EB5 Investors Magazine (English Edition) Volume 5, Issue 1 - Page 61

THE OPTION OF REAL ESTATE INVESTMENT TRUSTS Real Estate Investment Trusts (REIT) may be a viable redeployment alternative that might satisfy many foreign investors’ desire to participate in the real estate market. Redeploying directly to a REIT may be of mutual benefit to both parties. REITs can be either public or private and each type should be considered separately. Public REITs include many of the same concerns as public equities, including market and business volatility. Additionally, given that interest rates expected to rise and cap rates are at near-historic lows in some areas, shares could come under pressure in the form of deploying capital into low cap rate deals, meaning that effective property values could decrease should interest rates go up. The benefit of a public REIT is liquidity; although investors must be aware that a number of smaller publicly traded REITs may be too small for large scale investments. On the private side, finding a REIT that can use debt capital on a short-term basis, with timelines matching those of NCEs, may be challenging as this asset class often relies on long-term capital investment. The benefit of a private REIT is that volatility is muted and managers may be more inclined to add value and therefore be more selective and strategic in deploying capital into various properties that offer value–add or opportunistic circumstances, which can offer a higher return. ALTERNATIVE INVESTMENTS IN PRIVATE MARKETS Alternative investments, most notably private markets, present another interesting type of redeployment opportunity. In recent years, the private markets have spawned a number of investment firms run by industry veterans that focus on value-added methods of capital deployment. By way of example, in the research conducted for this article, the authors have come across several investment management firms that deploy debt capital to stable businesses with strong balance sheets to finance cash flow needs for growth or specific near-term events. Many of these investments are significantly collateralized and therefore present some very strong risk mitigation benefits. Several of the teams explored had surprisingly strong and consistent return records. Private market investments are well positioned to meet program requirements and offer a number of benefits, including potentially less volatility and higher returns than comparable public markets. These investments EB5INVESTORS.COM 60