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A little clarity for your next decision.
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Investor WorkspaceA little clarity for your next decision.
By Jerry Baker
Non-traded REITs generally estimate share values from the assets they own, the liabilities and other claims against those assets, and the shares outstanding. That estimate, often called net asset value or NAV, depends on the REIT's valuation policy and is not a promise that you can sell your shares for that amount.
An account statement can show a value to the penny. That precision does not mean a buyer has offered to pay that price. It may be the result of a model that uses many estimates.
A non-traded REIT does not have shares listed for regular trading on a national stock exchange. Some publish NAV frequently. Others follow a different schedule or use a different estimated-value process. Do not assume that all non-traded REITs calculate value the same way.
The first document I want is the valuation policy in the prospectus or other offering materials. It should explain what is valued, who supplies the inputs, who decides the final number, and when the process is updated.
The SEC's staff guidance identifies these as useful disclosures, along with major assets, liabilities, share counts, key assumptions, and sensitivity to changes. The guidance reflects staff observations; it is not a rule that makes any particular estimate accurate. [1]
| Value | What to ask |
|---|---|
| Original offering price | What did investors pay, including any upfront charges? |
| Reported NAV per share | What does the valuation policy estimate for this class and date? |
| Financial-statement book value | Which accounting rules produced this figure? |
| Repurchase price | What price applies if a request is accepted under the program? |
| Actual sale proceeds | What did a buyer pay, after relevant costs and claims? |
These values can differ for sound reasons. They can also differ because assumptions have not caught up with changing conditions. Reading them as if they were the same number hides those differences.
A share price used for subscriptions may include charges beyond the stated NAV. A repurchase may use a defined pricing date or an early-exit reduction. The program may limit requests or accept none. The documents, rather than the label on the statement, control that process. [1]
For a simple one-class example, start with estimated property values. Add cash and other assets. Subtract debt and other liabilities. Then account for any interests that do not belong to the common shareholders whose shares you are measuring.
Assume the following hypothetical figures, in millions. There is one common share class, no preferred stock, and no outside partnership interest.
| Component | Amount |
|---|---|
| Estimated property values | $500 |
| Cash and other assets | $25 |
| Debt | ($250) |
| Other liabilities and accrued costs | ($15) |
| Estimated common NAV | $260 |
| Common shares outstanding | 20 million |
| NAV per share | $13.00 |
The arithmetic is simple: $500 million plus $25 million minus $250 million minus $15 million equals $260 million. Dividing by 20 million shares gives $13. The hard work is deciding what belongs in each line and whether the values are supportable.
Do not divide total company NAV by the shares of only one class. The numerator and denominator must cover the same owners. A report may include operating partnership units or other interests alongside REIT shares.
The income approach estimates value from the income a property can produce. Direct capitalization uses a single year's income estimate and an appropriate capitalization rate. Discounted cash flow models estimate future cash flows and convert them to today's value. The California State Board of Equalization explains both methods in its appraisal training. [2]
Actual appraisal work may consider sales evidence and other methods as well. A useful review asks why a method fits the property. A stable leased building, an empty redevelopment project, and a construction site do not present the same forecasting problem.
Even when two reports use the same method, the inputs may differ. One may assume faster lease-up, higher rent growth, lower expenses, or an easier sale. The name of the method does not tell you how demanding the forecast is.
I want to understand which assumptions matter most. If a small change in rent or the expected sale price moves the value sharply, that sensitivity belongs in the investment discussion.
Suppose a property's annual net operating income, under the stated convention, is $2 million. At a 5% capitalization rate, the indicated property value is $40 million. Divide income by the rate: $2 million divided by 0.05. [2]
At a 6% rate, the same income supports about $33.33 million. That is roughly 16.7% less value. A one-percentage-point change in the rate does not mean a one-percent change in value.
The income figure matters just as much. If income is instead $1.8 million and the rate is 6%, value falls to $30 million. That is 25% below the original $40 million estimate.
These calculations are deliberately simple. They do not establish a market cap rate or replace an appraisal. The income and rate must use consistent conventions. For example, comparing income before a certain recurring cost with rates drawn from income after that cost can distort the result.
Also keep debt service out of this property-level cap-rate calculation. Debt and other claims enter later when moving from asset value to common equity value. Mixing the two steps can count financing effects twice.
A discounted cash flow model lays out income and spending over time. It may project rent, vacancy, expenses, improvements, and an eventual sale. Each future cash amount is discounted to reflect timing and risk. [2]
Here is a short hypothetical example to show the mechanics. A property is expected to provide $1 million at the end of year one and $1.1 million at the end of year two. It is also expected to sell for net proceeds of $20 million at the end of year two. Use a 10% discount rate.
The first year's cash is worth about $909,091 today: $1 million divided by 1.10. The combined $21.1 million expected at the end of year two is worth about $17,438,017 today: $21.1 million divided by 1.10 squared. Total indicated value is about $18.35 million.
The model is not predicting those results with certainty. It is showing the price implied by its assumptions. If the sale takes longer, costs more, or produces less, the answer changes.
The discount rate is also not the investor's promised return or cash distribution rate. It is an input used to convert projected future benefits into a present estimate. Treating it as a promised yield would change its meaning.
Many property models assume a sale at the end of a forecast. An exit cap rate may be applied to a later income estimate to calculate the price. That price is then adjusted for costs and discounted back to the valuation date.
Suppose the model uses $2.4 million of the relevant annual income and a 6% exit cap rate. The gross sale estimate is $40 million. At a 7% exit rate, it is about $34.29 million, before selling costs.
If hypothetical selling costs are 2% of the price, net proceeds before debt would be $39.2 million in the first case and $33.6 million in the second. The $5.6 million difference arrives at a future date, so its present effect depends on the discount rate and holding period.
Ask what share of the total indicated value comes from that final sale. A model with modest annual cash and a large terminal value depends heavily on a transaction years away.
Check whether the model assumes both strong rent growth and a more favorable exit rate. Either can be possible, but combining them can create an optimistic result that deserves a separate stress case.
Return to a $40 million property with $24 million of debt and no other assets or claims. Estimated equity is $16 million. If the property estimate falls to $34 million and debt stays fixed, equity falls to $10 million.
The property value fell 15%, while equity fell 37.5%. That is the effect of leverage in this simplified example. The same structure can amplify gains if asset values rise.
Real NAV policies can value liabilities under stated methods rather than simply using face amounts. Ask how fixed-rate debt, hedges, accrued interest, and other obligations are treated. A modeled liability value may differ from the amount required to repay or refinance a loan today.
Preferred interests, fees due to the adviser, and outside ownership in joint ventures also matter. A property's full value does not belong entirely to common shareholders if other parties have claims on it.
Read whether an unconsolidated investment is shown as net equity or whether the report shows gross assets and debt separately. Subtracting its debt again after starting with net equity would understate NAV.
Suppose a joint venture owns a building valued at $60 million and has $30 million of debt. Its net equity is $30 million. The REIT owns 60% of that equity under a simple proportional agreement, while another investor owns 40%.
The REIT's share is $18 million. One presentation could show that $18 million as a single net investment. Another could start with the REIT's $36 million share of gross asset value and subtract its $18 million share of debt. Both reach the same simplified answer.
Starting with the $18 million net investment and then subtracting another $18 million of debt would produce zero. That would be a double count. Using the whole $60 million building and only the REIT's share of debt would overstate its value.
Real agreements can divide returns unevenly, give one owner priority, or include fees and performance payments. The simple ownership percentage may not describe the actual claim. Ask how the valuation reflects those terms and whether all the amounts refer to the same ownership scope.
A single value can hide the effect of uncertain inputs. In a hypothetical direct-cap model, $2 million of income produces $40 million at 5%, about $36.36 million at 5.5%, and about $33.33 million at 6%. This range is arithmetic, not a claim that these are appropriate market rates.
Repeat the calculation with weaker income rather than changing only the rate. At $1.9 million of income, the same three rates produce $38 million, about $34.55 million, and about $31.67 million. The two assumptions can move together.
Then carry each result through debt and other claims to the per-share figure. A table that stops at property value can understate the effect on common equity. The goal is to learn which estimate drives the decision and what evidence would justify changing it.
BREIT's July 22, 2026 supplement illustrates several of these distinctions. It reported June 30 NAV and used that NAV for specified August subscription and July repurchase prices. The adviser had final responsibility for NAV, while properties received annual third-party appraisals. [3]
The filing also separated assets, liabilities, fees, outside interests, and share classes. It published discount-rate and exit-cap-rate assumptions and sensitivity examples. Those details make it possible to ask better questions than whether one share value went up.
This is a historical snapshot of one issuer's process. It does not establish today's transaction price, universal industry terms, or an obligation to accept a repurchase request. Read the latest documents before taking action.
A current-looking report can combine information from different dates. Write down the valuation date, publication date, date of the latest full property appraisal, and the date used for your proposed transaction.
For a hypothetical example, a report published August 20 might show NAV as of July 31. Some properties may have had full appraisals earlier in the year, followed by interim updates. A September subscription might use the July estimate under the stated policy.
That timing does not automatically make the number unreliable. It tells you what to ask about changes between those dates. A major tenant failure, disaster, sale agreement, or shift in financing may deserve attention before the next scheduled full appraisal.
Ask how the policy handles significant events and who can authorize an interim change. A daily or monthly NAV calculation does not necessarily mean every building receives a new full appraisal each day or month.
Frequency and depth are different. A frequent report can use stale inputs. A less frequent report can contain a careful recent appraisal. Read both the schedule and the actual work behind it.
A third-party appraiser can provide a useful outside check. But “independent valuation” is incomplete without the scope of the work.
Did the firm appraise every property, review selected assumptions, or check calculations? Who supplied leasing projections? Who chose the final inputs? Can the adviser change the conclusion? Are fees or other relationships disclosed?
The SEC staff's valuation guidance asks issuers to explain each party's role and conflicts. It also calls for explanation when the final disclosed value differs materially from a third-party recommendation. [1]
Independent work reduces neither uncertainty nor conflicts to zero. It improves the process when the assignment is clear, the evidence is sound, and differences are explained. A respected name at the bottom of a report is not a substitute for those details.
Total NAV can rise because the REIT sells more shares. That does not necessarily mean existing shares became more valuable.
Assume $100 million of NAV and 10 million shares, or $10 per share. New investors contribute $20 million at $10 per share, with no fees or other changes. NAV rises to $120 million and shares rise to 12 million. Per-share NAV remains $10.
If the REIT instead incurs $2 million of costs charged against that combined NAV, the simplified result is $118 million divided by 12 million shares, or about $9.83. The treatment of actual charges depends on the policy and class terms.
Distributions also affect the comparison. With no income, value changes, or other events, paying $0.50 per share out of a $10 NAV leaves $9.50. The investor has $0.50 cash and a share valued at $9.50. The payment alone did not create a 5% profit.
Look for a bridge that separates operating results, valuation changes, fees, distributions, share issuance, and repurchases. Mixing them together can turn fundraising into apparent growth or a cash payment into an apparent loss.
A fund can have sound assets and limited cash available for repurchases. Real estate takes time to sell, and a quick sale might produce less than the appraised value.
SEC staff guidance discusses restrictions and issuer discretion in non-traded REIT redemption programs. It also asks for histories of requests received, honored, deferred, or rejected. Those are useful facts when evaluating how the program has actually operated. [1]
Do not count an unaccepted request as money available for a closing or household expense. Check notice dates, pricing dates, payment timing, limits, and the power to suspend the program.
An outside buyer may offer a different price from reported NAV. Compare fees, transfer rules, and what you would actually receive. A statement estimate is not proof that another party will pay it.
For a reporting company, begin with the latest prospectus and supplements, annual report, and newer quarterly or event filings. The SEC explains that annual and quarterly reports provide financial statements, business risks, and management's discussion. The periods and purposes of those documents differ. [4]
Record the NAV date and class. Recreate the major asset-to-equity bridge. Note the largest assumptions and ask what happens if they move against the company. Check debt maturities and liquidity separately from value.
Then compare the reported value with actual purchases or sales where the information is available. A difference can reflect timing, property quality, costs, or model error. It needs an explanation rather than an automatic accusation or defense.
I would rather have a clear estimate with an honest range of uncertainty than a precise number presented as a fact no one should question.
Not necessarily. NAV is an estimate under a valuation policy. An accepted repurchase may use it with adjustments, but requests can be restricted or rejected. A separate buyer may offer another price. Review the applicable program and transaction terms. [1]
No. The NAV calculation can be updated monthly while full appraisals follow a different schedule. Ask what changes between full appraisals, who reviews those changes, and how significant events are handled.
Yes. Higher expenses, less favorable valuation rates, new liabilities, or other costs can outweigh rent growth. For example, a higher cap rate lowers value when the income estimate is unchanged. Examine the full bridge rather than one operating statistic. [2]
No. Financial-statement accounting and a stated NAV policy may measure assets or costs differently. Read the policy and financial notes to understand the differences. Neither label alone tells you the cash proceeds you could receive from a sale.
No. A steady estimate can reflect the reporting process and assumptions. Tenant, financing, property, and liquidity risks can change between updates. Review the underlying business and debt alongside the reported values.
Ask which assumptions would most change the estimate and what evidence supports them. Follow that with the valuation date, the responsible parties, and the actual exit terms. Together, those answers make the number more useful.
Educational information, not an offer or a personal tax, legal, or investment recommendation. Examples are hypothetical and omit stated adjustments. Tax treatment depends on your facts and current law. Review your transaction with your CPA, attorney, and qualified intermediary. Real estate investments can lose value and may be illiquid.
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