Life Cycle of the Non-Traded REIT
A non-traded REIT goes through distinct phases in its life cycle that make it a unique asset. The initial phase is the capital raising stage where the REIT sells shares to raise capital to fund acquisitions of assets. The second stage is the property acquisition stage where the REIT uses the capital raised in stage 1 to purchase properties. The third stage is the asset management phase where the REIT owns and manages the assets to increase cash flow and value. The final stage is the disposition phase where an exit strategy is implemented to return the investors’ original investment and any accrued capital gains (losses).
In reality, however, the phases typically overlap to some extent, so that acquisition begins while capital is still being raised. Similarly, active management begins although properties are still being acquired.