Morningstar reportedly will begin covering nontraded real estate investment trusts (REITs) next year, according to InvestmentNews. Morningstar has not decided whether to use its star-ratings system, but said it is a “strong possibility.” The independent research giant for mutual funds is expected to bring some transparency to what it described as an opaque and chaotic industry. The question is whether most nontraded REITs can “withstand the light of day?”
Morningstar’s decision follows the well-publicized lawsuits by the Financial Industry Regulatory Authority (FINRA) and numerous investors against David Lerner Associates for misleading investors about its Apple REITs. FINRA also issued an Investor Alert warning about the risks of non-traded REITs.
Morningstar decided to commence coverage of nontraded REITs because of persistent shortcomings in the industry, including how they communicate to the public, according to Philip J. Martin, who will head Morningstar’s non-traded REIT coverage.
Mr. Martin added: “Presently, Morningstar does not believe a significant investment in nonlisted REITs makes sense for most investors as there are still too many drawbacks and unresolved issues. We believe listed REITs to be the most appropriate option, from the standpoint of both the alignment of shareholder interests and long-term risk/return potential.”
Page Perry is an Atlanta-based law firm with over 150 years collective experience representing investors in securities-related litigation and arbitration. The firm is actively pursuing cases involving investments in nontraded REITs. 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. For further information, please contact us.