For a growing number of investors in non-listed REITs, the past year has taken a nod from Hotel California: Moving in was easy, but now they can’t get out. As reported in the financial press, liquidity issues have forced six of the biggest REITs to halt their redemption programs recently. Among them: Inland American Real Estate Trust, Inland Western Retail Real Estate Trust, Piedmont Office Realty Trust, Wells Real Estate Investment Trust II, Behringer Harvard REIT I and Cole Credit Property Trust II.
For many investors, the potential risks and high costs of these REITs made them unsuitable and inappropriate investments from the outset, especially for investors who were elderly or retired. Unfortunately, some brokerages and financial advisers never disclosed these facts. Instead, lured by potentially big commissions and fees of up to 15%, they marketed and sold the products as safe, conservative investments that were similar to certificates of deposit.
In addition to liquidity problems, many non-listed REITs are suffering from valuation issues. This is especially true in the case of REITs with a high concentration of commercial real estate purchased just before and during the housing market crash of 2007. As a result, more investors are now holding an illiquid investment or, at best, have no idea of the investment’s actual value.
Inland American Real Estate Trust is a prime example. Investors who recently tried to sell shares in this REIT on the secondary market were reportedly quoted prices of 40 cents on the dollar – despite the fact their statements continue to reflect double that amount.
If you believe your brokerage or financial adviser misrepresented the characteristics of non-listed REITs like Inland American Real Estate Trust or failed to disclose its risks,please fill out the Contact Us form. Or leave a comment below, we want to consult you on your options.
September 18th, 2009 at 1:35 pm
I have had an nvesment with Wells Reit (250K) for approx. 2 years now.
Last May 2009, I contacted Wells and asked to close my account due to the fact that I needed the money. I am a single mother of a young child and I needed to pull it out. They advised me to fill out a redemption form and that it would be honored October 2009 and I would receive my investment. They also said I could pull my money out now but it would be under penalty, no amount given, but that I would lose a portion for early withdrawal. I kept that in the back of my head, worse case scenario, I could pull it out, maybe lose 2% for early withdrawal.
It is now September and I recently received a letter (dated Aug 21, 2009) that they are suspending Redemptions until “at least” September 2010. The reason they state is to “better position REIT II to secure acquisition funds in light of continued uncertainty in credit markets”.
Please tell me if you can help me. I need to get my money out. Its just me against them, I stop using my money manager a long time ago.
October 7th, 2009 at 12:11 pm
I just had the same misfortune of being informed about them pushing out any redemption requests until Sept 2010. I am further amazed about a statement made by them through my financial advisor thatthey supposedly have enough money to honor redemption requests but feel they can essentially make more money by reinvesting it. This to me seems like an absolute load of shit. This smells like Madoff to me.
January 21st, 2010 at 2:20 pm
People – you don’t invest in real estate as a short term investment. Just as you can’t just liquidate your home overnight, you can’t expect the same in a REIT. You should have been told this was a long term investment when you purchased this – and it should have been suitable for you in that you had other investments that you could use. If this was sold to you incorrectly, then you should file a complaint against your financial rep. These big buildings that these companies own cannot just be liquidated overnight and when everyone wants their money at the same time, it presents a problem for the program and the investors who stay in so do your homework.
February 1st, 2010 at 11:14 am
Couldn’t agree with you more. Non-traded REITs were created for one reason. Sydicators and brokers wanted a high fee, high commission product that could enrich them both. Since investors got wise to limited partnerships, they switched to non-traded REITs.
February 12th, 2010 at 6:20 pm
I just got my statement from well real estate investment trust II. It says I have 4300 shares worth 43,000. They want to pay me 3.00 per share. I am out 30,000. My broker says to do nothing. Whats the scoop. Am I out the 30G.
March 27th, 2010 at 6:55 pm
And Wells REIT II continues to buy properties. More fees for them, no money for us.
June 3rd, 2010 at 2:42 pm
My investor advisor recomended this investment to because of the 6% interested they paid, he never disclose of course all the conscuences of withdrawing your money. For several years I reivested my interest payments until I had little over $350,000 In April of 08 I was lucky enough to get out of this investment but with a penalty cost of 10%
December 15th, 2010 at 11:43 am
An Alabama Investment Advisor, Allen Taylor, is listed on Sterling Trusts Quarterly Statements and is the Advisor who sold me on the Behringer Harvard REIT 1.
I have come to the conclusion that all of the people who work for these organizations and advisors and customer service people are crooks like Bernard Madoff. Before the real estate market dropped I gave orders to opt out and reinvest that money. The replies that I received was that I was making a mistake, that I would be penalized 10%, and about every excuse they could think of.
In my mind, there is no doubt that this crooked scheme was set up to steal investors money. I read the statements some of the people have made and it is clear they have been irrepairably injured. We need to get Attorney Generals involved so that these schemes can be uncovered and the ones responsible charged, convicted and incarcerated.