By CJ Follini | Noyack Capital
June 01, 2022
Prep for Retirement
People who are approaching retirement, or who are already retired, have many reasons to be concerned about inflation and preserving the value of their investments. Real estate investment trusts (REITs) are one strategy that can help to preserve assets and also provide income.
Retirees and others have already invested about $1.5 trillion in REITs, Morningstar Direct reports. Here are some of the reasons why REITs are an effective, appealing choice for retirement income.
The way REITs are structured allows them to pay out the majority of their taxable income as dividends to investors. Unlike stocks, which have no requirement to pay dividends, each year, a REIT must pay out at least 90% of its taxable income as dividends to shareholders. As a result, REITs are considered to be reliable income investments.
Historically, REITs have provided 3.78% higher yields on average than the S&P 500. And, according to a recent analysis from JP Morgan, over the past 20 years, REITs have also provided a higher yield than gold, oil, and the EAFE index, as well as outpacing inflation.
CNBC reported that REITs were paying an average dividend yield “in the neighborhood of 3%,” higher than the 1.5% yield on 10-year Treasury bonds. High-performing and well-structured REITs offer significantly higher yields than average.
REITs also add a real estate component to retirement portfolios, contributing to a diverse, balanced investment strategy.
Real estate investments can diversify a retirement portfolio and can also help to protect assets against the ups and downs of the stock and bond market. There are a number of ways to invest in real estate. For example, many people choose to own rental properties and receive income directly from tenants. Still, others fix houses and sell them or “flip” them for a profit.
These options take time and energy and come along with the potential for big property repair bills and property tax increases. Real estate investment trusts (REITs) offer the benefit of real estate investment without the need to be directly involved in managing and maintaining rental properties.
In comparison to active real estate “fixers and flippers,” REIT investors also don’t need to worry about volatility in the real estate market. With a REIT, investors own a small share of many properties, thereby reducing the risk that is inherent in buying and selling real estate properties one at a time.
Over time, well-operated REITs also gain experience in working with property developers and owners to select and invest in optimal income producing properties. Those which specialize in specific types of properties, such as commercial real estate and logistics, are able to not just focus on average rates of return on investment, but can maximize investment returns along with stable performance and preservation of capital.
Private real estate investments have historically outperformed stocks, government bonds, and investment grade bonds during times of inflation. In the case of commercial real estate, the performance differences are impressive.
According to NOYACK’s analysis of investment performance data from BlackRock, the National Council of Real Estate Investment Fiduciaries (NCREIF), Bloomberg, and the S&P 500, commercial real estate has returned a rate of 17.23% during periods of high economic growth and high inflation over the past 20 years. Even during times of low growth and high inflation, NOYACK’s analysis shows that when different asset classes are considered, commercial real estate returned 15.98% to investors, over 6% more than government bonds, and more than four times better than the stock market.
There are several reasons why commercial real estate performs well during periods of inflation. Commercial leases are typically longer than residential lease terms. In the commercial sector, leases also often have annual rent increases that are tied to the consumer price index. This allows REITs which are invested in commercial real estate to provide reliable income through dividends. REIT investments also have significantly better liquidity than an individual piece of real estate.
And, because NLI is investing in commercial real estate assets which are part of essential, core logistics that support eCommerce, like cold and dry storage warehouses and mobility hubs, investments in NLI have a greater potential for stability as well as an excellent overall rate of return. Whereas residential real estate investments can be vulnerable to volatility in the real estate market, commercial real estate leases are longer-term, offering greater stability.
Commercial REITs offer advantages to investors during periods of inflation. Within the sector, the type of commercial properties the REIT invests in also impact the rate of investment return (IRR) and dividend targets. A firm with a hands-on approach and years of experience in the commercial real estate sector can design a fund that invests in high-potential, secure, and future-focused properties.
NOYACK’s NLI is that fund, based in an investment philosophy borne of deep knowledge of the commercial real estate market and its role in eCommerce infrastructure. Over the past five years, eCommerce has grown by 140% to reach $2.4 trillion. At the same time, investment in the infrastructure supporting eCommerce has only increased by 25%. In 2021, industrial vacancy rates were at an all-time low, at the same time as more storage space and logistics hubs were needed.
Recognizing the mega-trends in eCommerce, NOYACK’s NLI has targeted investments in micro-fulfillment (dry storage and cold storage warehouses), mobility hubs (including parking and fleet management), and healthcare and life sciences, including laboratories, telehealth, and medical offices.
Beyond this investment philosophy, which enables NLI to target a 16 to 18% investment rate of return (IRR) and set a 6% annual target distribution rate for dividends, NOYACK offers a 38-year track record of successful commercial real estate investment. NOYACK is also a hands-on firm that offers a personal and case-by-case approach to working with investors. It is committed to transparency and accessibility, offering easy access for questions and rapid, fully-transparent answers for investors from its team of experienced and committed professionals.
NOYACK’s NLI also has no up-front fees and founders have invested their own capital with “skin in the deal.” NLI benefits from NOYACK’s proprietary algorithms that help to rate opportunities. The algorithms, including , and which give NOYACK a significant advantage in sourcing and disposition of properties. NOYACK also has many years of established relationships with property developers and owners, allowing them to generate deal flows with significant discounts.
NOYACK’s team, led by CJ Follini, combines creativity with experience and data-centric analysis, to create opportunities for investment returns that exceed expectations. According to Jack Romita of the Romita Family Office, the NOYACK team has presented him with a variety of commercial real estate deal opportunities, each of which has exceeded return expectations in 14 years of investment with the firm.
NOYACK Capital has a goal of opening economic opportunities in commercial real estate along with delivering excellent investment performance to retail investors, including people who are approaching retirement or who are already retired. You can invest in NOYACK’s NLI with confidence knowing that you will have access to the professionals who have created the fund and who are committed to providing one of the best REITS for retirement income that you can consider.
NLI’s 6% minimum annual dividend for preferred shares and near-zero volatility in price qualify it well for inclusion in your ROTH IRA, 401K, or employer-defined benefit pension plan. You can learn more about NLI and how NOYACK can support your goals for cash flow and long-term wealth preservation in retirement by defining your investor profile and receiving personalized investment advice from NOYACK’s experts today.
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