REIT Retreat: Investors Find Problems In Non-Listed REITs
For a growing number of investors in non-listed REITs, the past year has taken a nod from Hotel California: Moving in was easy, but now they can’t get out. As reported in the financial press, liquidity issues have forced six of the biggest REITs to halt their redemption programs recently. Among them: Inland American Real Estate Trust, Inland Western Retail Real Estate Trust, Piedmont Office Realty Trust, Wells Real Estate Investment Trust II, Behringer Harvard REIT I and Cole Credit Property Trust II.
For many investors, the potential risks and high costs of these REITs made them unsuitable and inappropriate investments from the outset, especially for investors who were elderly or retired. Unfortunately, some brokerages and financial advisers never disclosed these facts. Instead, lured by potentially big commissions and fees of up to 15%, they marketed and sold the products as safe, conservative investments that were similar to certificates of deposit.
In addition to liquidity problems, many non-listed REITs are suffering from valuation issues. This is especially true in the case of REITs with a high concentration of commercial real estate purchased just before and during the housing market crash of 2007. As a result, more investors are now holding an illiquid investment or, at best, have no idea of the investment’s actual value.
Inland American Real Estate Trust is a prime example. Investors who recently tried to sell shares in this REIT on the secondary market were reportedly quoted prices of 40 cents on the dollar - despite the fact their statements continue to reflect double that amount.
If you believe your brokerage or financial adviser misrepresented the characteristics of non-listed REITs like Inland American Real Estate Trust or failed to disclose its risks,please fill out the Contact Us form. Or leave a comment below, we want to consult you on your options.
September 18th, 2009 at 1:35 pm
I have had an nvesment with Wells Reit (250K) for approx. 2 years now.
Last May 2009, I contacted Wells and asked to close my account due to the fact that I needed the money. I am a single mother of a young child and I needed to pull it out. They advised me to fill out a redemption form and that it would be honored October 2009 and I would receive my investment. They also said I could pull my money out now but it would be under penalty, no amount given, but that I would lose a portion for early withdrawal. I kept that in the back of my head, worse case scenario, I could pull it out, maybe lose 2% for early withdrawal.
It is now September and I recently received a letter (dated Aug 21, 2009) that they are suspending Redemptions until “at least” September 2010. The reason they state is to “better position REIT II to secure acquisition funds in light of continued uncertainty in credit markets”.
Please tell me if you can help me. I need to get my money out. Its just me against them, I stop using my money manager a long time ago.
September 27th, 2009 at 9:27 am
My experience is nearly identical to Deborah. Early this summer, I had asked to cash in my Wells REIT II and was told that they would send me a check in October. In September, I received a letter saying that they had suspended such payments.
Allen
October 7th, 2009 at 12:11 pm
I just had the same misfortune of being informed about them pushing out any redemption requests until Sept 2010. I am further amazed about a statement made by them through my financial advisor thatthey supposedly have enough money to honor redemption requests but feel they can essentially make more money by reinvesting it. This to me seems like an absolute load of shit. This smells like Madoff to me.
January 14th, 2010 at 12:27 pm
My former investment advisor, who conveiniently retired as all trouble was to break open, has all my funds invested with Inland American and now I am in critical financial trouble. I am 79 years old and aside from my minimal Social Security have absolutely no other source of income. What can I do?
January 21st, 2010 at 2:20 pm
People - you don’t invest in real estate as a short term investment. Just as you can’t just liquidate your home overnight, you can’t expect the same in a REIT. You should have been told this was a long term investment when you purchased this - and it should have been suitable for you in that you had other investments that you could use. If this was sold to you incorrectly, then you should file a complaint against your financial rep. These big buildings that these companies own cannot just be liquidated overnight and when everyone wants their money at the same time, it presents a problem for the program and the investors who stay in so do your homework.
January 22nd, 2010 at 5:23 pm
I am 85 years old. I asked my financial advisor–may he burn in Hell forever–to invest my pension fund in low risk accessible products with short
maturity terms. He sold me Cole Credit II, Inland American and Athena II. All turned out to be high risk, illiquid products not appropiate to sell them to elderly retired people. He also sold me two products, of his boss’s Sherwood and WFG Holdsings, also high risk securies. A few months later both were stolen by his boss, the owner of Morgan Peabody LLT. With those gone, the monthly yield of remaining products was not enough to sustain our house hold. We cannot not pay our bills, loan and mortgage instalments. Since June 2009 I try to get back monies from Cole an Inland American. My requests were rejected. What can I do? We will soon our home, while Jonathan keeps on recruiting new victims by free lunches. Isn’t
there a way to stop him?
February 1st, 2010 at 11:14 am
Couldn’t agree with you more. Non-traded REITs were created for one reason. Sydicators and brokers wanted a high fee, high commission product that could enrich them both. Since investors got wise to limited partnerships, they switched to non-traded REITs.
February 12th, 2010 at 6:20 pm
I just got my statement from well real estate investment trust II. It says I have 4300 shares worth 43,000. They want to pay me 3.00 per share. I am out 30,000. My broker says to do nothing. Whats the scoop. Am I out the 30G.
March 20th, 2010 at 1:25 am
I just retired. When I ask my so called “financial advisor” about liquiditating these so called IRAs that he’d put my money in, I discovered they were nothing but REITs. I wondered why he switched brokerage firms in 2004 and suddenly he was feverously moving my poor performing stocks and annuities around. Now I know. My fault for not asking hard questions. I went from having no REITs to owning $110,000 worth. He now acts like the cat who swallowed the canary. All three REITs have cancelled their liquidation policies. They basically say they’ll return your money if you die.
March 23rd, 2010 at 10:39 pm
I work for a financial advisory firm who deals with non-traded REITs. The notice you received was not from Wells Real Estate Funds, but from a third party company who is trying to take advantage of illiquidity and get you (and other shareholders) to sell at an extremely discounted price ($3.00/share). Our clients also received this notice. If you look closely it was sent from a company besides Wells. Your advisor told you to ignore this because you should not sell your shares to this company for this insulting price, unless you are absolutely desperate for the money and are willing to take 30% of what you paid. I will say that your advisor should have taken the time to explain this letter to you as it does alarm many of Wells investors. Note: a similar letter went out to Inland investors around the same time. Hope this helps.
March 27th, 2010 at 6:55 pm
And Wells REIT II continues to buy properties. More fees for them, no money for us.
June 3rd, 2010 at 2:42 pm
My investor advisor recomended this investment to because of the 6% interested they paid, he never disclose of course all the conscuences of withdrawing your money. For several years I reivested my interest payments until I had little over $350,000 In April of 08 I was lucky enough to get out of this investment but with a penalty cost of 10%