While real estate investment trusts (REITs) have been around for decades, they continue to evolve in response to regulatory changes and investor preferences. On their initial introduction, publicly-traded REITs were governed by the SEC and subject to significant regulatory oversight. Following the 1986 Tax Reform Act, non-traded REITs emerged, which can be structured at a fixed share price for the duration of a continuous offering or as a finite life product. Those initial non-traded finite life REITs weren’t popular for a variety of reasons, including high upfront fee loads, the illiquidity of the closed-end structure and lack of transparency. An effort to address these concerns paved the way for a new alternative product.
The most popular REITs today are perpetual life (open-end) non-traded REITs (NTRs), which register their offering of common stock under the Securities Act of 1933, file SEC reports under the Securities Exchange Act of 1934, are not listed on trading platforms and typically invest in portfolios of direct real estate and real estate-related assets with low to moderate leverage. Other features include frequent and systematic valuations to establish and disclose NAV on a periodic basis, enhanced opportunity for liquidity via regular redemptions at a time chosen by investors and a streamlined management fee structure with lower and simpler selling fees.
While the different types of REITs have many characteristics that make them attractive to investors and intermediaries, they are also complex legal structures that require a thoughtful and disciplined approach. As such, today’s fund managers must evaluate the expertise and stability of operational support—like accurate NAV calculation, transfer agency services, financial reporting (including SEC disclosures) and compliance reporting. To create an operating advantage, they need to choose a reliable and experienced third-party administrator to assume the operational burden of managing the complex requirements of these products. Fund managers should be selective in choosing a provider with a dedicated team of professionals with specific subject-matter expertise and purpose-built technology to support NTR structures.
SS&C offers a seamless, end-to-end solution from fund accounting and administration down to the individual investor statement. We offer the scale needed to handle the volume and velocity of the marketplace. SS&C is the largest retail alternatives transfer agency provider, supporting 18 of the top 20 public program sponsors. We have long-standing, proven capabilities for retail alternative products of all types. With the recent addition of Blue Prism to the SS&C roster, we are ramping up the introduction of robotic automation to support the growing volume of transactions and drive efficiency in various reporting.