Securities Litigation Consulting Group of Fairfax, Virginia has estimated that shareholders of non-traded REITs are about $50 billion worse off for having put money into non-traded REITs rather than exchange-traded REITs. The estimate is based on the difference between the performance of more than 80 non-traded REITs and the performance of a diversified portfolio of publicly-traded REITs over a period of twenty years. According to research by the consultancy, the difference in performance between the two asset groups is largely due to the relatively high up-front expenses associated with non-traded REITs.
Non-traded real estate investment trusts (REITs) are investments that pose a significant risk that the investor will lose some or all of his initial investment. Non-traded REITs are not listed on a national securities exchange, limiting investors’ ability to sell them after the initial purchase. Such illiquid and risky investments are often better suited for sophisticated and institutional investors, rather than retail investors such as retirees who do not wish to have their money tied up for years, or risk losing a significant portion of their investment. Non-traded REITs usually have higher fees for investors than publicly-traded REITs and can be harder to sell.
A partial list of non-traded REITs is as follows (not all of the REITs listed have performed poorly):
American Realty Capital – Retail Centers of America, Inc.
American Realty Capital Daily Net Asset Value Trust, Inc.
American Realty Capital Healthcare Trust II, Inc.
American Realty Capital Hospitality Trust, Inc.
American Realty Capital New York City REIT, Inc.
American Realty Capital Trust V, Inc.
Behringer Harvard Opportunity REIT I
Behringer Harvard Opportunity REIT II
Carey Watermark Investors Incorporated
Carter Validus Mission Critical REIT
CNL Growth Properties
CNL Healthcare Properties Inc.
CNL Lifestyle Properties, Inc.
Cole Credit Property Trust IV, Inc.
Cole Credit Property Trust V, Inc.
Cole Office & Industrial REIT
Cole Real Estate Income Strategy (Daily NAV), Inc.
Corporate Property Associates 17 – Global, Inc.
Corporate Property Associates 18 – Global
Dividend Capital Diversified Property Fund Inc.
Global Income Trust, Inc.
Griffin Capital Essential Asset REIT, Inc.
Griffin-American Healthcare REIT III
GTJ REIT, Inc.
Hines Global REIT, Inc.
Hines Real Estate Investment Trust, Inc.
Industrial Income Trust, Inc.
Inland Real Estate Income Trust, Inc.
InvenTrust Properties Corp.
Jones Lang LaSalle Income Property Trust, Inc.
KBS Legacy Partners Apartment REIT, Inc.
KBS Real Estate Investment Trust I, Inc.
KBS Real Estate Investment Trust II, Inc.
KBS Real Estate Investment Trust III
KBS Strategic Opportunity REIT, Inc.
Northstar Healthcare Income, Inc.
Northstar Real Estate Income II, Inc.
Northstar Real Estate Income Trust, Inc.
Phillips Edison Grocery Center REIT I, Inc.
Phillips Edison Grocery Center REIT II, Inc.
Realty Finance Trust, Inc.
RREEF Property Trust
Steadfast Income REIT
Strategic Realty Trust Inc.
TIER REIT Inc.
United Realty Trust, Inc.
Brokers and financial advisors are required to make investment recommendations that are consistent with their clients’ risk tolerance, net worth, investment objectives and experience in the market. However, due to the high sales commissions brokers typically earn for selling REITs – as high as 15%- brokers can be tempted to make “one size fits all” recommendations to investors in order to reap commissions. These high up-front fees and commissions can negatively affect performance over time, as illustrated by the estimated $50 billion that non-traded REITs have cost customers.
If you have suffered significant losses as a result of unsuitable recommendations of non-traded REITs or other non-conventional investments by a stockbroker or financial advisor, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact an investor rights attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.