According to a recent report from Robert A. Stanger & Company the first quarter of 2012 saw a stampede of investors to non-traded REITs and other direct participation investments, including Business Development Companies (BDCs) and Direct Participation Programs (DPPs) which include limited partnerships, general partnerships and limited liability companies. Investors poured approximately $3.3 billion in REITs, BDCs and DPPs during the first three months of the year.
Stanger’s report reveals that $2.6 billion was invested in non-traded REITs and the balance in various BDCs.
The top fund raisers were:
- Cole Real Estate $805 million
- Franklin Square Capital $541 million
- American Realty Capital Advisors $330 million
- Dividend Capital $242 million
- W.P. Carey $188 million
- CBRE Advisors $172 million
This is somewhat suprising given the recent history of many of the non-traded REITs, sold to many with the promise of steady and dependable distributions and a stable market value. In reality many of the non-traded REITs have discontinued distributions, or worse yet funded them with a return of capital or debt financed distributions. Of each dollar invested in a REIT, as much as $.14 goes to pay various costs and fees, leaving only $.86 available for investment. Since they are not traded on any regular exchange, investors have no way to liquidate them if they need cash.
Here is a chart from a prior post in which we highlighted some of the worst performers. Since its publication, Inland Western Retail Real Estate Trust did a reverse merger and went public as Retail Properties of America (RPAI) and the loss to the investor is greater than indicated in the chart.
| Name | Offering price, per share | Current estimated value | % decline per share |
|---|---|---|---|
| Behringer Harvard Opportunity REIT I | $10.00 | $4.12 | -58.80% |
| Behringer Harvard REIT I | $10.00 | $4.64 | -53.60% |
| Behringer Harvard Short-Term Opportunity Fund | $10.00 | $0.40 | -96% |
| Cornerstone Core Properties REIT | $8.00 | $2.25 | -71.88% |
| Inland Western Retail Real Estate Trust Inc. | $10.00 | $6.95 | -30.50%(see note above) |
| KBS Real Estate Investment Trust Inc. | $10.00 | $5.16 | -48.40% |
If you have losses on REIT investments or other stock market losses, you may be able to recover some or all of the losses through FINRA arbitration.
Rex Securities Law , with offices in Boca Raton, FL, and Austin, TX, provides representation to investors nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.
Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.
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