Non-traded real estate investment trusts (REITs) are big business. According to research from Blue Vault Partners LLC, non-traded REITs are on track to raise $7 billion in 2010, a 17% increase over 2009.
For brokers and firms pushing non-traded REITs, that’s good news. They stand to make huge commissions from sales of non-traded REITs. Investors, however, often come out on the losing end of non-traded REIT deals. That’s because non-traded REITs lack transparency, and they are not even considered liquid investments.
Moreover, investors in non-traded REITs often fail to realize that redemptions can be suspended at any time. The same goes for dividends, which could be reduced or suspended. The end result? Investors’ money in non-traded REITs is tied up, oftentimes for years.
As reported by REIT Wrecks, a Website devoted to the REIT sector, a number of non-traded REIT programs have eliminated or severely limited their share repurchase programs. Among these are some non-traded REITs that continue to offer their shares to the public. As of the first quarter of 2010, this group included Behringer Harvard Multi-family REIT I, Grubb & Ellis Apartment REIT, Wells REIT II, and Wells Timberland REIT.
Says REIT Wrecks: “Based on their Q3 earnings, the two apartment REITs are in heaps of trouble, while Wells Timberland REIT is playing a game of beat the clock with its lenders using money from new shareholders. Avoid these like the plague.”
Maddox Hargett & Caruso currently is investigating sales of non-traded REITs on behalf of investors. If you believe your broker/dealer or financial adviser misrepresented the facts concerning investments in a non-traded REIT, please contact us.