Investor Lawyers Blog
INVESTORLAWYER_6Q17_2012-11-12_Mon_Recovery of Desert Capital REIT Losses
Many investors who purchased Desert Capital REIT, a non-traded REIT, are consulting securities fraud attorneys in order to recover their REIT losses. Claims by investors include unsuitable recommendations and misrepresentations of Desert Capital REIT. In addition, many investors suffered losses as a result of overconcentration of funds in Desert Capital REIT.
Typically, REITs carry a high commission which motivates some brokers to make the recommendation to investors despite the investment’s unsuitability. The commission on a non-traded REIT is often as high as 15 percent. Non-traded REITs carry a relatively high dividend or high interest, making them attractive to retired investors. However, non-traded REITs are inherently risky and illiquid, which limits access of funds to investors. The most common complaints regarding the recommendation of Desert Capital REIT mention valuations, prospects, performance, liquidity, redemption and distribution of the investment. Many investors assert that they were not aware of the truth regarding these aspects and their decision to invest would have been affected if they’d had all of this information.
Desert Capital REIT is a non-traded real estate investment trust that invested in loans to developers and builders that would build on residential or commercial land, as opposed to traditional residential mortgages. These loans were structured in a way that would provide monthly interest payments to the REIT during the life of the loan. The REIT would then receive a balloon principal payment at the time of the loan’s maturity. These types of loans are considered much riskier than traditional mortgages. Desert Capital was put into involuntary Chapter 11 bankruptcy in 2011 with $43 million in claims by creditors.
Investors who suffered significant REIT losses as a result of their investment in Desert Capital REIT could recover losses through FINRA arbitration. To find out more about your legal rights and options, contact a securities fraud attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.