According to a report in the Investment News, a new study confirms that non-traded REITS consistently underperform the broad market of real estate investing in large part because of the high fees and commissions associated with these investments (the fees for non-traded REITs are often as high as 12-15%).
The study found that 70% of the non-traded REITs included in the study underperformed basic benchmarks. The study is particularly timely as the initial public offering market for nontraded REITs, known in the industry as a “liquidity event” or “going full cycle,” has heated up this year. Since March, three nontraded REITs have listed on exchanges, with more likely to come, each with limited to no success.
Notwithstanding the poor track record of these investments, brokerage firms have only increased the sale of such products. According to an executive summary of the study performed the nontraded REIT industry had $84 billion in assets under management at the end of 2011 (representing huge growth in the industry). Certainly, an inference can be made that the industry is actively looking to grow this investment area because of the very commissions that makes it so difficult for these investments to succeed.
The study was performed by BlueVault Partners LLC and the University of Texas at Austin’s McCombs School of Business. For more information on the study, visit http://www.investmentnews.com.
The White Law Group continues to file arbitration claims involving non-traded REITs. Generally these claims argue that the broker-dealers that sold these investments failed to perform the necessary due diligence on the non-traded REITs prior to offering them for sale to their clients and that the brokerage firms failed to properly assess whether the investments were suitable for their clients in light of their client’s age, net worth, investment experience, and investment objectives.
The White Law Group has filed claims involving the following non-traded REITs (among others): Desert Capital REIT, Cornerstone Core Properties, CIP Levaraged Fund Advisors, Cornerstone Health Care REIT, Behringer Harvard REIT, Inland Western REIT, Inland American REIT, KBS REIT, and AmREIT.
If you invested in a non-traded REIT and would like to discuss your litigation options, please call the securities attorneys of The White Law Group at 312/238-9650 for a free consultation.
The White Law Group is a national securities fraud, securities arbitration and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida. For more information on the firm visit http://www.whitesecuritieslaw.com.