The Behringer Harvard REIT and other unlisted real estate investment trusts like it are generating a myriad of questions by investors who say their broker/dealer misrepresented the products as safe investment vehicles that offered guaranteed dividends and little to no volatility.
Some broker/dealers and their financial reps may have been motivated by the large commissions – 15% is typical – tied to sales of unlisted REITs. Investors, however, may be unaware of these hefty fees. They also may not clearly understand the liquidity and valuation issues associated with unlisted REITs versus publicly traded REITs.
Unlisted REITs – also referred to as non-traded REITs – are registered with the Securities and Exchange Commission (SEC) but they don’t trade on national stock exchanges or over counter. Retail investors who invest in unlisted REITs purchase shares through a broker/dealer, with the idea that they will collect a steady dividend check from their investment.
It’s the fine print surrounding unlisted REITs that often comes back to haunt investors. Unlisted REITs can tie up investors’ money for years. In other words, an investor’s money essentially is “illiquid” until the end of the investing term. That means any shares in the REIT cannot be sold before that specified date.
In addition, it’s more and more common for unlisted REITs to deny redemption requests altogether if too many investors attempt to redeem their investments at once.
It’s also become increasingly common for some of biggest names in the non-listed REIT business to cut their dividends to investors. As reported by Investment News last fall, several of the most prominent non-traded REITs did just that, including the Behringer Harvard REIT I.
If you were ill-advised about the risks of investing in unlisted REITs like the Behringer Harvard REIT, contact our securities fraud team. We will evaluate your situation to determine if you have a viable claim for recovery.