On August 31, 2015, the SEC Office of Investor Education and Advocacy issued a bulletin to educate investors about the risks of non-traded REITs. The bulletin noted many of the downsides associated with non-traded REIT’s for small investors, including the following:
- Lack of liquidity/inability to be readily sold in the marketplace at a favorable price.
- High fees - As high as 15% of the offering price.
- Distributions coming from principal - Not actual income earned by the underlying properties.
- Lack of share value transparency - No market price readily available and inability to assess the value or performance for significant time periods.
- Conflicts of interest - High transaction fees paid to external managers also having interests contrary to those of shareholders, including fees and income based on the value of property acquisitions and assets under management. Additionally, external managers may be affiliated with competing companies.
We offer free initial consultation to investors who feel they may have been victimized with the inappropriate sale of a REIT investment. For a free initial consultation, please contact the Law Offices of Timothy J. O’Connor at (518) 426-7700.