The latest of the market crashes exposes again the risk of entrusting retirement assets to one venue. Conventional stock and bond portfolios have failed to protect most investors saving for retirement. Many “sophisticated” strategies have failed even more dramatically.

The traditional, time tested, strategy of institutional grade property investment can provide the income and capital preservation needed for retirement.  Used as an “alternative” to the conventional bond/stock world that may retain value when other assets crash.

One caveat is that many “alternative” strategies have paralleled the conventional market. The Wall Street traded REIT market is a good example. While the REITs own real estate, their shares perform more in sync with the overall market.  The 2010-11 run up in REIT stocks was substantially greater than any increase in underlying real estate value. Commercial, blue chip, real estate remained cheap.

So why would an investor buy overpriced Wall Street traded REIT stock, when one can acquire institutional property directly and at better pricing? Usually, it is investor who is poorly informed or intimidated by the challenges of owning and understanding this type of investment.

Most experts agree that blue chip property is attractively priced and well able to provide 6% income with strong capital preservation. This is ideal for retirement portfolios. Retirement strategies should focus on stable income and preservation of value. Frequently, Institutional investors look to blue chip commercial real estate and potential appreciation. As this is a successful solution for institutional, a savvy individual investor would do well to apply the same strategy to achieve their investment goals.

The challenge for the strategy is the size of the investment needed and the competence to create the portfolio. Most lack the means to purchase assets in the $5 million to $100 million range and, even if they have the means, the challenge of management and the evaluation remains. This suggests the desire for professionally created funds and trusts.

Professionally created property investment vehicles may be referred to as  “Real Estate Investment Securities.” They should be offered through FINRA and SEC licensed professionals in compliance with the requirements of the regulatory agencies. Comprehensive disclosures are included as a part of these requirements, and are typically far beyond that found in most real estate transactions. Disclosure doesn’t necessarily measure quality, but it does make the evaluation of quality easier. 

The offerings must be made via a registered professional. However, not all professionals have the necessary experience to evaluate real estate investment securities. Stock jockeys, bond salesman and annuity hawkers may know their fields well but they usually lack the fundamentals to assist in real estate securities investment. Investment real estate has specific measurement tools and guidelines. It has different risks and requires specialized expertise to determine if it will deliver on the promise of income and capital preservation.

It is the potential of net income and capital preservation that attracts investors.  In this time of recurring market losses the case for real estate investment securities can be compelling. Most experts report the pricing is attractive and the income above average. The required disclosures should provide the investor the means to know a potential investment property; and the use of a well-qualified professional should provide the investor with the access and expertise needed for such properties.