Despite their promises of high, steady income and low volatility, unlisted real estate investment trusts have been shunned by many fee-based financial advisors because of upfront commissions, lack of transparency and limited liquidity. Cole Real Estate Investments says it is introducing a new fund that eliminates those issues.
Cole, which has $9 billion invested in commercial real estate and is one of the largest real estate buyers in the country, plans to introduce an unlisted REIT in about a month that will be commission free, priced daily and allow advisors to buy and sell shares once a day, similar to a traditional mutual fund, said Jeff Holland, Cole's executive vice president and head of its capital markets group, at the inaugural Fiduciary Gatekeeper Research Manager Summit in Boston. The conference offered research managers and others in a fiduciary role to meet in small groups with more than 50 portfolio managers from around the country.
Cole Real Estate Income Strategy (Daily NAV) is a new unlisted real estate fund that will be different than any other on the market and will specifically be targeted for fee accounts, where 70 percent to 80 percent of new money flowing to advisors is going, Holland said. The fund will bring commercial real estate to a broader group of financial advisors, including registered investment advisors (RIAs), who are trying to "recreate paychecks" for retired clients, he said. Most advisors using Cole funds now are those affiliated with independent and insurance-based broker-dealers.
Cole will be able to redeem shares daily because 10 percent to 15 percent of the fund will be in liquid, fixed-income assets managed by BlackRock. The minimum investment will be $2,500 and there will be a 2 percent redemption fee for the first year to encourage long-term investment, Holland said. Cole, which owns 1,400 properties around the country, focuses on high-quality retail, office and industrial space with longer-term leases. Its properties have an overall 97.5 occupancy rate, Holland said. "The length of the lease term allows us to generate and lock in a stable income stream," he added.