What is a REIT?
In general, a non-traded REIT:
- Sells shares to investors.
- Acquires real estate properties and, to a lesser extent, invests in real estate-related assets.
- Receives rent from property tenants and/or real estate-related assets provide additional income.
- Passes income to its investors through distributions, although distributions from CNL Growth Properties are in the form of a stock distribution.
- Typically avoids paying taxes on distributions as long as it distributes at least 90 percent of income received to investors.1
Investors are generally subject to taxation on distributions as ordinary income.
Why Invest in Non-Traded REITs?
Investor diversification across a variety of asset classes and securities is important. Non-traded REITs are a recognized investment alternative that may provide certain investors:2
- Portfolio diversification.
- Historically low correlation with other traditional asset classes.
- Potential protection against inflation.3
- Potential for long-term income and/or growth.
Investing in non-traded real estate investment trusts or non-traded REITs is not suitable for all investors and is subject to significant risks. These risks include limited operating history, reliance on the advisor, history of losses, conflicts of interest, use of leverage, payment of substantial fees to the advisor and its affiliates, limited proceeds raised, limited number of investments, lack of diversification, dilution related to stock distributions, no guarantee of distributions, no public market for the shares, illiquidity, and liquidation at less than the original amount invested.
See the Risk Factors section of the prospectus and the Risk Factors link below.
1 If a non-traded REIT fails to meet the qualification standards now or in the future, the REIT will be subject to increased taxes, which will decrease investors' returns.
2 There is no assurance these objectives will be met.
3 National Council on Real Estate Investment Fiduciaries: http://www.ncreif.org/property-index-returns.aspx.