Their names may be different – Cornerstone Core Property, Inland American, Inland Western and Behringer Harvard REIT I – but these non-traded real estate investment trusts (REITs) have produced similar financial woes for their investors.
Non-traded REITs can be tricky investments. The products do not trade on national stock exchanges. Redemptions in them are limited at best; most non-traded REITs entail a lengthy holding period – in some instances, up to eight years.
The biggest fault concerning non-traded REITs is one of transparency. Non-traded REITs generally provide no independent source of performance data for investors. Instead, investors must rely on the broker/dealer responsible for pitching and selling the the investment.
And therein lies the problem.
In recent months, numerous complaints have come to light concerning non-traded REITs and, specifically, the broker/dealers behind the deals. Investors allege that they were never given complete details about their investment, as well as the many risks associated with non-traded REITs in general.
The lack of disclosure may have something to do with the high commissions and fees that broker/dealers take in from sales of non-traded REIT shares. In many cases, these fees are 15% or more.
This year, many investors in non-traded REITs have had to face a harsh reality. Instead of getting the stability, liquidity and a reliable source of income they were initially promised by their broker/dealers, they received dividend cuts and elimination of shareholder redemption programs.
Earlier this year, the Financial Industry Regulatory Authority (FINRA) began to take a keen interest in non-traded REITs by conducting a sweep of the promotion practices and sales of broker/dealers associated with the products.
Maddox Hargett & Caruso currently is investigating sales of non-traded REITs, including Cornerstone, Inland American, Inland Western and Behringer Harvard. If you’ve suffered financial losses of $100,000 or more in a non-traded REIT and believe those losses are the result of inadequate information on the part of your broker/dealer, please Contact Us.