Cohen & Steers Total Return Realty (RFI): A Non-Leveraged High-Yield Real Estate CEF with a Unique Value Proposition

In the evolving landscape of real estate investing, Cohen & Steers Total Return Realty Fund, Inc. (RFI) stands out as a compelling option for income-focused investors seeking stability and consistent returns. As a non-leveraged, high-yield closed-end fund (CEF), RFI distinguishes itself through a disciplined approach to capital gains distribution and a strategic focus on global real estate securities. This analysis explores RFI's unique value proposition, its performance in 2025, and how its structure mitigates risks inherent in leveraged alternatives.

A Non-Leveraged Approach to Real Estate Income

RFI's non-leveraged structure is a cornerstone of its strategy, offering a stark contrast to many real estate CEFs that rely on debt to amplify returns. According to a report by Morningstar, RFI's managed distribution policy prioritizes long-term capital gains as the primary source of its monthly dividends. For instance, the October 2025 distribution of $0.08 per share (8.0% annualized yield) was composed of 86.12% long-term capital gains. This approach eliminates the volatility and credit risk associated with leverage, making RFI particularly attractive in uncertain market environments.

By avoiding debt, RFI sidesteps the interest rate sensitivity and liquidity constraints that plague leveraged funds. As noted in its investor communications, the fund's strategy is designed to deliver consistent monthly distributions while maintaining a diversified portfolio of real estate securities. This balance between income generation and capital preservation aligns with the needs of risk-averse investors seeking predictable cash flows.

High-Yield Performance and Distribution Flexibility

RFI's 2025 performance underscores its ability to deliver robust returns. Year-to-date cumulative total returns stood at 6.34% through September 30, 2025, while the cumulative distribution rate reached 6.88% for the same period. These figures highlight the fund's capacity to generate income without relying on net investment income (NII), which can fluctuate with interest rates or market conditions.

RFI's managed distribution policy further enhances its appeal. By adjusting distributions based on portfolio performance and market dynamics, RFI ensures that shareholders receive a steady stream of income. For example, the October 2025 payout included $0.0689 per share from long-term capital gains and $0.0111 from net investment income. This flexibility allows RFI to adapt to changing economic cycles, a critical advantage in today's volatile markets.

Risk Mitigation vs. Leveraged Real Estate CEFs

Leveraged real estate CEFs, while potentially offering higher returns, come with elevated risks. Industry reports indicate that these funds often employ leverage ratios ranging from 20% to 50% of total assets, amplifying both gains and losses. During downturns, such as the 2020 market correction, leveraged funds faced significant redemptions and liquidity pressures, leading to sharp declines in net asset value (NAV).

RFI's non-leveraged structure inherently reduces exposure to these risks. By forgoing debt, the fund avoids the compounding effects of interest rate hikes and economic contractions. This conservative approach aligns with the fund's long-term total return objective, as outlined in its prospectus. For investors prioritizing capital stability, RFI's strategy offers a compelling alternative to the high-volatility profiles of leveraged peers.

Conclusion: A Unique Value Proposition

Cohen & Steers Total Return Realty (RFI) exemplifies how a non-leveraged, high-yield real estate CEF can deliver consistent income and risk-adjusted returns. Its reliance on long-term capital gains, combined with a flexible distribution policy, positions it as a resilient option in both bull and bear markets. While leveraged CEFs may allure investors with higher yields, RFI's disciplined approach to capital preservation and steady performance makes it a standout choice for those seeking stability without sacrificing income potential.

As the real estate sector navigates macroeconomic uncertainties in 2025, RFI's unique value proposition-rooted in its non-leveraged structure and strategic capital gains focus-continues to resonate with a broad spectrum of investors.