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.