Dividend Capital Total Reality Trust Inc. operates as a non-traded REIT that began by providing investment opportunity in high-quality office, industrial retail, multi-family, and real properties located in North America. Dividend Capital also targeted investments in real estate related securities, securities issued by other real estate companies, and mortgage loans secured by income-producing real estate. Today the REIT primarily invests in a diverse portfolio of real properties and real estate-related debt and securities.
The White Law Group continues to investigate FINRA arbitration claims involving Dividend Capital REIT investments. Unfortunately for investors it appears that many financial advisors/brokerage firms that sold Dividend Capital understated or misrepresent the risks and liquidity problems associated with a non-traded REIT (like Dividend Capital).
According to Dividend Capital Diversified Property Fund’s most current 8-K form filed February 1, 2013 with the U.S. Securities and Exchange Commission, the current Net Asset Value (NAV) per share is $6.72. This represents Dividend Capital’s “book value.” Unfortunately for investors, the REITs market value may be substantially less. The secondary market for non-traded REITs often pays substantially less than the stated book value.
While the NAV value has not changed significantly since the firm’s last post, continued changes to Dividend Capital’s redemption plan have arisen that might raise concerns for some investors. According Divided Capital Diversified Property Fund form 10-Q Dividend Capital has yet to redeem any Class A, Class W, or Class I shares, during their quarterly report ending Sept 30, 2012. (See http://www.sec.gov/Archives/edgar/data/1327978/000119312512467266/d398334d10q.htm).
In addition, the redemption price will now be determined at the end of each business day and based on the NAV for each class. Divided Capital also has the ability to modify, suspend, or terminate their share redemption program at any time.
Further, major changes and reorganization has incurred within Dividend Capital. On December 19, 2012 the board of directors of Dividend Capital appointed Jeffery L Johnson as Chief Executive Officers and announced the resignation of Guy M Arnold.
REITS are required to distribute at least 90% of their taxable income to shareholders. A potential warning sign for a REIT then could be the REITs inability to pay out that income with funds on hand.
According to Form 10-Q, Dividend Capital entered into a senior mortgage fixed rate amortizing loan in the amount of $185.0 million borrowed from Wells Fargo Bank on June 25, 2010. The NOIP fixed rate loan has an interest rate of approximately 5.46% and matures in July 2020. In addition they entered into a $450 million unsecured term loan and revolving line of credit with eight lenders, including Wells Fargo Bank.
The fact that Dividend Capital needed to borrow funds could certainly be a poor indicator for the REIT’s future prospects and liquidity.
For a full description of the senior unsecured loan between Dividend Capital and Wells Fargo bank visit: http://www.sec.gov/Archives/edgar/data/1327978/000119312510188067/d10q.htm
Prior to making recommendations to an individual investor, brokerage firms are required by the Financial Industry Regulatory Authority (FINRA) to disclose all the risks of an investment. Recommendations should only be made if the investment is suitable for an individual investor given their age, investment objections, investment experience and risk tolerance.
Brokerage firms that do not perform adequate due diligence on an investment and/or make unsuitable recommendations can be held accountable for investment losses through securities arbitration.
Although many brokerage firms may have sold Dividend Capital to investors, it is known that Wells Fargo Advisors has sold this REIT to its clients.
According to Dividend Capital’s prospectus dated January 27, 2006, the REIT paid 6% commission to the brokerage firm that sold the product. Additionally, approximately 2.5% dealer manager fee and up to 1.0% distribution fee was also deducted from the primary offering price, and up to 1.5% of the proceeds from the sale of shares may have been allocated to the Advisor (Dividend Capital Total Advisors Group LLC) for incurring or paying offering expenses.
Certainly the high commission could be a motivating factor for unscrupulous financial advisors to sell Dividend Capital regardless of whether the investment is in line with the client’s investment objectives and profile. Moreover, the total commissions and expenses make it difficult for the REIT to perform in line with the market.
If you invested in a Dividend Capital 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 White Law Group, visit http://www.whitesecuritieslaw.com.