Understanding and Investing in Commercial Real Estate through Non-Traded REITs

THE REIT ADVANTAGE

Today, many investors are focusing on their long-term financial objectives with an increasing desire to strike a balance between the risk and reward potential in their investment portfolio.

Investments in public, non-traded real estate investment trusts (REITs) may complement efforts to create a stable, diversified portfolio while also potentially preserving capital, generating income, softening the effects of inflation and providing capital appreciation.

Investments in non-traded real estate funds are subject to substantial risks that may include: • Absence of a public market for these securities• Limited transferability• Lack of liquidity and share repurchase at a share price

less than initially paid• Lack of an operating history of the sponsor

and/or advisor• Absence of properties identified for acquisition and lack

of diversification in property holdings until significant funds have been raised and invested

• Mortgage indebtedness• An offering price that may not accurately reflect the

value of assets• Disruptions in the financial markets and deteriorating

economic conditions• Payment of significant fees to advisors and/or

their affiliates• No requirement to effectuate a liquidity event by a

certain date, if at all• Uncertain distribution amounts and/or distributions that

may be paid from sources such as borrowings, offering proceeds or advances that could reduce overall investor returns

• Potential conflicts of interest

Investments in any particular fund are not suitable for all investors. Refer to the fund’s prospectus for a more detailed discussion of risks and suitability standards in your state.

THIS IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES. AN OFFERING IS MADE ONLY BY A PROSPECTUS. THIS SALES AND ADVERTISING LITERATURE MUST BE READ IN CONJUNCTION WITH A PROSPECTUS IN ORDER TO UNDERSTAND FULLY ALL OF THE IMPLICATIONS AND RISKS OF THE OFFERING OF SECURITIES TO WHICH IT RELATES. A COPY OF A PROSPECTUS MUST PRECEDE OR ACCOMPANY THIS MATERIAL. An investment in any Steadfast product involves a high degree of risk and there is no assurance that the investment objectives of the program will be attained. Steadfast Capital Market Group, LLC, member FINRA/SIPC, is the dealer manager for securities offered by Steadfast Companies or its affiliates.

What you should know

For investors, including a REIT allocation in their portfolio may offer key advantages such as:*

* REIT investments do not guarantee a profit or ensure against a loss

Diversification

Stable cash flows

Professional management

Potential inflation hedge

Capital preservation

Attractive risk-adjusted returns

REIT Fundamentals

Investors have long known the value that real estate investments can offer, but most individuals lack enough capital to acquire and create a diversified real estate portfolio, especially when it comes to commercial real estate.

However, in 1960 Congress passed legislation to allow individual investors the opportunity to participate in the ownership of income-producing properties in the form of a REIT.

A REIT is a company that pools the money of many investors to purchase and, in most cases, operate income-producing real estate.

The stockholders of a REIT are purchasing equity in the REIT and, in turn, earning a pro-rata share of the potential economic benefits that can be derived through commercial real estate ownership.

REIT investors get many of the potential advantages of property ownership, but leave the hassles of identifying, acquiring and managing those assets to the REIT sponsor.

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Equity REITEquity REITs are the most common type of REIT and are what most people are familiar with. Equity REITs purchase, own and manage income-producing real estate properties and may be beneficial for long-term investors because, in addition to potentially earning dividends from rental income, they also receive any capital gains from the sale of properties.

Mortgage REITMortgage REITs lend money directly to real estate owners and their operators, or indirectly through acquisition of loans or mortgage-backed securities. They do not invest in properties, but generate revenue through the interest that they are paid on their mortgage loans.

Hybrid REITHybrid REITs are a combination of equity and mortgage REITs. They own property and make loans to real estate owners and operators. Hybrid REITs earn money through a combination of rents, capital gains and interest.

Public Traded REITs Traded REITs have shares listed on a national securities exchange (such as the NYSE).They are registered with and regulated by the U.S. Securities and Exchange Commission (SEC) and required to file certain reports with the SEC pursuant to federal securities laws, including quarterly and annual reports. Traded REITs are more liquid than non-traded REITs, however, they are subject to the same market fluctuations and volatility as other exchange-traded stocks.

Public Non-Traded REITs Non-traded REITs are also registered with and regulated by the SEC and required to file certain reports with the SEC pursuant to federal securities laws, including quarterly and annual reports. However, non-traded REITs are not listed on any public securities exchange, making them less liquid than their traded REIT counterparts. Non-traded REITs are generally considered more stable and less volatile than traded REITs because they are not subject to the same stock market fluctuations as traded REITs. However, non-traded REIT investors generally do not have the ability to realize any gain on the sale of their shares until the REIT completes its cycle of fundraising, operation and liquidation and the price per share received by an investor upon liquidation may not necessarily reflect the value of the company.

Traded REITs Non-Traded REITs

Holding Period

Flexible. As long or short as investor chooses

A long-term investment. Typically a multi-year holding period

Share Price Variable based on trading on an exchange

Stated share price which generally does not fluctuate

during the initial offering period

Liquidity Highly liquidVery Limited. Restricted

redemption programs may be made available by REIT sponsor

Volatility Exposed to stock market fluctuations

Insulated from stock market fluctuations

Types of REITs

To qualify as a REIT, a company must comply with a number of requirements, including having most of its assets and income tied to real estate investments and distributing at least 90 percent of its taxable income to shareholders annually in the form of dividends.

A further REIT classification is based on how shares of the REIT can be purchased and held. REITs can either be publicly traded, public non-traded or private.

Investors must meet minimum suitability requirements to invest in non-traded REITs.

Summary of Public REIT Classifications

Private REITsPrivate REITs are not registered with the SEC or traded on a securities exchange and are subject to less regulation with the exception of guidelines associated with qualifying and maintaining REIT status.

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REITs feature different investment strategies and may vary in the types of income producing properties they focus on as well as the specific geographic areas they target.

Some of the possible categories of commercial real estate a REIT may specialize in:

Investment StrategiesThere are three primary categories of REIT investment strategies, each with its own risk and return characteristics. A REIT will typically acquire assets that fit within its respective investment strategy. To choose an investment that is the best fit, an investor must decide what their risk tolerance is, then choose a REIT with a corresponding investment strategy.

REIT Property Types

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ApartmentsIndustrialOffice

RetailHealthcareHospitality

COREProduces current income from stable, operating assets in well-established markets that require a minimum of capital improvements.

VALUE-ADDEDProvides value appreciation from moderately well-leased properties or pre-leased development.

OPPORTUNISTICOpportunity for significant appreciation or returns by developing or redeveloping properties in secondary markets.

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REIT TimelineREIT Timeline

Regardless of property type or strategy, a non-traded REIT investment goes through the same four phases: fundraising, property acquisition, portfolio management and exit strategy. The first three stages can overlap or occur concurrently. Exit strategies may include liquidating the portfolio, listing on a national stock exchange or selling the REIT to another company.

Capital Stability* – Since a non-traded REIT does not trade on an exchange such as the New York Stock Exchange or the NASDAQ, the share price does not fluctuate on a daily basis.

Attractive Risk-Adjusted Returns* – Investors comfortable with a multi-year investment time frame may benefit from the capital appreciation proceeds recognized when the portfolio is sold or liquidated.

Stable Cash Flows* – Non-traded REITs distribute at least 90 percent of annual taxable income to shareholders on a monthly or quarterly basis to qualify as a REIT for federal income tax purposes.

Capital Stability* – Since a non-traded REIT does not trade on an exchange such as the New York Stock Exchange or the NASDAQ, the share price does not fluctuate on a daily basis.

Attractive Risk-Adjusted Returns* – Investors comfortable with a multi-year investment time frame may benefit from the capital appreciation proceeds recognized when the portfolio is sold or liquidated.

Stable Cash Flows* – Non-traded REITs distribute at least 90 percent of annual taxable income to shareholders on a monthly or quarterly basis to qualify as a REIT for federal income tax purposes.

How to InvestWe invite you to talk to your financial advisor to further explore if a non-traded REIT is right for you.

Steadfast Companies’ investment programs are sold through a select group of authorized financial professionals. If you do not have a financial professional and would like a referral to one of the firms currently selling our products, please contact our sales desk at (877) 525-SCMG (7264) and we will be happy to assist you with information on locating a financial advisor in your area.

How to InvestWe invite you to talk to your financial advisor to further explore if a non-traded REIT is right for you.

Steadfast Companies’ investment programs are sold through a select group of authorized financial professionals. If you do not have a financial professional and would like a referral to one of the firms currently selling our products, please contact our sales desk at (877) 525-SCMG (7264) and we will be happy to assist you with information on locating a financial advisor in your area.

Realizing long-term financial objectives requires a well-planned, comprehensive asset allocation strategy, and including real estate investments, like non-traded REITs, may help investors achieve some of the following goals:

Realizing long-term financial objectives requires a well-planned, comprehensive asset allocation strategy, and including real estate investments, like non-traded REITs, may help investors achieve some of the following goals:

Access to Professional Management – Real estate professionals identify the opportunities, conduct the purchases and then maintain the properties and manage the portfolio in keeping with the stated REIT objectives.

Potential Capital Preservation* – Even though real estate is not immune to shifts in the economic cycles, it is a hard asset that has historically retained its intrinsic value.

Potential Inflation Hedge* – Inflation can act as a hidden tax that erodes purchasing power and cancels out investment efforts but, “investors widely consider commercial real estate an asset class that can help offset the impact of inflation over the long term. In fact, that benefit is regularly cited as one of the advantages of adding real estate to a mixed-asset portfolio of investments.” **

Diversification* - Real estate’s historically low correlation to other asset classes may help diversify an investment portfolio, lower risk and increase overall return.

Access to Professional Management – Real estate professionals identify the opportunities, conduct the purchases and then maintain the properties and manage the portfolio in keeping with the stated REIT objectives.

Potential Capital Preservation* – Even though real estate is not immune to shifts in the economic cycles, it is a hard asset that has historically retained its intrinsic value.

Potential Inflation Hedge* – Inflation can act as a hidden tax that erodes purchasing power and cancels out investment efforts but, “investors widely consider commercial real estate an asset class that can help offset the impact of inflation over the long term. In fact, that benefit is regularly cited as one of the advantages of adding real estate to a mixed-asset portfolio of investments.” **

Diversification* - Real estate’s historically low correlation to other asset classes may help diversify an investment portfolio, lower risk and increase overall return.

* REIT investments do not guarantee a profit or ensure against a loss and past performance is no guarantee of future results.** National Real Estate Investor, August 2010* REIT investments do not guarantee a profit or ensure against a loss and past performance is no guarantee of future results.** National Real Estate Investor, August 2010

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PORTFOLIO MANAGEMENT

EXIT STRATEGY

List on an Exchange

Liquidate Assets Sell REIT

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Steadfast Companies and its affiliates has developed into an integrated,

multifaceted real estate investment and management company that acquires,

develops and manages real estate in the U.S. and Mexico.

Real estate acumen with a proven process of strong fundamentals and controls have

allowed the company to develop into a 500-person real estate organization that owns

and/or operates multifamily, commercial, retail and hospitality projects.

Steadfast’s five Core Values – Value People, Proceed with Integrity,

Embrace Opportunities, Pursue Excellence and Do Good as We Do Well – along

with the company’s leadership, experience, strategic vision and entrepreneurial spirit have

been the cornerstone for the company’s achievements since its founding in 1994.

18100 Von Karman Avenue, Suite 500Irvine, CA 92612

877-525-SCMG (7264)Fax: 949-333-1798

www.steadfastcompanies.com

Securities of Steadfast Companies are offered by Steadfast Capital Markets Group, LLC as dealer manager. Steadfast Capital Markets Group is a member of FINRA/SIPC

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