Why Commercial Real Estate?
Commercial real estate has the potential to offer several benefits and may serve an integral role in diversified investment portfolios.
Commercial real estate is considered a non-correlated asset, meaning that its value does not fluctuate in conjunction with public markets. Adding a non-correlated asset such as commercial real estate to an existing portfolio has the potential to increase diversification and manage portfolio volatility.
It is important to note that commercial real estate performs differently than other asset classes such as stocks or bonds and lacks liquidity. Also, an investment in a non-listed real estate investment trust (REIT) is not a direct investment in commercial real estate.
CIM believes that one of the most beneficial ways to participate in the benefits of commercial real estate is through a non-listed REIT.
Understanding Non-Listed REITs
A non-listed REIT is illiquid, designed as a long-term investment and generally only suitable for those with an investment horizon in excess of seven years. While a non-listed REIT does lack liquidity, it may also help provide lower portfolio volatility because the shares are not openly traded on a securities exchange.
Shares in REIT are purchased.
The REIT uses this capital to purchase properties that fit the REIT’s objectives.2
Tenants who lease space within those properties pay rent to the REIT.
The rent, minus fees and expenses associated with managing the REIT, is passed along as distributions to shareholders.1
Potential Benefits of Non-Listed REITs1
Rent collected from tenants contributes to the monthly distributions.
Adding a non-correlated asset class such as commercial real estate to an existing portfolio helps increase diversification.
Commercial real estate values have historically been highly correlated to inflation.
Commercial real estate has the potential to appreciate in value over the long term.
Lower Portfolio Volatility
A well-diversified portfolio has the potential to reduce volatility without sacrificing return.
The Cole Net-Lease investment approach is built upon the simple objective of collecting rent from some of the biggest corporations in America and passing it on as distributions to our shareholders.1 Cole Net-Lease Assets invest primarily in commercial real estate leased to creditworthy tenants under long-term net leases and situated in strategic locations.
The tenant, not the landlord, is responsible for monthly rental payments as well as the majority of the property operating costs. This limits the REIT’s expenses.
Industry-leading, creditworthy tenants and corporate backed lease guarantees minimize the risk of interrupted income. Not all tenants have lease guarantees.
Our typical net lease is long-term with regular rent increases that may adjust for inflation.3
Real Estate Experience
Throughout the lifecycle of each Cole REIT, experienced real estate professionals employ a clearly defined and disciplined approach to the investment process, ongoing operations and active portfolio management. The fundamental objective is to build and manage core net-lease portfolios with strong, diversified metrics and reliable net operating income, which provides long-term value to shareholders.
Since 2004, nine Cole REITs have collectively acquired more than $22 billion in assets.4
We have seen the market fluctuate and continue to apply the same business model, which has been successful during various economic cycles.
We focus on commercial real estate that meets specific criteria, and understand the key components of a conservative real estate investment strategy.
Active Portfolio Management
Our team actively monitors the broader real estate property markets and our real estate portfolios to potentially capitalize on opportunities that could enhance overall credit quality, strengthen yield characteristics and further diversify across tenancy, industry and geography. Our dynamic and disciplined portfolio strategy involves actively seeking opportunities to buy or sell properties, based on the investment objectives of the product offering.
Our active portfolio management process encompasses three main areas:
Maximizing Net Operating Income
Our focus is on maximizing rental revenue through property management, leasing and operational reviews of properties.
Strengthening Portfolio Metrics
We strategically build and manage portfolios to optimize exposure to targeted tenants, industries and credit ratings.
Positioning for Long-Term Value
We strive to ensure that Cole REITs are well-positioned for the long term and provide future options for a liquidity event.
There is no guarantee that any CCO Group program will replicate these types of liquidity events, if at all, and the programs are not required to effect a liquidity event at any time. The programs have limited liquidity as there is no public market, and one may never exist, for shares of common stock.
Please consult the Prior Performance Summary and Appendix A — Prior Performance Tables sections of any Cole REIT prospectus for a further discussion as certain Cole REIT programs have experienced adverse business developments.
1) There is no guarantee that shareholders will receive a distribution, and distributions have been paid from proceeds from the offering, from borrowings or from the sale of assets. Fees and expenses associated with the management of the REIT will impact the ability to pay distributions and the effects of any capital appreciation. There is no guarantee that the shares of the REIT and the underlying properties will appreciate in value. Shareholders should be aware that returns and volatility may not have a favorable effect on their portfolio. Shareholders should consider their ability to withstand the lack of liquidity and price transparency. The REIT may exhibit volatility even though its securities are not listed on a national securities exchange.
2) Requires payments by the REIT of significant fees to the advisor and its affiliates, many of which face a conflict of interest.
3) Double net lease (NN) is a lease under which the tenant agrees to pay all operating expenses associated with the property (e.g., real estate taxes, insurance, maintenance), but excludes some or all major repairs (e.g. roof, structure, parking lot). Triple net lease (NNN) is a lease under which the tenant agrees to pay all expenses associated with the property (e.g., real estate taxes, insurance, maintenance and repairs).
4) Data as of 09/30/2017.
Past performance does not guarantee future results. Commercial real estate performs differently than other asset classes such as stocks or bonds and lacks liquidity. An investment in a non-listed REIT is not a direct investment in commercial real estate. Non-listed REITs should be considered long-term investments. The REIT may exhibit volatility even though its securities are not listed on a national securities exchange. CIM believes the historical performance and correlation of commercial real estate compared to other asset classes is, however, relevant to evaluating an investment in a non-listed REIT comprising primarily commercial real estate assets.