How Private REIT Investments Help Beat Inflation

How Private REIT Investments Help Beat Inflation

During times of high inflation -- whether or not there's high or low economic growth -- REITs have outperformed other major investment classes.

If you are invested in the stock market, we don’t have to be the ones to tell you what happens to your portfolio when the CPI is rising at 7%+. With rising rates and low consumer confidence, the stock market doesn’t look to be improving. So where should you turn to hedge inflation and protect your principal? Whether the Fed’s rate moves can slow inflation effectively or not, real assets and rents tend to “inflate with inflation.” As a result, real estate investment trusts (REITs) are an asset class that can offer protection against inflation.

How much protection could a REIT offer to investors in times of high inflation? Potentially, a lot. 

During times of high inflation — whether or not there’s high or low economic growth — REITs have outperformed other major investment classes, including government bonds, stocks, and investment-grade bonds.

The Relationship Between REITs and Inflation

To find out just how REITs performed compared to other investment choices, we looked at some of our past peak inflation periods. What did we find out? 

For the 20 year period ending in December 2020, as you can see from the below chart, REITs outperformed a range of other asset classes when inflation peaked – whether economic growth was considered low or high.

Another reason to invest in a commercial REIT: tax advantages

The rate of return on your investments is an important consideration, but so are tax implications. 

Real estate investment trusts offer tax advantages that start with their requirements to be a REIT. A REIT must distribute at least 90 percent of its taxable income to its shareholders, but 100% of these distributions are not taxable at the same rate as ordinary rental property income, i.e. if you chose to invest in real estate directly. 

A privately-held commercial REIT like NOYACK’s NLI (NOYACK Logistics Income REIT) directly invests in commercial real estate and may provide tax benefits. Of course, your financial situation is unique and in evaluating any tax implications of investing in a commercial REIT, you should consult with your financial advisor.

Private REITs can produce higher returns whether or not it’s a time of high inflation

In 2022, inflation is continuing to rise. That’s an important consideration, but commercial REITS can perform better than other investment vehicles whether inflation rates are high or low. Part of the reason for their strong performance is the nature of commercial real estate. Commercial leases are generally long-term that allow for annual increases.

Click here if you want to learn more more about the current state of inflation.

Why NOYACK Logistics Income REIT?

NOYACK Logistics Income REIT (NLI) is producing higher returns than publicly-traded REITs for a variety of reasons, starting with NOYACK’s 38+ year track record of success. Years of successful experience have enabled the NLI REIT to focus on five different commercial real estate/logistics categories:

  • Warehouses
  • Cold Storage
  • Healthcare
  • Life Science
  • Mobility Hubs

The NLI strategy is tied to the fact that digital or e-commerce has grown by 140% over the past five years to reach a massive $2.4 trillion. At the same time, the commercial real estate infrastructure that makes this rapid e-commerce market growth possible has increased by only 25%. This imbalance in supply vs. demand provides considerable opportunity for savvy investors.

NOYACK’s “competitive edge” has many factors, but it has resulted in a “best-in-class” historical track record, with an impressive average historical IRR of better than 20 percent and an average equity multiple of 5.3%.

As customers continue to move toward e-commerce, demographics change, and supply chain and logistics work to keep up, investments in the sector make sense from several perspectives, in addition to commercial real estate’s ability to provide some protection against inflation.

NOYACK has some specific themes for the NLI, which include acquiring and modernizing assets that can benefit from industry trends in micro-fulfillment, life sciences, and mobility. If you haven’t heard of micro-fulfillment, it’s an essential part of the growing e-commerce ecosystem. It combines the speed and convenience of online ordering for local store pick-ups with large automated warehouse efficiency. It includes warehouse technology like robots and data-driven operations and “last-mile” fulfillment.

It takes experience, vision, a deep understanding of how e-commerce has impacted logistics and will continue to impact the sector. NOYACK’s track record shows why and how NLI can outperform publicly-traded REITs.

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