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The right resources to deeply understand REITs

Real estate investing is rich with opportunity. But understanding the unique category of Real Estate Investment Trusts (REITs) and the number of varied sector categories within real estate can take time. Broadstone is here to help investors—and the advisers and consultants who serve them—understand the Real Estate market in general, and REITs in particular.

From REIT basics to detailed papers from trusted sources, our library of materials is designed to provide you with a full complement of insight into the market.

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If you have questions or you’re ready for an initial consultation, call 585.287.6500 or email info@broadstone.com

REIT 101

"Private REITs" & "Public Non-Traded REITs" - What's the Difference?

"Private REITs" and "Public Non-Traded REITs" are oftentimes confused with one-another, as both types of products are structured as open-ended vehicles, and neither type of product is listed or traded on public stock exchanges. There are key differences, though, in the way that these types of offerings are sold to investors, how they are valued, and the commissions & fees that can be involved in a purchase.
Broadstone Net Lease is a "Private REIT." Private REITs are not SEC-registered entities, but are required to conform with the SEC's rule 506, regulation D. The offerings are available only to investors that meet one or more of the SEC's "Accredited Investor" thresholds, and are sold directly via private placement. Investors' shares are valued on a quarterly basis via a "Net Asset Value" calculation, which is outlined in detail in the FAQ. While private REITs are, by law, allowed to charge front-loaded commissions on investments, Broadstone Net Lease does not charge a commission to invest, and does not pay any broker-dealer commissions on sales of BNL shares. The REIT has, instead, built in a one-time capital-raising fee of 0.5%, which helps cover the cost of the offering, including legal and marketing expenses. This means that 99.5% of every dollar invested in Broadstone Net Lease goes directly towards purchasing income producing real estate.
"Non-Traded REITs" are SEC-registered offerings, and are required to conform with the Securities Acts of 1933 and 1934. These offerings are most frequently marketed and sold by a "broker/dealer" or "dealer manager," which may not be the same entity as the REIT itself, but may be "affiliated," and ultimately controlled by the same management team. These "broker/dealers" often charge investors front-loaded commissions as high as 10% of the purchase value, and, according to a 2012 report from the Securities Litigation and Consulting group, Inc., the all-in commissions for "organization and offering expenses" can sometimes reach as high as 15%.

How do I invest with Broadstone?

Click on the Investor Kit on the left-hand side of this page to request more information.

What does “Net Lease” mean? What about “Triple Net Lease?”

A net lease requires the tenants to pay some or all of the property expenses that are otherwise paid by the property owner, such as real estate taxes, insurance, maintenance, and utilities. A triple net lease is an agreement in which the tenant is solely responsible for all of the costs related to the property they're leasing, in addition to rental fee. The name “triple net” comes from the three types of costs the tenant has to pay—net real estate taxes, net building insurance, and net maintenance.

What is a REIT?

Short for Real Estate Investment Trust, a REIT is an organization that owns—and usually operates—income-producing real estate. It can include commercial and residential properties. A REIT can deduct dividends paid to its owners and avoid incurring all or part of its U.S. federal income tax liabilities. REITs are required to distribute all of its net annual income to its shareholders. REITs were first introduced in the U.S. to provide all investors an opportunity to invest in large portfolios of income-producing real estate through the purchase of liquid securities. A REIT is in many ways like a mutual fund for real estate with investors obtaining the benefit of a diversified portfolio under professional management.

What is the criteria necessary to qualify as an “Accredited Investor?”

According to the Securities and Exchange Commission, Under the Securities Act of 1933, a company that offers or sells its securities must register the securities with the SEC or find an exemption from the registration requirements. The Act provides companies with a number of exemptions. For some of the exemptions, such as rules 505 and 506 of Regulation D, a company may sell its securities to what are known as "accredited investors." The federal securities laws define the term accredited investor in Rule 501 of Regulation D as:
  • a bank, insurance company, registered investment company, business development company, or small business investment company;
  • an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
  • a charitable organization, corporation, or partnership with assets exceeding $5 million;
  • a director, executive officer, or general partner of the company selling the securities;
  • a business in which all the equity owners are accredited investors;
  • a natural person who has individual net worth, or joint net worth with the person's spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person;
  • a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
  • a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.
See the Securities and Exchange Commission Website for more information.

What are “Alternative Investments?”

An alternative investment is one that does not involve the traditional investments of stocks, bonds and cash. It includes tangible assets such as precious metals, art, antiques, or coins, as well as financial assets such as commodities, private equity, and hedge funds. Real estate often falls under the term “alternative investment.” Such investments are often used to diversify, thereby reducing overall risk. Alternative investments such as real estate often require a high degree of investment analysis before buying. They may also be relatively illiquid.

How does Broadstone Net Lease calculate it’s Determined Share Value (DSV)?

On a quarterly basis, BNL’s Independent Directors Committee establishes and approves the Determined Share Value (DSV), which is derived by adjusting the net asset value per share to reflect the current market value of the real estate investment portfolio and the entities debt. Each quarter, BRE’s Property Management Team determines the current market value of the real estate investment portfolio by applying a current market capitalization rate to each property’s upcoming 12-months rental revenue. The appropriate capitalization rate is derived based on the current market conditions for comparable properties. Due to the significant volume of transactions and straightforward nature of underwriting in the net lease market resulting from the long-term leases in place and lack of operating expenses or capital expenditures, BNL utilizes leading national real estate databases to gather real-time sales comparables referenced across geography and property types. Additionally, BRE’s Acquisition Team is active in the market and studies potential acquisitions every day, providing additional opportunities for market value comparables. All of these factors lead to a strong market presence that allows management to adjust capitalization rates up or down based on actual market conditions. Further, BNL Property Valuation Policy requires a third-party appraisal to be conducted on portfolio holdings on a rolling two year basis. The valuations are then reviewed by a third-party, nationally recognized real estate sales and appraisal organization, Cushman & Wakefield (CW) and their Valuation and Advisory Group, on a quarterly and annual basis for procedural and market value accuracy. CW provides opinion on the estimated fair market value of the portfolio and also provides opinion on any discrepancies or anomalies via a thorough written report. The Capital Markets team also calculates a debt mark-to-market adjustment each quarter which in turn accounts for debt above or below market interest rates. Subsequent to the Property Management Team’s determination of each property’s current value and the calculation of DSV, the DSV and property valuation summaries are reviewed, BNL’s Management and submitted to the Independent Directors Committee for review and approval or adjustment. The Independent Directors discuss the valuation recommendations of management at its quarterly meeting and then sets the final DSV for the next three months. Management and Inside Directors do not have a vote on the setting of the DSV. The valuation guides presented here closely match those of the Investment Program Association and their guidance issued on April 25, 2013 in “The IPA Practice Guideline 2013-01-Valuations of Publicly Registered Non-Listed REITs.”

What is “Determined Share Value (DSV)”?

The share price may be adjusted quarterly by the Independent Directors Committee based on the net asset value of the portfolio and such other factors as the Independent Directors Committee may, in its sole discretion determine. The Asset Manager may, but is not required to, engage consultants, appraisers and other real estate or investment professionals to assist in their valuations.

How is Compound Annual Growth Rate (CAGR) calculated?

The Compound Annual Growth Rate is defined as the average annual rate of growth over a defined number of years. CAGR is calculated as follows: [(Ending Value/Beginning Value)^1/n] -1, where n is the number of annual periods.

How do you calculate Average Annual Total Return?

The Average Annual Total Return is defined as the average annual return over a defined number of years and assumes the reinvestment of dividends. Average Annual Total Return is calculated as follows: [(Ending Value/Beginning Value)^1/n] -1, where n is the number of annual periods.

Help me understand “Operating Adjusted Funds From Operations (OAFFO)”

Operating Adjusted Funds From Operations is a non-GAAP supplemental financial performance measure to evaluate the operating performance of our real estate portfolio. OAFFO, as defined by our company, excludes from AFFO property acquisition expenses. In evaluating the performance of our portfolio over time, management employs business models and analyses that differentiate the costs to acquire investments from the investments’ revenues and expenses. Management believes that excluding the items noted to derive OAFFO provides investors with supplemental performance information that is consistent with the performance models and analysis used by management, and provides investors a view of the performance of our portfolio over time, including after the Company ceases to acquire properties on a frequent and regular basis. OAFFO also allows for a comparison of the performance of our real estate portfolio with other REITs that are not currently engaging in acquisitions and mergers.

What are “Adjusted Funds From Operations (AFFO)?”

Adjusted Funds From Operations is a non-GAAP supplemental financial performance measure to evaluate the operating performance of our real estate portfolio. AFFO, as defined by our company, excludes from FFO amortization and write off of deferred financing costs, straight-line rent adjustments, above and below market lease intangibles amortization, debt prepayment fees, and adjustments for discontinued operations. AFFO allows for a comparison of the performance of our portfolio with that of other REITs, as AFFO, or an equivalent measure, is routinely reported by other REITs, and we believe often used by analysts and investors for comparison purposes.

What does “Funds From Operations (FFO)” mean?

Funds From Operations is a non-GAAP financial performance measure defined by the National Association of Real Estate Investment Trusts (“NAREIT”) and widely recognized by investors and analysts as one measure of operating performance of a real estate company. FFO is defined as net income (computed in accordance with generally accepted accounting principles), excluding items such as real estate depreciation and amortization, gains and losses on the sale of depreciable real estate and impairments of depreciable real estate. Depreciation and amortization as applied in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, it is management’s view, and we believe the view of many industry investors and analysts, that the presentation of operating results for real estate companies by using historical cost accounting method alone is insufficient. In addition, FFO excludes gains and losses from the sale of depreciable real estate and impairment charges on depreciable real estate, which we believe provides management and investors with a helpful additional measure of the performance of our real estate portfolio, as it allows for comparisons, year to year, that reflect the impact of operations from trends in items such as occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs. We compute FFO in accordance with NAREIT’s definition.

What is a REIT? How can I learn more about this business?

REIT stands for Real Estate Investment Trust.  Read more in our REIT 101 section.

Is Broadstone hiring?

Visit the Broadstone Careers page to read about what it's like to work at Broadstone and possible opportunities.

How do I invest in Broadtree Residential?

Broadtree Residential is a private real estate investment offering which allows investment by Accredited Investors only.  Investments are accepted on a monthly basis and the minimum initial investment level is $100,000.

Steps to Invest:

  1. Request and review Investor Kit and contact our Investor Relations team with any questions.
  2. Request Private Placement Memorandum and Subscription Documents from our Investor Relations team
  3. Complete and return subscription documents to a member of the Investor Relations team so that the funding process can be initiated.

How do I invest in Broadstone Net Lease?

Broadstone Net Lease is a private REIT which allows investment by Accredited Investors.  Investments are accepted on a monthly basis and the minimum initial investment level is $500,000. Steps to Invest:
  1. Request and review Investor Kit and contact our Investor Relations team with any questions.
  2. Request Private Placement Memorandum and Subscription Documents from our Investor Relations team
  3. Complete and return subscription documents to a member of the Investor Relations team so that the funding process can be initiated.

News

FAQs

"Private REITs" & "Public Non-Traded REITs" - What's the Difference?

"Private REITs" and "Public Non-Traded REITs" are oftentimes confused with one-another, as both types of products are structured as open-ended vehicles, and neither type of product is listed or traded on public stock exchanges. There are key differences, though, in the way that these types of offerings are sold to investors, how they are valued, and the commissions & fees that can be involved in a purchase.
Broadstone Net Lease is a "Private REIT." Private REITs are not SEC-registered entities, but are required to conform with the SEC's rule 506, regulation D. The offerings are available only to investors that meet one or more of the SEC's "Accredited Investor" thresholds, and are sold directly via private placement. Investors' shares are valued on a quarterly basis via a "Net Asset Value" calculation, which is outlined in detail in the FAQ. While private REITs are, by law, allowed to charge front-loaded commissions on investments, Broadstone Net Lease does not charge a commission to invest, and does not pay any broker-dealer commissions on sales of BNL shares. The REIT has, instead, built in a one-time capital-raising fee of 0.5%, which helps cover the cost of the offering, including legal and marketing expenses. This means that 99.5% of every dollar invested in Broadstone Net Lease goes directly towards purchasing income producing real estate.
"Non-Traded REITs" are SEC-registered offerings, and are required to conform with the Securities Acts of 1933 and 1934. These offerings are most frequently marketed and sold by a "broker/dealer" or "dealer manager," which may not be the same entity as the REIT itself, but may be "affiliated," and ultimately controlled by the same management team. These "broker/dealers" often charge investors front-loaded commissions as high as 10% of the purchase value, and, according to a 2012 report from the Securities Litigation and Consulting group, Inc., the all-in commissions for "organization and offering expenses" can sometimes reach as high as 15%.

How do I invest with Broadstone?

Click on the Investor Kit on the left-hand side of this page to request more information.

What does “Net Lease” mean? What about “Triple Net Lease?”

A net lease requires the tenants to pay some or all of the property expenses that are otherwise paid by the property owner, such as real estate taxes, insurance, maintenance, and utilities. A triple net lease is an agreement in which the tenant is solely responsible for all of the costs related to the property they're leasing, in addition to rental fee. The name “triple net” comes from the three types of costs the tenant has to pay—net real estate taxes, net building insurance, and net maintenance.

What is a REIT?

Short for Real Estate Investment Trust, a REIT is an organization that owns—and usually operates—income-producing real estate. It can include commercial and residential properties. A REIT can deduct dividends paid to its owners and avoid incurring all or part of its U.S. federal income tax liabilities. REITs are required to distribute all of its net annual income to its shareholders. REITs were first introduced in the U.S. to provide all investors an opportunity to invest in large portfolios of income-producing real estate through the purchase of liquid securities. A REIT is in many ways like a mutual fund for real estate with investors obtaining the benefit of a diversified portfolio under professional management.

What is the criteria necessary to qualify as an “Accredited Investor?”

According to the Securities and Exchange Commission, Under the Securities Act of 1933, a company that offers or sells its securities must register the securities with the SEC or find an exemption from the registration requirements. The Act provides companies with a number of exemptions. For some of the exemptions, such as rules 505 and 506 of Regulation D, a company may sell its securities to what are known as "accredited investors." The federal securities laws define the term accredited investor in Rule 501 of Regulation D as:
  • a bank, insurance company, registered investment company, business development company, or small business investment company;
  • an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
  • a charitable organization, corporation, or partnership with assets exceeding $5 million;
  • a director, executive officer, or general partner of the company selling the securities;
  • a business in which all the equity owners are accredited investors;
  • a natural person who has individual net worth, or joint net worth with the person's spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person;
  • a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
  • a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.
See the Securities and Exchange Commission Website for more information.

What are “Alternative Investments?”

An alternative investment is one that does not involve the traditional investments of stocks, bonds and cash. It includes tangible assets such as precious metals, art, antiques, or coins, as well as financial assets such as commodities, private equity, and hedge funds. Real estate often falls under the term “alternative investment.” Such investments are often used to diversify, thereby reducing overall risk. Alternative investments such as real estate often require a high degree of investment analysis before buying. They may also be relatively illiquid.

How does Broadstone Net Lease calculate it’s Determined Share Value (DSV)?

On a quarterly basis, BNL’s Independent Directors Committee establishes and approves the Determined Share Value (DSV), which is derived by adjusting the net asset value per share to reflect the current market value of the real estate investment portfolio and the entities debt. Each quarter, BRE’s Property Management Team determines the current market value of the real estate investment portfolio by applying a current market capitalization rate to each property’s upcoming 12-months rental revenue. The appropriate capitalization rate is derived based on the current market conditions for comparable properties. Due to the significant volume of transactions and straightforward nature of underwriting in the net lease market resulting from the long-term leases in place and lack of operating expenses or capital expenditures, BNL utilizes leading national real estate databases to gather real-time sales comparables referenced across geography and property types. Additionally, BRE’s Acquisition Team is active in the market and studies potential acquisitions every day, providing additional opportunities for market value comparables. All of these factors lead to a strong market presence that allows management to adjust capitalization rates up or down based on actual market conditions. Further, BNL Property Valuation Policy requires a third-party appraisal to be conducted on portfolio holdings on a rolling two year basis. The valuations are then reviewed by a third-party, nationally recognized real estate sales and appraisal organization, Cushman & Wakefield (CW) and their Valuation and Advisory Group, on a quarterly and annual basis for procedural and market value accuracy. CW provides opinion on the estimated fair market value of the portfolio and also provides opinion on any discrepancies or anomalies via a thorough written report. The Capital Markets team also calculates a debt mark-to-market adjustment each quarter which in turn accounts for debt above or below market interest rates. Subsequent to the Property Management Team’s determination of each property’s current value and the calculation of DSV, the DSV and property valuation summaries are reviewed, BNL’s Management and submitted to the Independent Directors Committee for review and approval or adjustment. The Independent Directors discuss the valuation recommendations of management at its quarterly meeting and then sets the final DSV for the next three months. Management and Inside Directors do not have a vote on the setting of the DSV. The valuation guides presented here closely match those of the Investment Program Association and their guidance issued on April 25, 2013 in “The IPA Practice Guideline 2013-01-Valuations of Publicly Registered Non-Listed REITs.”

What is “Determined Share Value (DSV)”?

The share price may be adjusted quarterly by the Independent Directors Committee based on the net asset value of the portfolio and such other factors as the Independent Directors Committee may, in its sole discretion determine. The Asset Manager may, but is not required to, engage consultants, appraisers and other real estate or investment professionals to assist in their valuations.

How is Compound Annual Growth Rate (CAGR) calculated?

The Compound Annual Growth Rate is defined as the average annual rate of growth over a defined number of years. CAGR is calculated as follows: [(Ending Value/Beginning Value)^1/n] -1, where n is the number of annual periods.

How do you calculate Average Annual Total Return?

The Average Annual Total Return is defined as the average annual return over a defined number of years and assumes the reinvestment of dividends. Average Annual Total Return is calculated as follows: [(Ending Value/Beginning Value)^1/n] -1, where n is the number of annual periods.

Help me understand “Operating Adjusted Funds From Operations (OAFFO)”

Operating Adjusted Funds From Operations is a non-GAAP supplemental financial performance measure to evaluate the operating performance of our real estate portfolio. OAFFO, as defined by our company, excludes from AFFO property acquisition expenses. In evaluating the performance of our portfolio over time, management employs business models and analyses that differentiate the costs to acquire investments from the investments’ revenues and expenses. Management believes that excluding the items noted to derive OAFFO provides investors with supplemental performance information that is consistent with the performance models and analysis used by management, and provides investors a view of the performance of our portfolio over time, including after the Company ceases to acquire properties on a frequent and regular basis. OAFFO also allows for a comparison of the performance of our real estate portfolio with other REITs that are not currently engaging in acquisitions and mergers.

What are “Adjusted Funds From Operations (AFFO)?”

Adjusted Funds From Operations is a non-GAAP supplemental financial performance measure to evaluate the operating performance of our real estate portfolio. AFFO, as defined by our company, excludes from FFO amortization and write off of deferred financing costs, straight-line rent adjustments, above and below market lease intangibles amortization, debt prepayment fees, and adjustments for discontinued operations. AFFO allows for a comparison of the performance of our portfolio with that of other REITs, as AFFO, or an equivalent measure, is routinely reported by other REITs, and we believe often used by analysts and investors for comparison purposes.

What does “Funds From Operations (FFO)” mean?

Funds From Operations is a non-GAAP financial performance measure defined by the National Association of Real Estate Investment Trusts (“NAREIT”) and widely recognized by investors and analysts as one measure of operating performance of a real estate company. FFO is defined as net income (computed in accordance with generally accepted accounting principles), excluding items such as real estate depreciation and amortization, gains and losses on the sale of depreciable real estate and impairments of depreciable real estate. Depreciation and amortization as applied in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, it is management’s view, and we believe the view of many industry investors and analysts, that the presentation of operating results for real estate companies by using historical cost accounting method alone is insufficient. In addition, FFO excludes gains and losses from the sale of depreciable real estate and impairment charges on depreciable real estate, which we believe provides management and investors with a helpful additional measure of the performance of our real estate portfolio, as it allows for comparisons, year to year, that reflect the impact of operations from trends in items such as occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs. We compute FFO in accordance with NAREIT’s definition.

What is a REIT? How can I learn more about this business?

REIT stands for Real Estate Investment Trust.  Read more in our REIT 101 section.

Is Broadstone hiring?

Visit the Broadstone Careers page to read about what it's like to work at Broadstone and possible opportunities.

How do I invest in Broadtree Residential?

Broadtree Residential is a private real estate investment offering which allows investment by Accredited Investors only.  Investments are accepted on a monthly basis and the minimum initial investment level is $100,000.

Steps to Invest:

  1. Request and review Investor Kit and contact our Investor Relations team with any questions.
  2. Request Private Placement Memorandum and Subscription Documents from our Investor Relations team
  3. Complete and return subscription documents to a member of the Investor Relations team so that the funding process can be initiated.

How do I invest in Broadstone Net Lease?

Broadstone Net Lease is a private REIT which allows investment by Accredited Investors.  Investments are accepted on a monthly basis and the minimum initial investment level is $500,000. Steps to Invest:
  1. Request and review Investor Kit and contact our Investor Relations team with any questions.
  2. Request Private Placement Memorandum and Subscription Documents from our Investor Relations team
  3. Complete and return subscription documents to a member of the Investor Relations team so that the funding process can be initiated.