Inland American Real Estate Trust, one of the industry’s biggest non-traded real estate investment trusts (REIT), is facing an investigation by the Securities and Exchange Commission (SEC) over potential violations of federal securities laws concerning fees and its administration.
News of the investigation was made public by Inland American in its quarterly report. As in other recent regulatory investigations into non-traded REITs, the SEC is focusing on specifics of Inland American’s fee structure.
According to a May 10 article by Investment News, Inland American stated in its quarterly report that the . . . “SEC is conducting a nonpublic, formal fact-finding investigation to determine whether there have been violations of certain provisions of the federal securities laws.”
The report went on to reveal that the potential violations include “business manager fees, property management fees, transactions with affiliates, timing and amount of distributions paid to investors, determination of property impairments, and any decision regarding whether the company might become a self-administered REIT.”
Inland American is one of five REITs to be sponsored by The Inland American Real Estate Group of Companies. A related REIT, Retail Properties of America (formerly known as Inland Western Retail Real Estate Trust) also has been in the news lately. In early April, the REIT went public with an initial share price listed at an equivalent of $3.20 per share. For investors who bought Inland Western at its original share price of $10 a decade ago, the new price means they have lost some $65% of their original investment.