This past month a number of large brokerage firms have expressed concerned over some REIT offerings. In an earlier post, here, Advisor Group announced that the company would no longer sell Cole Credit Property Trust III, citing the a management’s decision to pay itself and founder Chris Cole a $127 million fee.
In addition, Securities America and National Planning Corp. have both terminated their selling agreements with American Reality Capital Trust V. According to Investment News, Securities America notified their representatives that they would no longer offer ARC V due to the risk of over concentration. After the sales reached $70 million in just three and half months, Securities America notified their representatives that the firm was implementing new “threshold” measures and is limiting the firms investment in any one alternative investment.
National Planning Corp had an arguably more concerning reason for suspending sales, citing due diligence on another American Reality Capital REIT, American Reality Capital Trust IV (ARC IV). According to Investment News, National Planning Corp suspended sales following ARC IV $1.45 billion dollar purchase from General Electric Capital in which they acquired over 980 properties, most of which were fast food and casual dining restaurants. The report indicates that the recent purchase appeared to deviate from the REIT’s prospectus.
REITs are complex and high risk investments that are really only suitable for sophisticated investors. It is the duty of the brokerage firm to perform due diligence on any investment and to ensure that the investment is suitable for a particular investor in light of that investor’s age, investment objectives, income, net worth, and investment experience. Given the current risk of devaluation of these REITs, such investments are likely only suitable for wealthy and/or sophisticated investors.
The White Law Group continues to investigate potential arbitration claims against the firms that pushed these high-risk investments. If you have suffered losses in a nontraded 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 https://www.whitesecuritieslaw.com.