Understanding Net Asset Value (NAV)

The Net Asset Value (NAV) per share is a crucial metric used to determine the market value of a fund and its shares on a specific date. It serves as a basis for setting the purchase and redemption prices of shares. As an investor, grasping the concept of NAV per share is essential. It allows you to track the value of your investments over time, ultimately providing a metric of performance relative to other investments.

What is NAV?

NAV is calculated using a simple formula: NAV = Total Assets−Total Liabilities / Number of Shares Outstanding For instance, a real estate fund’s assets might include real estate properties, cash, and accounts receivable. Liabilities could encompass outstanding mortgages, debt, accounts payable, and accruals for fees like asset management or performance incentives.

Frequency of NAV Calculation

The frequency of NAV evaluation varies:

• Exchange-Traded Funds (ETFs): Calculated daily using closing market prices.
• Non-Exchange Traded Funds: Typically assessed monthly or quarterly, involving different valuation processes. These funds may rely on third-party valuation experts or internal market-guided estimates for their investment positions.

NAV vs. Purchase Price

While NAV per share represents the value of a fund’s shares, the purchase price can differ, especially in scenarios like an Initial Public Offering (IPO). During an IPO, funds might set a starting price, floor, or ceiling that isn’t necessarily based on NAV. For ongoing offerings, NAV per share is used to establish the purchase price, which is usually announced at the beginning of each fiscal quarter.

NAV vs. Redemption Price

NAV also serves as a foundation for setting the redemption price. When investors request redemptions, the fund typically repurchases shares at NAV. This approach ensures that investors exit at a value close to the current market value, benefiting both the fund and its investors.

Ginkgo REIT Valuation Process

At Ginkgo REIT, our valuation process includes several key components, as outlined in our offering materials:

• Commercial Real Estate Assets and Investments: Valued by in-house professionals or third-party appraisers.
• Liquid Assets: Priced accordingly.
• Other Assets and Liabilities: Valued at book value, including fees paid to our manager or affiliates.
• Accruals: Including periodic distributions, operating revenues, and expenses.

Our aim is to provide a market value estimate of our shares within a reasonable timeframe. However, it’s important to note that commercial real estate valuations are based on various assumptions, which can influence the final figures.

Why Understanding NAV Matters

Comprehending NAV is vital for investors as it reflects the value of your holdings and indicates the performance of your investment over time. Whether your investment has appreciated or not since purchase, NAV directly impacts your net worth. Staying informed about the NAV of your holdings helps you make educated decisions about your investments.  

Disclaimer

The views expressed above are presented only for educational and informational purposes and are subject to change in the future. No specific securities or services are being promoted or offered herein. This communication is not to be construed as investment, tax, or legal advice in relation to the relevant subject matter, investors must seek their own legal or other professional advice. Past performance is no guarantee of future results. Any historical returns, or projections are not guaranteed and may not reflect actual future performance.