Great article! I have two comments, both stemming from the comparison of private real estate vs. REITs.
1) An attribute of private real estate not available to REIT investors is direct control of the asset. With a REIT the decisions are made for you, for privately held real estate you get to (have to) make all of the decisions. For investors who want control, REITs require letting go of that control.
2) information asymmetry of REITs (and equities in general) vs. private real estate. With private real estate you can know everything there is to know, with REITs there is much less transparency, flow of information, and much longer time lags with information known by the REIT vs. information known by the investor. This is a real concern as the average investor often has little insight into the values, ethics, executive compensation packages, appetite for risk, workplace climate, integrity of the management team, etc. Nobody wants to be holding shares of a company when a scandal breaks or a risky bet goes bad, but protecting from these types of risks is very difficult given the information asymmetry of the investor vs. the company.
Great article! I have two comments, both stemming from the comparison of private real estate vs. REITs.
1) An attribute of private real estate not available to REIT investors is direct control of the asset. With a REIT the decisions are made for you, for privately held real estate you get to (have to) make all of the decisions. For investors who want control, REITs require letting go of that control.
2) information asymmetry of REITs (and equities in general) vs. private real estate. With private real estate you can know everything there is to know, with REITs there is much less transparency, flow of information, and much longer time lags with information known by the REIT vs. information known by the investor. This is a real concern as the average investor often has little insight into the values, ethics, executive compensation packages, appetite for risk, workplace climate, integrity of the management team, etc. Nobody wants to be holding shares of a company when a scandal breaks or a risky bet goes bad, but protecting from these types of risks is very difficult given the information asymmetry of the investor vs. the company.