The Relative Value of Public Non - Listed REITs

In this paper, I evaluate equity claims to publicly registered, non-listed real estate investment trusts (REITs). Although market-determined equity prices for public non-listed REITs (PNLRs) are unavailable, I demonstrate that such equity claims are worth between 23% and 80% less than equity claims to identical underlying assets organized as listed REITs. Sources for losses include illiquidity, high transactions costs and sub-optimal capital, and organizational structures. An alleged advantage of PNLRs—higher current income—is unsustainable: REITs frequently reduce levels of promised returns to equity holders, only achieving these lower levels by issuing additional capital.