Non-Trade REITs - Risky Investments

After being persuaded that non-traded real estate investment trusts (REITs) were safe and conservative investments for retirement, many investors are now stuck with huge losses. REITs are specialized entities that own or manage income producing real estate. Unfortunately for many investors, they were not advised of the underlying financial condition of the REITs or the risks of illiquidity, in addition to a litany of other disclosures such as huge broker fees, commissions, dividend cuts and suspended buyback programs. The question is whether the investment was ever suitable for the people it generally appealed to. Back as early as March 2009, FINRA launched an investigation into non-traded REITs, which raised $59 billion since 2000, and is continuing to focus on whether the sales were suitable or whether firms made misleading statements about fees, dividends and liquidity. One example is the Behringer Harvard REIT I, which raised $2.9 billion from its launch in 2003 to the end of its final offering in December 2008, has reduced its share value and cut its annualized dividend rate. Some other non-traded REITs that have reduced dividends to shareholders include Hines Real Estate Investment Trust, Inc., Cole Credit Property Trust II, Wells Real Estate Investment Trust II and Inland Western Retail Real Estate Trust.

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