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SKRADD Non-Traded REIT Index Methodology

Index Objective

The SK Research and Due Diligence, LLC ("SKRADD") Non-Traded REIT Equity Indexes aim to track the performance of the 10 largest non-traded, perpetual-life equity REITs, based on net assets and subject to the eligibility requirements discussed below. SKRADD currently provides two non-traded equity REIT equity indexes:

  • SKRADD Non-Traded REIT Equity Index ("SKRADD-NTRE")

  • SKRADD Non-Traded REIT Equity – Diversified Index ("SKRADD-NTRED")

Constituent candidates for the SKRADD-NTRE include all non-traded, perpetual-life equity REITs. The more narrowly focused SKRADD-NTRED does not include sector-specific programs:

The constituents of the index are weighted by fund net assets as measured during the fourth calendar quarter of the prior year, with a maximum weight cap of 20% for any individual constituent. The index is calculated on a quarterly basis and reconstituted and rebalanced annually. The index has a Base Date of December 31, 2020, and a Base Value of 100.0.

Any changes to or deviations from the methodology described are made in the sole judgment and discretion of SKRADD so that the index continues to achieve its objective.

Index Eligibility

To be eligible for inclusion in the SKRADD-NTRE and SKRADD-NTRED, a REIT must meet the following criteria:

  • REIT Tax Status - The entity must be recognized as a REIT under the U.S. Internal Revenue Code.

  • Non-Traded Investment Vehicle – The REIT's shares should not be listed on any national securities exchange.

  • Perpetual Life – The REIT should be structured without a predefined dissolution timeline, indicating an absence of a planned liquidity event or limited operational term.

  • Real Estate Equity Focus – The primary investment focus must be on equity interests in real property, rather than debt financing or mortgage-backed securities.

  • Valuation Frequency - The Net Asset Value (NAV) per share must be calculated and published at minimum on a quarterly basis.

  • Data Availability - Essential data for determining index constituents must be submitted to the Securities and Exchange Commission in line with index reconstitution schedules. Furthermore, data necessary for calculating the total return accurately within a specified quarter must be readily available to the public in a consistent and timely manner.

Constituent Selection

The indexes includes the 10 largest non-traded REITs, as determined by their net assets as of the rebalancing reference date, provided they satisfy the index eligibility criteria.

Constituent Weighting and Rebalancing

The index is rebalanced annually at the end of each calendar year. During rebalancing, the constituents are assigned weights based on their most recently reported net assets.

Each individual constituent is subject to a maximum weight of 20% of the total index weight. Should any constituent's weight surpass this threshold, it will be capped at 20%, and the excess allocation will be proportionally redistributed among the remaining constituents that are below the cap. This process is iterative, continuing until all constituent weights do not exceed the 20% limit.

Event-Driven Constituent Removal and Impact on Index Composition

An index constituent may undergo certain significant corporate events that could render it ineligible for inclusion in the index. These events include, but are not limited to, a listing, an initial public offering, a merger, or a liquidation. Should a constituent experience any such qualifying event, it remains in the index only until the end of the quarter preceding the occurrence of the event. It is removed from subsequent index calculations within that indexing year.

Following the removal of an ineligible constituent due to a qualifying event, the index does not undertake midyear replacements. The constituent is only replaced during the annual rebalancing. Therefore, there may be instances when the index comprises less than 10 constituents for a certain period of the indexing year.

Index Calculation

Individual Constituent Quarterly Returns

For each constituent REIT, the quarterly total return is calculated. This return includes both capital appreciation and reinvested distributions, where applicable. The specific methodology for calculating the quarterly return may depend on the available data and any adjustments required by the REIT's reporting characteristics in SKRADD’s discretion.

Weighted Returns

The next step involves weighting the individual constituent returns based on their respective weights. The quarterly return of each constituent is multiplied by its corresponding weight.

Index Return Calculation

The index return for the calendar quarter is obtained by summing the weighted returns of all the constituent REITs in the index. This provides an aggregated measure of the performance of the index during that quarter:

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