The White Law Group is investigating potential securities fraud claims on behalf of investors involving broker-dealers recommending that investors invest in inappropriate REIT investments.
A REIT (real estate investment trust) is a corporation or trust that uses the pooled capital of many investors to purchase and manage income property (equity REIT) and/or mortgage loans (mortgage REIT). While Registered REITs are traded on major exchanges just like stocks, many REITs that are currently being sold by financial advisors are unregistered REITs and are not traded on the stock exchange (thus making them virtually illiquid). Non-traded REITs pay a high commission which often explains the stockbroker’s motivation in recommending the REIT investment to the investor. Moreover, the price assigned to the investment is often artificial (the price of these REITs is usually assigned a value by the REITs manager – creating a conflict of interest).
Attempting to capitalize on investors desire for income and safe investments in the market downturn of 2007-2008, the industry increased its sales of various types of REITs, including Mortgage REITs, Equity REITs, and Hybrid REITs (Hybrid REITs invest their assets in mortgages and hard assets).
Sales for REITs totaled over $12 billion in 2007, followed by over $10 billion in 2008. These sales were likely driven by the high commissions and expenses paid to the broker selling the REITs. Notwithstanding the representations made by stockbrokers in selling these investments, REITS lack liquidity, can be extremely risky, and are unsuitable for many.
FINRA recently announced that it is paying close attention to non-traded REITs and, in particular, the ways in which broker/dealers marketed and sold the products to investors. In many cases, broker-dealers marketed these investments as safe and secure.
With the failing real estate market, the market for non-traded and traded REITs experienced a significantly down year in 2009. Many of the largest REITs either slashed dividends to investors, shut down redemption programs, or both.
The White Law Group’s investigation into the improper sales of REITs to investors includes, but is not limited to, recommendations to invest in the following REITs: Behringer Harvard REIT I, Inland America Real Estate Trust, Lightstone REIT, CNL Income Properties, Hines Real Estate Trust, Cole Credit Property Trust, Inland Western Retail Real Estate Trust, Wells Real Estate Investment Trust II, Piedmont Office Realty Trust, Desert Capital REIT, Apple REIT, and Crystal River REIT.
If you have any information that may assist The White Law Group in its investigation, please contact the firm’s Chicago, Illinois office at 312-238-9650.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida. For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.