Non-traded REITs (Real Estate Investment Trusts) do not trade on any national exchange and therefore have no market in which a share price can be established. Most were sold initially for $10 per share with the promise of steady and dependable dividends and an expectation that the share price would increase over time. Most investors were unaware of the liquidity issues resulting from the fact that the investments are not publicly traded, leaving only a privately operated secondary market as a sales outlet should the investor want to raise cash.
The largest REIT, Inland American Real Estate Trust, Inc. (assets of 12.2 billion) recently reduced its estimated share value to $6.93. Behringer Harvard REIT I (4.2 billion in assets) dropped its estimated value to $4.01 a share and Hines Real Estate Investment Trust dropped the estimated value of its shares to $7.61.
KBS REIT 1, increased their share value by two cents to $5.18.
Note regarding Value of Non-Traded REITs:
Since these investments do not trade on an exchange, valuing the
investment is difficult, if not impossible. FINRA requires that the
company provide an estimated valuation of the shares within 18 months after cessation of the offering. Investors should be wary that estimated value does not accurately reflect fair market value;
ie, the amount an investor could expect to receive if the investment
were liquidated immediately. The only market for most of these
investments is one of the privately operated secondary markets where
selling prices are often discounted 30% or more from the estimated value. See this blog article for more information on secondary markets for non-traded REITs.
If you have questions about losses on non exchange traded REITs or other stock market losses, do not hesitate to contact us.
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