Non-Traded REITs and Private REITs

Both non-traded real estate investment trusts (non-traded REITs) and private real estate investment trusts (private REITs) are technically considered securities, but they do not trade on any exchanges, such as the New York Stock Exchange ("NYSE") or the American Stock Exchange ("AMEX").

These REITs are generally illiquid. This means that basically, an investor is locked in and cannot get their cash back. (Some third-party vendors may purchase these types of REITs, but they do so at a steep discount.)

While non-traded REITs are required to register with and be regulated by the Securities and Exchange Commission (SEC), private REITs are not. Both REITs are not directly affected by stock market volatility because they don’t trade on any national stock exchanges.

Anyone can invest in a public, non-traded REIT pending certain investment limits. However, private REITs are generally only available to accredited, experienced investors with either a $1M net worth (not counting the value of their personal residence) or those who have earned at least $200K during each of the last two years. Retail investors who end up buying private REITs usually have to invest a minimum amount of somewhere between $10K and $100K.

The underlying collateral for REITs, regardless of whether they are privately or publicly traded, is made up of real estate, preferably the kind that produces income. REITs tend to be composed of commercial real estate, but there are those with some residential exposure. Think of a REIT as a mutual fund that owns real property instead of stocks.

It is unclear why anyone would want to own a private REIT as there are many publicly-traded REITs with long track records and public disclosures that are more liquid and lower risk.

Our skilled private REIT and non-traded REIT attorneys at Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) represent investors who have suffered losses because they were sold these securities even when they were unsuitable for them. Or, because their broker did not properly apprise them of the risks.

Call SSEK Law Firm at (800) 259-9010 today if you suffered non-traded REIT or private REIT investment losses.

Our investment fraud lawyers are continuing to investigate claims of REIT fraud for investors across the United States. Below are a number of the private REITs and non-traded REITs we are currently investigating:

1. CIM Real Estate Finance Trust
2. CNL Healthcare Properties (related to Lifestyle Properties)
3. Corporate Property Associates 18
4. Griffin Realty Trust
5. Healthcare Trust
6. Highlands REIT
7. Inland Real Estate Income Trust
8. Inland American Real Estate Trust
9. Inland Western Real Estate Trust
10. Pacific Oak Strategic Opportunity REIT
11. Phillips Edison & Company
12. Sila Realty Trust (formerly Carter Validus Mission Critical REIT II)
13. Smartstop Self Storage REIT
14. Steadfast Apartment REIT
15. Hospitality Investors Trust (HIT REIT)
16. Benefit Street Partners Realty Trust (Now Franklin BSP Realty Trust)
17. KBS Growth & Income, KBS Real Estate Investment Trust II, & KBS Real Estate Investment Trust III REITs
18. NorthStar Healthcare Income REIT

Usually, the payout to the broker who sells private REITs and non-traded REITs is high, sometimes even up to 15 % in various fees and commissions to the advisors and their brokerage firms. In contrast, public REITs pay the broker about the same in commissions for what he or she would get if they sold you GE or Exxon stock.

Besides larger fees, one of the other negative aspects of private and non-traded REITs is risks and performance. They may contain questionable conflicts of interests associated with the properties purchased, the management of the properties, the very REIT itself.

Often properties are purchased at overvalued prices, and revenue projections (rent collections) can be way off from the forecasts. Disclosures by most privately traded REITs are thin and are not up to the standards of their publicly traded brethren.

Dividend declines and stoppages can happen. If things go south, there is not much one can do, unlike with a public REIT that can be sold any day the markets are open.

SSEK Law Firm represents investors that are the victims of unscrupulous financial advisors/brokers. Misrepresenting risks or omitting facts associated with an investment is a prime example of inappropriate or negligent conduct. Concentration in private REITs and non-traded REITs exponentially increases the risks for consumers, thus compounding suitability issues.

Our seasoned non-traded and private REIT lawyers have decades of experience suing brokerage firms on behalf of investors. We have filed thousands of lawsuits through FINRA arbitration for clients, recovering many millions of dollars on their behalf.

Contact SSEK Law Firm or call (800) 259-9010 for your free, no-obligation case consultation.