of the month the request is processed, which sounds like the same thing but might not be. And is the early repurchase deduction taken off that price or off the original purchase price?

Bramble that helps. So the redemption is discretionary and the fee isn't. Got it.

Were the distributions taken in cash or reinvested? That matters because if they're reinvested, each new batch of shares likely starts its own holding clock for that early repurchase deduction, which would mean the newest shares are always the most expensive ones to sell.

The simple question worth returning to is this. A 1.4 percent price move nobody controlled plus a nine day wait, a 1.25 percent annual fee, and a value that only updates monthly. What does that actually buy that a plain listed REIT index does not offer for a tenth of the fee and same day sales?

Price stability that isn't fake, arguably. The listed version marks to whatever the market feels that week. Whether that's a feature depends on whether the holder would have panic sold. Kestrel, which documents did you actually read? A full year could go into this kind of review before anyone sends real money.

The deadline detail is the part worth framing and hanging up. A lot of problems at small scale trace back to a date nobody knew existed. Second month of the quarter, four days to spare. That's the post.

Sorry, basic one, what is NAV?

Rigging, net asset value. The sponsor values the properties, subtracts the debt and what it owes, divides by shares outstanding. That's the price you buy and sell at, and it comes from appraisals rather than a market of buyers, which is exactly why hollow is suspicious of it.

Kestrel, this reads a lot like how I think about land. No daily quote, no way to sell in a week, and I've made peace with that. Difference is nobody sets my land's value for me each month.

If you're holding ten years, does the exit test matter much? I'd spend that effort on the property mix and the debt maturities. Though I suppose the point is that a ten year plan turns into a three year plan more often than anyone admits.

How do you screen the sponsor? I know how to screen a tenant, I want pay history and references and a look at how they left the last place. Is there an equivalent here, like how a sponsor treated redeemers the last time things got tight?

Can someone say plainly what prorated means in this context? I read it as everyone gets a haircut but I'd rather be sure.

Juniper, requests come in for 8% of NAV, cap is 5%, so everyone gets roughly five eighths of what they asked for and the rest goes unfilled. The investor resubmits next quarter, at whatever the NAV is then. Kestrel, worth knowing how much of a portfolio like that is ground leased or in markets where the entitlement risk sits with somebody else. The appraisal picks up income long before it picks up a zoning fight.

A six unit portfolio teaches an owner something every month and costs most Saturdays. What you paid $56 to learn, most operators would have paid more for. The real concern with the vehicle isn't the fee, it's that when it goes wrong there's no lever to pull. On a directly owned building an owner can raise rents or replace a manager.

A few questions worth asking in a setup like this. Why 25k in T-bills specifically, was that a calculated number or a feeling? Did the platform put anything in writing about the deadline, or does it take digging to find it in the plan itself? And if the fill had come back at 60 percent instead of 100, would the rest still have gone in?

Ran my own version of the drag while this thread sat. 1.25% management, plus a stockholder servicing fee on some classes that I'd want to see in the fee table, plus performance participation on gains that are measured off appraisals. On 60k held five years the management fee alone is around 4k of the 60k, assuming flat NAV. Kestrel's exit cost is a rounding error next to that. The exit test was still the right test, it just isn't where the money goes.

I've been using something like this as the place cash sits between deals and this thread is making me nervous about that. If a deal shows up in month two of a quarter, I'm looking at a submission deadline, a quarter end, a nine day wait, and a possible proration before I see the money. That's not a parking spot, that's a commitment. Kestrel your line about no dollar in there with a closing date attached is the part I needed to read.