Too many REITs get it wrong, making money from their investors rather than for their investors while ignoring the benefits of a client-first approach. It’s especially troubling in retirement planning, something meant to solidify a lifetime of hard work and ensure your legacy lasts.
Make no mistake, private real estate investment trusts (REITs) belong in the retirement portfolio. The diversification and higher risk-adjusted returns they offer are especially important later in life. The fact that they’re required to pay 90% of cash flows directly to investors means regular and predictable income streams for retirees.
A recent analyses of the performance of real estate investments held by 200 of the largest U.S. pension funds found REITs delivered the highest average annual net returns at 10.68%.
Recent headlines stated: An estimated $3 trillion in retirement savings has been lost in 2022, mainly from 401(k)s and IRAs. Hyper-inflation and rising interest rates mean higher correlations, crushing the “upside potential and downside protection” of traditional 60/40 portfolios. Wealth preservation is paramount in retirement, and fixed income is no longer safe, reinforcing the need for alternative, non-correlated assets like private REITs.
While inflationary factors are front and center, other factors are just as compelling. Billionaire investor Sam Zell made his fortune from buying and holding undervalued real estate properties for extended periods.
Legendary investment manager David Swensen, who grew Yale University’s endowment by $30 billion, allocated 20 percent of the institution’s portfolio to REITs. Yet far from sophisticated strategies reserved for elite institutions, Swensen was a big fan of their use with investors of all types, including those planning for retirement.
Private REITs do not need a complete overhaul, rather simple yet meaningful tweaks.
High fees are one. Upfront fees are “great for the firm but not the investor, making it difficult to generate a useable return from the start” Noyack Managing Principal CJ Follini said. Performance-based compensation is a better way, ensuring an investor-first, “you earn then we earn” approach. It means a return of capital and a return on capital for every investor up to a specific internal rate of return, driven by rent, property appreciation, and time.
Diversification is another, more specifically, striking the right balance between single-asset and multi-asset strategies. Including too many assets dilutes scale and return potential, yet including too few increases risk and investment cost.
The answer is a balanced approach of thematically-linked investments that are complementary enough to achieve scale yet sufficiently diversified enough to address risk. They include properties that support the supply-chain infrastructure in delivering a particular good or service (dry warehouses, cold storage, medical offices, etc.).
Noyack Capital is a mission driven investment platform with a revolutionary concept—EVERYBODY should be able to invest like a billionaire with access to a variety of world-class private investments.
“NOYACK’s mission is revolutionary,” Noyack Managing Principal CJ Follini said, “ we provide all size investors universal access to private investment strategies usually restricted to sovereign wealth funds, large pension groups and UNHW’s. Why not change the world by eliminating the the most pervasive discrimination – economic inequality – with opportunity and financial literacy. Main Street not Wall Street.”
An investor can access Noyack Logistics Income REIT, Inc. by transferring or rolling over funds from an existing IRA or 401(k) plan.
By using funds invested in an existing IRA or employer-sponsored retirement account, the income thresholds and current year, tax-advantaged contribution limitations do not apply. The investor is simply reallocating a portion of their existing retirement account to a new investment. The income limitations and current year contributions thresholds only apply if the investor is trying to direct current annual contributions or a newly created retirement account directly into Noyack Logistics Income REIT, Inc. The tax-advantaged status remains as long as the REIT investment account is registered as a 401(k) or IRA.
Given this, an investor with an existing IRA, 401(k), or other retirement account can expand their retirement account into a portfolio of professionally managed, high-quality commercial real estate assets to grow and diversify their retirement savings.
Defined contribution (DC) plan sponsors, defined benefit (DB) pension administrators, and registered investment advisors (RIA) interested in adding private REITs options to their investment menus can simply contact a NOYACK representative for more information.
Pre- and post-retirees can’t afford to make a market mistake—there’s too little time to recover. Private REITs are a perfect way to get potential income and protection as a part of a professionally managed portfolio at a time it’s needed most.
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