As in picking a school, the decision to go public or private with your REIT investment will have significant impact on your wallet.
With the housing market in flux, more and more investors are investing in those real estate investment trusts to diversify their portfolios. And with companies like Allied Properties REIT (TSX:AP.UN) announcing plans this week for a $21.3 million expansion into Western Canada, it’s no surprise investors are doing their research.
One key consideration? The difference between buying a publicly-listed or private REIT.
“The main difference between a private and public REIT is how they’re structured,” says Marcel Greaux. “In a public market REIT, your evaluation is based on the current market value. So if an announcement is made that causes the market to go down and you buy into that REIT, you’re not necessarily buying the value of what that’s property is worth.”
Conversely with a private REIT, the evaluation of worth is based on the aggregate of the portfolio assessed by an independent appraiser.
“You’re always buying units at the appraised value as opposed to market value with a public REIT,” he says.
So what else should investors consider when deciding to go private or public?