Corporate & Securities Law

Non-listed real estate investment trusts (?REITs?) are designed to allow retail investors to participate in large commercial real estate development projects, such as shopping malls, that they could not otherwise participate in.  These non-traded REITs are typically managed by a founding sponsor, who earns fees for services they render such as managing or acquiring properties. 

These non-traded REITs raise money for these acquisitions by selling shares in the REITs to retail investors.  Nontraded REITs trend to attract unsophisticated investors who do not understand the the extent of the risks involved in the investment, such as lack of liquidity, conflicts of interest, and high fees.  Brokers who sell non-traded REITs can earn anywhere from 6-7% in commissions for selling these products.

Non-traded REITs are typically sold at $10 per share, which is an arbitrarily set price that does not change unless the REIT gets revalued.  Other than limited exit windows, investors can only exit the investment when the REIT lists publicly, is acquired, or if the investor can find a private buyer. Nontraded REITs are supposed to have a limited life, usually not exceed 10 years, after which they are supposed to distribute the proceeds from the investments. 

Brokers selling unlisted REITs have raised more than $59 billion since 2000, which has caused regulators to examine the sales practices of those brokers.  In particular, regulators are focused on whether or not the sales were suitable for investors and whether the brokers failed to fully disclose the risks, fees and liquidity of the investments.

As a result of the economic turmoil of the past few years, investors have been filing arbitration claims after being hurt by share devaluations and the suspension of buyback programs in nontraded REITs.

Some of the nontraded REITs that were forced to respond to lower occupancy rates and falling rents with reduced dividends or suspension of redemptions include the following:

1. Inland Western
2. Behringer Harvard
3. Cole Credit Property Trust
4. Hines Real Estate Investment Trust
5. Wells Real Estate Investment Trust

In response to the dividend reductions and redemption suspensions, investors have been filing FINRA arbitration claims against brokers who sold them the nontraded REITs in an effort to try to recover some of their losses.

Eccleston Law represents individual and institutional investors to recover their investment losses caused by securities and investment fraud. Our attorneys also help victims of Ponzi schemes pursue recovery by submitting claims with receiverships established by the SEC and by assisting victims with the filing of a Theft Loss Tax Deduction with the IRS.

If you have lost money investing in a non-traded REIT such as Inland Western or Behringer Harvard, you may be entitled to a recovery through securities arbitration. Please contact Jim Eccleston at the Eccleston Law Offices at 312-332-0000 to discuss your case.