Private Real Estate Funds: NAV REITs, Core Funds, Closed-End Funds, and How You Get Paid Out

Private real estate funds offer steadier reported values and access to property you can't buy on an exchange. In return, you accept limits on when you can get your money out. Between 2022 and 2026 those limits were tested hard. Blackstone Real Estate Income Trust (BREIT) paid redeeming investors only part of what they asked for from late 2022 until early 2024, and the core funds that pension plans use built exit queues equal to almost a fifth of their value. In April 2026, Starwood Real Estate Income Trust (SREIT) stopped nearly all repurchases.

This guide covers the three main fund structures, how their values are set, how redemption limits have worked in practice, what the fees cost by share class, and how to test the return math in a closed-end fund's offering documents. Listed REITs are covered in our REIT investing guide. Buying property directly or through a single-deal syndication is in our commercial real estate guide, and online platforms with Reg CF and Reg A offerings are in our real estate crowdfunding guide.

The three structures

Closed-end real estate funds call your commitment in stages as they buy, so they have the same J-curve and uncalled-capital planning problem as private equity funds. Our guide to private equity access for individuals walks through those cash flows. Real estate interval funds sit between the structures above: they are registered funds that must offer to buy back between 5% and 25% of their shares at set intervals, usually quarterly.

Appraisal-based values move late

A listed REIT's price changes every trading day. A private fund's NAV changes when its properties are revalued, and appraisers work from completed sales, which take months to happen and months more to show up in data. BREIT's 2025 annual report describes a typical process: the adviser values each property monthly, an independent valuation advisor reviews those values for reasonableness using information the adviser supplies, and each property gets a third-party appraisal once a year. The filing states that the adviser is "ultimately and solely responsible" for the NAV. The adviser's management fee is also a percentage of that NAV.

The timing difference shows clearly in 2022 to 2025:

Sources: Nareit fact sheet; NCREIF snapshot reports for 2022, 2024, and 2025; BREIT 10-K filings for 2022, 2023, and 2025. Combined figures are compounded by us.

REITs took their loss in 2022, when interest rates jumped. The core funds took theirs in 2023 and 2024, after appraisals caught up. Over the three years from 2023 through 2025, NCREIF's own figures show ODCE losing 4.25% a year after fees while the REIT index gained 6.12% a year. BREIT's better record also reflects what it owns: at mid-2026 its property was 42% rental housing, 27% data centers, and 20% industrial, per its second-quarter 10-Q. So the gap with the indexes is partly the portfolio and partly the valuation method, and the table can't separate the two.

Two practical consequences follow. Smoothed values make private real estate look less volatile and less tied to stocks than it is, so an allocation model fed those numbers will tend to hold too much of it. And when a fund pays leaving investors at an appraised NAV that is above what its buildings would sell for, the difference comes out of the pockets of the investors who stay. Redemption caps exist partly to limit that transfer.

How redemption limits work in practice

A non-traded REIT's repurchase plan reads like a liquidity promise, but the board controls it. BREIT's plan, as described in its 10-Q, is typical:

• Repurchases are limited to 2% of aggregate NAV a month and 5% a quarter.
• The board may buy back less than requested, or nothing, if it decides repurchases would strain liquidity or hurt the company as a whole.
• When requests exceed the limits, requests tied to death, disability, or divorce are paid first and everyone else is paid pro rata. Unpaid requests must be resubmitted.
• Shares held less than a year are repurchased at 98% of the transaction price.

BREIT, 2022 to 2026

Requests passed BREIT's limits in November 2022, and from then on it paid them pro rata. Requests peaked at $5.3 billion in January 2023. In December 2023 it paid about 52% of $1.1 billion requested, and in January 2024 about 88% of $1.3 billion. In February 2024 it paid all $961 million requested, the first full month since 2022, as reported by Bisnow and Commercial Observer.

It has paid every request since then, but that has taken selling. In 2025 BREIT repurchased $6.2 billion of shares and units while raising $3.6 billion, and it sold $6.6 billion of property during the year. In the first half of 2026 it repurchased another $2.1 billion, again covering all requests.

SREIT, 2022 to 2026

SREIT's second-quarter 2026 10-Q says repurchase requests have exceeded its plan's limits every month since October 2022. The board tightened the plan in steps:

Barry Sternlicht's April 29, 2026 letter to shareholders explains the sequence. SREIT had redeemed more than $5 billion of shares at NAV, funded partly by $5.1 billion of property sales. In March 2024 it slowed sales rather than sell into a weak market, and it kept paying its dividend and funding some redemptions, which added debt and pushed NAV per share down month after month. The letter puts the decline from redemptions at roughly 6% over the prior twelve months. The same letter cut the Class I distribution rate to 4.7%, and it notes that Starwood and its affiliates own about 7% of the fund. In August 2026 SREIT sold a 41.5% stake in about 120 affordable housing properties to Apollo for $1.02 billion. Its September 2026 prospectus supplement shows Class I NAV of $19.27 per share and total NAV of $7.9 billion at August 31, and repurchases of $4.2 million in July and $5.1 million in August.

Institutional funds have the same problem

Pension plans in open-end core funds wait in line too. Callan reports that ODCE redemption queues peaked at 19.3% of NAV in the first quarter of 2024 and that, over the two years before its 2025 review, managers paid out only about 5% of the queue each quarter because few properties were selling. Queues then fell as sales picked up, some investors withdrew requests, and some funds added loyalty fees that reward investors for staying. Callan put the queue at about 9.9% of NAV in its second-quarter 2026 review.

Treat the stated repurchase limit as a maximum. When you size a position, assume you may get nothing out for two or three years.

What the fees cost

Non-traded REIT fees differ by share class, and the class is often chosen by the adviser or platform selling it. BREIT's 2025 10-K lays out a representative stack:

• Management fee: 1.25% a year of NAV for most share classes.
• Performance participation: 12.5% of total return, paid only after investors earn 5% for the year and after prior losses are recovered.
• Class S-2 and T-2 shares: up to 3.5% of the purchase price upfront, plus a 0.85% annual servicing fee.
• Class D-2 shares: up to 1.5% upfront and 0.25% a year.
• Class I shares: no upfront charge or servicing fee.

The difference shows up in reported returns. In 2025 BREIT's Class I shares returned 8.1% and its Class S shares 7.2%, or 3.5% for an investor who paid the maximum upfront charge that year. Over five years the gap compounds:

The assumptions are ours; the 7% return is a round number, not a forecast. The $10,041 difference comes from share class alone, before anything else about the fund.

Institutions pay less. In Callan's 2024 study of open-end real assets funds, the median management fee for a core real estate fund on a $25 million account was 0.96%, and only four core funds charged performance fees. Value-add funds had a median fee of 1.30%, and the median preferred return across funds with performance fees was 7%.

Closed-end funds usually charge a management fee on committed capital while they are investing, then on invested capital, plus carried interest. The offering memorandum will also list fees paid to the manager's affiliates at the property level, such as acquisition, property management, construction management, financing, and disposition fees. Those come on top of the headline fee, so add them up.

How a closed-end fund splits the profits

Most closed-end funds pay out through a waterfall. Here is one with common terms: an 8% preferred return compounded annually, a 100% catch-up, and an 80/20 split.

Illustration: investors put in $100 million at the start, and the fund distributes $170 million at the end of year five.

The fund earned 1.70 times its money, or 11.2% a year. Investors received 1.56 times theirs, or 9.3% a year, and the manager took 20% of the $70 million profit. The preferred return only gives investors priority in the payout order. It isn't a guaranteed return, and once the catch-up is paid the manager ends up with its full 20% anyway.

Catch-up terms change the result. With a 50/50 catch-up, where the manager gets half of the cash in tier 3, the manager would receive $11.53 million (16.5% of profits) and investors would earn 9.6% a year. With no catch-up, the manager would get 20% of the $23.07 million left after the preferred return, or $4.61 million.

The timing of carried interest matters too. A whole-fund (European) waterfall pays carry only after investors have their capital and preferred return back across the entire fund. A deal-by-deal (American) waterfall pays it as each property sells. Illustration, ignoring the preferred return: a fund makes two $50 million investments. The first sells in year three for $100 million, and the second sells in year six for $25 million. Deal by deal, the manager collects $10 million of carry in year three. Measured across the whole fund, profit is only $25 million and carry should be $5 million, so the manager owes $5 million back under the clawback. Clawbacks are often limited to what the manager kept after taxes and are only as good as the escrow or guarantee behind them, so read those terms before you commit.

Stress-test the exit cap rate

A property's cap rate is its net operating income (NOI) divided by its price. Sponsors estimate the sale price by dividing projected NOI by an assumed exit cap rate, and small changes in that one assumption move returns more than almost anything else in the model.

Illustration: a fund buys a $100 million building with $5 million of NOI (a 5% cap rate), borrowing $60 million interest-only at 6%. NOI grows 3% a year, the building sells after five years based on the next year's NOI of $5.80 million, and selling costs are 2%. Fees and capital spending are left out to keep the math clear.

The investors' $40 million of equity earns $1.4 million in year one, a 3.5% cash yield, lower than the building's 5% because the loan costs 6%. With the 10-year Treasury near 5.2% in late September 2026 (FRED), borrowing costs above cap rates are common, which means the debt adds to returns only if the sale price rises. Without the loan, the same building sold at a 5% cap rate returns 7.6% a year; with it, 9.8%. At a 6% exit cap the loan turns a modest gain into a near-zero one.

Ask for the exit cap rate the sponsor assumed and compare it with the entry cap rate. If the target return depends on selling at a lower cap rate than the purchase, the plan is a bet on falling rates. Ask for the sensitivity table as well, since most sponsors have one, and look at the rows with flat rents.

Taxes differ by structure

• Closed-end funds and syndications organized as partnerships send a Schedule K-1. Depreciation flows through, rental income and losses are generally passive under the rules in IRS Publication 925, and you may owe returns in states where the fund owns property. K-1s often arrive late enough to require a filing extension. Our commercial real estate guide covers depreciation and cost segregation, and our capital gains tax guide covers recapture on sale.
• Non-traded REITs send a Form 1099-DIV. Ordinary REIT dividends qualify for the 20% Section 199A deduction, and the part of a distribution classified as return of capital isn't taxed when paid but lowers your cost basis, which raises the gain when you sell. The REIT guide has the rates.
• In an IRA, a partnership fund that borrows to buy property can generate unrelated business taxable income from debt-financed property, as described in IRS Publication 598. Dividends, including most REIT dividends, are generally excluded.
• Some NAV REITs also sell Delaware statutory trust (DST) interests to investors completing a 1031 exchange. BREIT's DST program charges up to 3.5% upfront and up to 0.85% a year, and BREIT holds an option to swap the DST interests for operating partnership units, which after a year can be redeemed for shares or cash at BREIT's discretion. Partnership units are not real property, so once you hold them a further 1031 exchange is generally not available.

Who should skip private real estate funds

• Anyone who may need the money within five years. SREIT's investors went from a 2% monthly limit to almost no liquidity within four years.
• Investors whose home, rental properties, or business real estate already make up much of their net worth.
• Anyone comparing a fund's smooth return history directly with stock or REIT returns without adjusting for appraisal lag.
• Investors who can buy only a share class with upfront and servicing fees when the same fund, or a listed REIT fund, is available more cheaply.

Questions to ask before investing

1. How is NAV set, who appraises the properties, how often, and who is paid a fee based on NAV?
2. What has the fund actually paid redeeming investors in each of the last eight quarters, as a share of requests? Is there an early repurchase deduction?
3. How were distributions funded over the last two years: cash flow from operations, property sales, or borrowing? The annual report has a sources-of-distributions table.
4. How much debt does the fund carry, how much floats with interest rates, and when does it mature?
5. Which share class are you being offered, and what is its total cost including upfront and servicing fees?
6. For a closed-end fund: whole-fund or deal-by-deal waterfall, the catch-up terms, how the clawback is secured, how much of its own money the manager has committed, what affiliate fees apply, and whether investors can stop new investments if named senior people leave.
7. How did the manager's earlier funds do, including the weak ones? Our guide to evaluating private equity funds and managers covers track-record checks that apply to real estate managers as well.

Private real estate usually belongs in the alternatives part of a portfolio; our alternative investments guide covers how much to hold and how to pay for it.

This guide is for informational purposes only and does not constitute investment, tax, or legal advice. Fund terms, NAVs, and redemption policies are as of September 2026 and can change at the board's discretion; read the current prospectus or offering memorandum. Private real estate funds are illiquid, use borrowed money, and can lose value. Consult qualified professionals before investing.