Retirement Planning: Time for Non-Traded REITs?

Finding an asset class in the midst of a recession that will provide retiree and pre-retiree clients with exactly what they need–a steady stream of income, great yields, and a stable net asset value–may seem out of reach, but the non-traded REIT market could be just the ticket.

In fact, Cole Real Estate Investments began offering in January its Cole Credit Property Trust III, Inc., which is a non-traded REIT focusing on big box, necessity retail commercial real estate–that includes retailers like Walmart, Target, BJ’s, Walgreens, Home Depot, and Lowe’s, to name a few. While commercial real estate has been hit by the recession like other asset classes, “there are many sectors of the commercial real estate market that have held up really well, especially the necessity retail” space, says Clint Blaser, a partner with National Planning Corp. in Scottsdale, Arizona, who is allocating about 20% of his clients’ portfolios to the Cole Credit Property Trust III.

Cole is offering 250 million shares of common stock of Cole Credit Property Trust III and seeking to raise $2.5 billion. Since opening the Credit Property Trust III at the beginning of 2009, Cole has been garnering about $80 to $100 million per month in flows, says John Towle, Cole’s chief marketing officer, “which is a pretty aggressive clip given the fact that most of the flows come during the end of the offering in these products.”

Why has the REIT portfolio garnered so much interest? Towle says it’s largely because of the solid annualized yield of 6.75%, and stable NAV of $10 per share. The REIT portfolio, he says, also offers investors an opportunity for “capital appreciation at the time of portfolio exit.” As Cole builds out the Credit Property Trust III portfolio, “we are in a situation where we are buying high quality properties that are discounted from where they were two years ago,” says Towle. “So over the long term this could translate into solid capital appreciation at time of portfolio exit.”