If you own shares in a non-traded REIT, a Delaware Statutory Trust, or a Regulation D private placement and need to exit before the fund liquidates or lists, you generally have two paths: the sponsor’s own share repurchase program, or the secondary market for non-traded REITs and related private real estate interests, where institutional buyers, auction platforms, and broker-dealers trade these positions at a discount to the sponsor’s reported value. The repurchase program is almost always the better price when it’s open. When it isn’t, secondary market buyers will price in the illiquidity, and you should expect a discount, more paperwork, and a settlement window measured in weeks rather than days.
Start With the Sponsor’s Repurchase Program
Most non-traded REIT sponsors run their own share repurchase programs, and checking that window first usually returns a price closer to net asset value than any outside buyer will offer. Capacity is the constraint. A common structure caps total buybacks at roughly 2% of the fund’s NAV per month and 5% per quarter. When redemption requests exceed those limits, the sponsor fills them pro rata, so everyone who asked to sell gets only a fraction of what they requested.
Sponsors also reserve broad discretion to suspend repurchases. If the board decides that buybacks would strain cash reserves, hurt operations, or conflict with new investment plans, it can freeze the program with little warning. During the commercial real estate stress of 2022 and 2023, several large non-traded REITs limited or paused their redemption windows, which pushed more sellers toward the secondary market. Shares redeemed within the first year of ownership often carry a small penalty, such as a 2% early repurchase deduction, so timing matters.
If the program is open and you can wait for a monthly or quarterly window, take that route. If it’s suspended or oversubscribed, keep reading.
Who Buys on the Secondary Market
The secondary market is not a single exchange. It’s a loose network of institutional liquidity providers, specialized auction platforms, and broker-dealers who facilitate trades in shares that were never designed to change hands easily.
Institutional liquidity providers are the largest buyers. They specialize in acquiring illiquid positions, usually at a steep discount, and hold until the fund liquidates or lists publicly. Some of these firms initiate mini-tender offers, which are targeted solicitations to buy shares directly from existing investors. Because a mini-tender targets less than 5% of a fund’s outstanding shares, it falls below the threshold that triggers the full disclosure and filing requirements of Section 14(d) of the Exchange Act.1U.S. Securities and Exchange Commission. Commission Guidance on Mini-Tender Offers and Limited Partnership Tender Offers That reduced oversight creates real risk for sellers, covered below.
Auction platforms have emerged to make these trades more transparent. LODAS Markets, for instance, operates a marketplace where investors can list non-traded REIT, BDC, and private real estate interests for a pool of buyers to bid on.2LODAS Markets. The Marketplace to Sell and Buy Alternative and Real Estate Investments Competitive bidding on a platform generally beats a single unsolicited tender offer.
Broker-dealers also facilitate secondary trades as part of wealth management services. When a restricted security needs to be resold, SEC Rule 144 provides the framework: investors who have held the shares at least six months (for securities of a reporting company) or one year (for a non-reporting issuer) can sell under specific conditions without a new registration.3U.S. Securities and Exchange Commission. Rule 144 – Selling Restricted and Control Securities The broker-dealer also confirms that the buyer meets the suitability and accreditation standards that applied to the original offering.
Behind all of this sits the transfer agent, which maintains the sponsor’s official ownership records. Until the agent updates those records to reflect the new buyer, the deal isn’t legally complete. The agent verifies that the buyer meets the prospectus suitability requirements and that no liens or legal holds encumber the shares.
Why Mini-Tender Offers Deserve Extra Caution
Mini-tenders are where investors most often get hurt. The SEC has cautioned that some bidders make mini-tender offers at below-market prices, counting on investors not comparing the offer to the fund’s current NAV. Others post a premium and then extend the deadline repeatedly, hoping market conditions shift in their favor.4U.S. Securities and Exchange Commission. Mini-Tender Offers – Tips for Investors
The most dangerous feature is that you generally cannot withdraw your shares after tendering, even if the offer hasn’t yet closed. The bidder can extend the offer without giving you a right to pull out. Some bidders also lack the financing to complete the purchase, leading to weeks or months of payment delays.4U.S. Securities and Exchange Commission. Mini-Tender Offers – Tips for Investors
Mini-tenders aren’t unregulated. Section 14(e) of the Exchange Act prohibits fraud in any tender offer, Regulation 14E requires the offer to remain open for at least 20 business days, and the bidder must pay promptly or return shares when the offer expires. Rule 14e-8 prohibits publicly announcing a tender offer without a reasonable belief in the means to fund it.1U.S. Securities and Exchange Commission. Commission Guidance on Mini-Tender Offers and Limited Partnership Tender Offers Enforcement after the fact is cold comfort if your shares are already tied up. Before accepting any mini-tender, compare the offered price to the most recent NAV, confirm the bidder’s financing, and consider whether a platform-based sale might yield a better result.
How Prices Are Set
Every secondary negotiation starts with the sponsor’s reported per-share estimated value, commonly called the NAV. FINRA Rule 2310 requires that a non-traded REIT or direct participation program disclose this value in its periodic reports, based on independent third-party appraisals performed at least annually once the fund passes its second-anniversary mark.5FINRA. FINRA Rule 2310 – Direct Participation Programs Before that, sponsors can report a “net investment” value that reflects the offering price minus upfront fees.
The NAV sets the ceiling, not the floor. Secondary buyers almost always offer less because they’re taking on an illiquid asset with uncertain future cash flows. Discounts of 15% to 40% off NAV are common, and the spread depends heavily on portfolio quality. A fund with high occupancy, long-term leases, and steady distributions trades at a modest discount. A fund that has suspended distributions or faces near-term debt maturities sees the discount widen.
Transparency drives pricing as much as fundamentals do. Sponsors that publish detailed quarterly reports with property-level performance data give buyers enough information to price the risk with confidence, which tightens the discount. Funds with minimal disclosure or opaque fee structures force buyers to assume the worst.
Age matters too. A fund nearing its projected liquidation date means a shorter wait for the buyer and less uncertainty, which narrows the discount. Selling early in a fund’s life cycle typically produces the steepest haircut.
Transfer Restrictions That Can Block a Sale
Even after you find a willing buyer at an acceptable price, the sale can be blocked by restrictions in the fund’s governing documents. Nearly all REIT charters impose ownership concentration limits, typically capping any single investor at 9.9% of outstanding shares. The reason is tax status: the Internal Revenue Code requires that no five or fewer individuals own more than 50% of a REIT’s shares during the last half of its taxable year.6Office of the Law Revision Counsel. 26 USC 856 – Definition of Real Estate Investment Trust If a secondary sale would push the buyer past the threshold, the transfer agent will reject it.
Many funds also include a right of first refusal, giving the sponsor or existing investors the option to buy the shares at the same price and terms offered by the outside buyer. The sponsor may have 15 to 45 days to decide whether to exercise that right. If it does, your sale still closes at the agreed price, but the sponsor becomes the buyer.
Board discretion is the broadest restriction. Most non-traded REIT charters grant the board authority to refuse any transfer that could jeopardize the fund’s REIT qualification or conflict with the interests of remaining shareholders. This power is rarely exercised on routine secondary sales, but it exists. Check the fund’s prospectus or charter for these provisions before listing shares or accepting a tender offer.
Documents You’ll Need
Selling an illiquid position takes more paperwork than most investors expect. Start with your most recent account statement, which contains the investment program name and the CUSIP number, a nine-character identifier that uniquely identifies the security.7Investor.gov. CUSIP Number Most sponsors provide statements through an online investor portal.
You’ll also need the original subscription agreement, which specifies the share class (such as Class T, Class S, or Class I), your tax identification number, and the exact number of units held. Share class affects distribution rates and fee structures, so buyers care about this detail. Verify your unit count to the fourth decimal place against the transfer agent’s records. A mismatch, even a rounding difference, can stall the process.
Once you have a buyer or are responding to a tender offer, you’ll complete a Letter of Intent, a Sell Order Form, or (for tender offers) a Letter of Transmittal. These forms require your account number, share count, and price per share. The name on the form must match the account registration exactly. A nickname, a missing middle initial, or a different name order will cause rejection.
Federal Know Your Customer rules add another layer. You’ll need a valid government-issued ID and confirmation of the account’s tax status. If the position is held in an IRA, the IRA custodian must sign the transfer documents, because the custodian, not you, is the legal owner of the shares for tax purposes. Gather everything before listing the position and you’ll save weeks of back-and-forth.
If the Original Offering Used Rule 506(c)
If the shares were originally offered under Rule 506(c) of Regulation D, the issuer is legally obligated to take reasonable steps to verify that any buyer is an accredited investor.8U.S. Securities and Exchange Commission. Assessing Accredited Investors under Regulation D A buyer checking a box doesn’t satisfy this. Verification is typically handled by a registered broker-dealer, investment adviser, licensed attorney, or CPA who confirms status within the prior three months. For repeat investors previously verified, a written representation can suffice for up to five years. The current thresholds for individuals are $200,000 in annual income ($300,000 with a spouse) or net worth above $1 million, excluding the primary residence.9U.S. Securities and Exchange Commission. Accredited Investors
Transfer, Escrow, and Settlement Timing
After price and documents are set, the transfer package must include a Medallion Signature Guarantee. This is not a notary stamp. It’s a certification by a financial institution that the signature is genuine and that the institution accepts financial liability if it turns out to be forged. Banks, credit unions, and broker-dealers that participate in the Securities Transfer Agents Medallion Program provide the guarantee, but only for their own customers.10Investor.gov. Medallion Signature Guarantees – Preventing the Unauthorized Transfer of Securities If you don’t have a relationship with a participating institution, expect to open an account first. The guarantee itself typically costs between $0 and $50.
The transfer agent then runs the package through several checks: no liens, court orders, or stop-transfer flags from divorce or bankruptcy proceedings; buyer meets prospectus suitability standards. If everything clears, the agent updates the master shareholder ledger to reflect the new owner. Re-registration generally takes 30 to 60 days, though some sponsors move faster.
Money moves through escrow during that window. The buyer deposits the purchase price into a third-party escrow account, where it sits until the transfer agent confirms re-registration. Once confirmation arrives, escrow releases the funds to the seller by wire. If the shares are in an IRA, the wire must go directly to the IRA custodian to preserve the account’s tax status. Routing the funds to your personal bank account would be treated as a taxable distribution.
Tax Consequences by Vehicle
Selling on the secondary market triggers tax reporting that can be more complex than a typical stock sale, especially if the fund distributed return of capital during the holding period.
Non-Traded REITs
When you sell non-traded REIT shares, you receive Form 1099-B reporting the gross proceeds and, if the security qualifies as covered, your adjusted cost basis.11Internal Revenue Service. Instructions for Form 1099-B (2026) Gain or loss is the difference between sale price and adjusted basis, taxed at long-term capital gains rates if you held the shares more than a year.
The wrinkle is return of capital. Many non-traded REITs distribute cash that is partially classified as return of capital rather than ordinary income, and each such distribution reduces your basis. Buy at $10, receive $2 per share in return of capital over time, and your adjusted basis is $8. A sale at $7 on the secondary market looks like a $3 loss but the IRS sees a $1 loss. If cumulative return of capital exceeds your original investment, the excess is taxed as a capital gain even before you sell.
Delaware Statutory Trusts
DST investors receive a Schedule K-1 reporting their share of the trust’s income, deductions, and expenses through the transfer date. Because DSTs pass through depreciation deductions, your basis may have been reduced substantially during the holding period, which can produce a taxable gain larger than the cash you actually receive.
Investors who originally acquired their DST interest through a 1031 exchange should know that a cash sale on the secondary market is a taxable event. A 1031 exchange requires proceeds to be reinvested into qualifying like-kind property through a qualified intermediary. A straightforward cash sale to a secondary market buyer doesn’t meet that requirement. Deferring the gain would require structuring the exit as another 1031 exchange into a replacement property, which adds significant complexity.
IRA-Held Interests
Selling REIT or DST shares held within an IRA doesn’t trigger an immediate tax event for the account holder, since the IRA itself is the owner. One narrow exception: if a REIT is classified as “pension-held” under the Internal Revenue Code, a qualified trust holding more than 10% of the REIT could be required to treat a portion of its dividends as unrelated business taxable income.6Office of the Law Revision Counsel. 26 USC 856 – Definition of Real Estate Investment Trust This is uncommon for individual IRA holders but worth confirming through the fund’s disclosures if the IRA position is large.
Fees That Come Out of Your Proceeds
Several layers of fees apply, and they all reduce what you walk away with. Sponsors typically charge a transfer fee to update ownership records, either flat per position or as a small percentage of the transaction. Platform fees on an auction marketplace are separate and fall on either the buyer or seller depending on the platform’s terms. Broker-dealers facilitating the trade may charge a commission or markup. Escrow, if used, is another line item. None of these costs are enormous individually, but stacked on top of the discount to NAV, they matter. Ask for a complete fee breakdown before committing so you can calculate net proceeds accurately instead of discovering deductions at closing.
Registered Versus Private: Why It Matters for Sellers
One common source of confusion is whether non-traded REITs are registered with the SEC. Most are. The large non-traded REITs individual investors typically encounter, often called public non-listed REITs, file registration statements under the Securities Act and submit periodic reports to the SEC just like publicly traded companies.12U.S. Securities and Exchange Commission. CF Disclosure Guidance Topic No 6 – Staff Observations Regarding Disclosures of Non-Traded Real Estate Investment Trusts They simply choose not to list on an exchange, which is what makes them illiquid.
A separate, smaller category of private REITs is exempt from SEC registration under Regulation D and sold only to accredited investors.13Legal Information Institute. Rule 506 These carry even more restrictive transfer limitations because the registration exemption depends on the securities not being freely traded. If your position is a private placement REIT, secondary market options are narrower, and Rule 144’s holding periods become a hard constraint before any resale is possible.