Both EOG and private REITs generate returns through real estate investment. However, they are different in terms of transparency, volatility, profit model, management style, cost control and interest alignment.
Most REITs are blind pool offering which means investors don’t know the name of the project, project location and financial projection. EOG fund share project information such as project location, business plan, financial projection and etc. As such, investor has options to invest our fund directly or co-invest single project.
In addition, EOG fund provide quarterly updates on our investments and provide full transparency into our investments and process. A Private REIT is not obligated to provide investors with similar transparency.
Our Funds operate through an LLC structure, which means that all tax benefits (such as depreciation and interest expense) pass through to investors. In a REIT structure, the tax benefits are captured at the REIT-level and any income paid out is taxed at the ordinary income rate.
REITs are typically designed to generate fees for the manager, while EOG is in the business of generating investment returns for both EOG and our investment partners and investors
REITs derive the majority of their fees through transactions, while ours come after the investor makes money.
Private REITs typically pay substantial fees to advisors to ‘sell’ their product. We don’t pay a middle man to ‘sell’ our investments, which means lower fees for the investor and more dollars invested into properties.
REITs take investor money upfront, even though they may not have properties to invest the capital. This creates pressure to invest money, which they either invest in cash or public securities. They can also pay investors a dividend with their own equity if they don’t have ample cash flow. EOG operates under a called capital structure, which means that we ask for capital only after we’ve found a property. Capital is returned to our investors after a property sale or refinance or from operating cash flow.
Alignment of Interests
EOG’s partners invest significantly in our own deals, whereas very few Private REIT managers invest significant capital into their vehicles.