Investors turned to the Behringer Harvard REIT for safe investing, but are now stuck holding essentially worthless positions.

In an attempt to avoid the risk of investing in the stock market, some investors chose real estate investment trusts (REITs). REITs are specialized entities that own or manage income-producing real estate. They are established to avoid corporate taxes, allowing pass-through taxation to the investors.

Financial advisors have recommended people invest a substantial portion of their nest egg in REITs, representing them as safe and conservative investments for retirement. The advisors may not disclose the REITs underlying financial condition and the risks of the investment becoming illiquid. One such example is the Behringer Harvard REIT I. This REIT never made any money and is now completely illiquid, thereby preventing investors from selling their positions. The REIT was sold to inexperienced and conservative investors, who are now stuck holding essentially worthless positions.

Failure to disclose these and other potential risks to investors could be violation of Securities laws and could also lead to a host of other viable legal claims, such as breach of fiduciary duty.

If you have suffered investment losses from REITs, contact us to tell us your story. We want to counsel you on your options.

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.