REIT Listing Status
Understanding REIT types by investment strategy matters, but the exam also tests another classification: listing status. Whether a REIT trades on an exchange directly affects liquidity, fees, and investor protections.
Three Categories by Listing Status
| Category | SEC Registered? | Exchange Traded? | Liquidity | Disclosure |
|---|---|---|---|---|
| Listed (publicly traded) | Yes | Yes (NYSE, Nasdaq) | High | Full SEC reporting |
| Public non-traded | Yes | No | Low (illiquid) | Full SEC reporting |
| Private (non-registered) | No | No | Very low | Limited (private placement) |
Exam Tip: Gotchas
"SEC registered" and "exchange traded" are NOT the same. Public non-traded REITs are registered but cannot be sold on an exchange; they are highly illiquid despite sounding "public."
Listed (Publicly Traded) REITs
- SEC registered and trade on major exchanges (NYSE, Nasdaq)
- Shares can be bought and sold daily like any stock
- Price determined by market supply and demand
- Subject to full SEC reporting requirements (annual 10-K, quarterly 10-Q)
- Most liquid type of REIT
Exam Tip: Gotchas
Listed REITs trade like stocks, which means their price is set by supply and demand, not by net asset value. Expect a distractor that prices a listed REIT at NAV like a mutual fund.
Public Non-Traded REITs
This is the category the exam focuses on most:
- SEC registered but do NOT trade on an exchange
- Despite being "public," they are highly illiquid
- Often have high upfront fees; commissions and offering costs can exceed 10-15% of the investment
- A 15% front-end fee on a $10,000 investment means only $8,500 goes to work for the investor
- Net asset value (NAV) is not updated daily; the stated value may be stale or inaccurate
- Redemption programs are limited and may be suspended by the REIT at any time
- Holding periods are often 8 years or more before investors achieve liquidity
- Distributions may be partly funded by borrowed money or return of investor principal (not just operating income)
Exam Tip: Gotchas
- Non-traded REITs are SEC-registered (public) but NOT exchange-traded. Do NOT confuse "public" with "liquid." FINRA has issued investor alerts specifically about non-traded REITs because being SEC-registered does not mean shares can be easily sold.
- Non-traded REIT fees can exceed 10-15% upfront.
- Non-traded REIT distributions may come from borrowed funds, not operating income.
Private (Non-Registered) REITs
- Not registered with the SEC
- Sold through private placement (Regulation D exemption)
- Very limited disclosure; investors receive far less information than with public REITs
- The least liquid and least transparent category
- Available only to investors who meet private placement requirements
Exam Tip: Gotchas
Private REITs are sold under Regulation D and are not SEC-registered. Disclosure is minimal, and these are restricted to investors who meet private placement eligibility.
Now let's examine how REIT income is taxed and why it differs from regular stock dividends.