Non-traded REITs suffer further devaluations.

Thursday, December 27th, 2012

Several large non-traded REITs recently announced further devaluations.  For example, Inland American REIT recently announced that its valuation was decreasing to $6.93 per share (down from its latest valuation of $7.22 per share, and even lower from its original value of $10 per share).

Behringer Harvard REIT I also announced a drop in estimated value to $4.01 per share from $4.64 per share and Hines REIT announced its share value had dropped to $7.61 from $7.78 per share.

Although one large non-traded REIT, KBS REIT, announced its shares had risen nominally from $5.16 per share to $5.18 per share, overall the news for non-traded REIT investors represented more disappointment in these underperforming investments.

Further compounding the problem with these devaluations is that the shares are illiquid and it is unlikely that the secondary market is paying anywhere near the announced estimated values.  Due to the illiquid nature of non-traded REITs, the buy side of the secondary market is usually inhabited by enterprising and sophisticated venture capital firms and hedge funds.  These entities know that the sellers of non-traded REITs are often desperate for liquidity so the offerss  are often for significantly less than the book value of the underlying assets.  With any real estate investment, though, the “true value” is whatever someone is willing to pay so it is likely that secondary market value of these non-traded REITs is currently less than the recently announced “estimated value.”

The good news is that investors may be able to recover their losses in these underperforming non-trading REITs.

The White Law Group continues to file FINRA arbitration claims involving non-traded REITs, like Inland American REIT, Behringer Harvard REIT I, Hines REIT, KBS REIT and others.  These cases are generally brought against the brokerage firms and financial professionals that recommended the investments

Financial advisors and broker-dealers have a duty to their clients to perform the necessary due diligence on an investment before offering it for sale to their clients and to ensure that any investment recommendation that is made is suitable in light of the client’s age, investment experience, net worth, and investment objectives.   Unfortunately for investors in non-traded REITs, brokerage firms often down play the risk of these products to their clients and sell the investments as safe, income producing investments.

The claims filed by The White Law Group involving these REITs generally allege that the brokerage firms that sold these products failed to perform adequate due diligence on the investments (as they are required to do by FINRA rules, that the investments were unsuitable for the investors in light of their particular financial situation, and that the firms only sold the investments because of the large commissions that non-traded REITs pay to brokerage firms and brokers to sell these products.

If you invested in non-traded REIT and are interested in 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 White Law Group, visit http://www.whitesecuritieslaw.com.

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