More investors are finding themselves steeped in financial losses because of misguided investing advice in non-traded or unlisted real estate investment trusts (REITs). The issue with these complex, illiquid and risky investments has to do with their statement value – which in many instances is inaccurate and based on outdated data.
In 2009, the Financial Industry Regulatory Authority (FINRA) issued a notice to broker/dealers of non-traded REITs prohibiting them from using data that was more than 18 months old to estimate the value of the products.
The problem is this: Some broker/dealers apparently did not abide by FINRA’s notice and, instead, provided artificial and/or misleading per share values on their clients’ account statements.
In other instances, broker/dealers showed the value of a client’s non-traded REIT at par – typically $10 a share. The price was inaccurate, however, because upfront fees, commissions and other expenses were never taken into account.
Other investors in non-traded REITs are facing suspended redemption policies, meaning they are literally stuck in an illiquid investment that they thought was safe, conservative and low risk. That list is long and getting longer, and includes such names as Behringer Harvard REIT I, Cole Credit Property Trust I, Desert Capital, and Inland Western.
The non-traded REIT industry is a big business, raising nearly $20 billion in 2009. For many non-traded REIT investors, these investments are causing more pain than gain.
If you’ve experienced financial losses in a non-traded REIT such as Behringer Harvard REIT I, Cole Credit Property Trust I, Desert Capital, or Inland Western, please contact us to tell your story.