Behringer Harvard REIT I, one of the largest nontraded real estate investment trusts with over $4 billion in assets, was recently sued in Federal Court in the Northern District of Texas by an investor who purchase 1,275 shares from 2004 to 2008. The suit, which also names Behringer Harvard Holdings, CEO Robert Aisner and other company executives, may lead to the formation of a class action.
The complaint, which may be viewed here, alleges that the company: “sought to mask the poor performance by paying investors back with their own money, while at the same time draining the company of millions of dollars” for Behringer Harvard and its executives.
Behringer Harvard has seen its value drop from its $10 per share offering price to a recent value, as estimated by the company itself, of $4.64. Since these investments are not traded on any conventional exchange, the actual amount an investor desiring to liquidate immediately can obtain is often 20-30% less than the company’s estimated value. For prior articles related to the secondary market for non traded REITs, go to this link.
Nontraded REITs were sold to many retirees who believed that they were similar to bonds, that they would pay out income on a steady basis and that the original purchase price was not subject to such drastic decline. In addition, most investors were unaware of the fact that it may be difficult or impossible to liquidate the investments.
While class actions may provide some relief for investors, in the case of these REIT investments, in most cases an investor will be likely to have better success with an individual arbitration filed with FINRA. For a discussion on class actions vs. arbitration, see here.
If the risks associated with owning a nontraded REIT like Behringer Harvard were not adequately explained to you, pursuing an arbitration proceeding with FINRA may lead to the recovery of some or all of your investment losses.
We have been helping investors recover stock market losses for more than 20 years. Please contact us if you have questions.
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