In the universe of non-traded REITs, it looks like history is about to repeat itself and investors should be wary of any financial advisor pushing these risky products. Contrary to the “next big thing” claim by certain investment professionals hawking non-traded REITs, this is not the first time these products have infected fixed-income investors’ portfolios.
In the early to mid-1990s, as the US was coming out of a recession, my team represented multiple fixed-income investors who were improperly sold these high commission products. We were so incensed by some of the activity, in more than one case we filed FINRA arbitration claims and obtained arbitration awards not only against the brokerage firm but also against the owner of the brokerage firm that improperly sold the non-traded REITs.
“I’m disappointed to see that history is now repeating itself as more and more investors who sought low risk, income-producing investments contact Vernon Litigation Group regarding problems with non-traded REITs. They invested in these products only to find later on that redemptions could be suspended, dividends could be reduced or suspended, and their money locked up just as dividends are reduced or suspended. Often, they are stuck with non-traded REITs that are losing value in the declining market for commercial real estate, and they can’t even sell to cut their losses.”
The recent sales pitch for these investments often urges retail investors to jump at the chance to buy commercial property at “fire sale” prices. The investors are told banks would normally do the lending for these properties but don’t because of the current economic climate. The truth is that no one knows for sure when commercial real estate will hit bottom, and investors holding these products stand to lose if, as many suspect, the freefall of commercial real estate values continues. Even more offensive in this new round of non-traded REIT pushing is that the effort to dump these risky products on retail investors may be the salvation of the big players in commercial real estate who see the trouble that is ahead for the sector.
Vernon Litigation Group is a Naples, Florida law firm that represents investors nationwide who are victims of stock fraud and investment losses due to broker incompetence and brokerage firm misconduct. The firm’s securities attorneys focus their practice on complex business litigation, including financial litigation and securities arbitration.
For more information contact,
Chris Vernon, attorney at law
Vernon Litigation Group