Many non-traded (private) REITs are very dangerous for retail investors. These investments typically charge extremely high fees, are illiquid and are virtually impossible to value. Many non-traded REITs have routinely been valued at their original cost on reports provided to investors when such valuations are highly suspect given the tumultuous conditions that have existed in the economy and real estate markets during the past four years. Such valuations are often deceptive and misleading.
For example, David Lerner Associates (“DLA”) who previously valued non-public REITs at cost is no longer providing a market value for Apple REITs on monthly account statements sent to its customers. Now DLA’s statements admit that the per unit price of $10.50 or $11.00 that customers paid for them is not the current market value.
DLA’s implicit acknowledgment that its prior valuation at $10.50 or $11.00 was false comes in the wake of numerous investor lawsuits and arbitrations regarding its non-traded Apple REITs, as well as an enforcement action by the Financial Industry Regulatory Authority (FINRA).
FINRA said that DLA’s selling of Apple REITs that had not been re-priced for several years was misleading, especially where the REITs were paying dividends with principal and borrowed funds instead of operating income.
Given the fact that commercial real estate has plummeted over the past three years, it is hard to understand why brokers would continue to tell their customers that the market value is anywhere near what they paid for it.
Investors in non-traded REITS should be skeptical of valuations at or near their cost basis. Non-traded REIT investors may wish to consult with an experienced attorney to consider their options. The following is a partial list of non-traded REITS that we are investigating:
Apple REITs
Desert Capital REIT
Dubose Model Home (NetREIT)
Behringer Harvard REIT I
KBS REIT
G REIT
Inland Western Retail Real Estate Trust
NNN Healthcare Office REIT
AmREIT
Wells Real Estate Investment Trust II
Piedmont Office Realty Trust
Crystal River REIT
J. Boyd Page, senior partner of Page Perry, observed “we saw these same abuses in limited partnerships back in the nineties. High fees, illiquid investments, and false values. It was a bad mix for investors then and it is a bad mix for investors today.”
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 45 occasions. Page Perry’s attorneys have extensive experience in representing investors in cases involving non-traded REITs and other private placement or Regulation D investments. For further information, please contact us.