What are Real Estate Investment Trusts (REITs)?
Real Estate Investment Trusts, also known by their acronym REITs, can include both traded REITs and non-traded REITs. Generally speaking, REITs work by pooling the resources of numerous smaller investors into one large fund which a manager then invests in various real estate holdings. Investors buy in when they purchase shares of the REIT.
Industry watchdog organizations including FINRA and the SEC are leading increased scrutiny into the way non-traded REITs are marketed to the public.
Traded REIT and Non-Traded REIT Differences
Here are some of the differences between Traded REITs and Non Traded REITs:
|Traded REITs||Non-Traded REITs|
|Primary Differences||Traded on stock exchanges, unlike non-traded REITs.||Not traded on public stock exchanges and generally may only be bought through private offerings, unlike traded REITs.|
|Liquidity||Traded on stock exchange, generally easy to sell.||Typically, a limited number of shares are redeemable but with a number of restrictions. Can be difficult to sell.|
|Up-Front Fees||Underwriting fees may be 7% or more, can be subject to brokerage fees when bought on the open market.||Fees may be as much as 15% of the price per share.|
|Valuation||Share valuation is determined by market value.||Valuation is determined by the fund managers or a third party.|
Non-Traded REITs Lawsuits & Investigations
Following complaints from investors, FINRA and the SEC have increased scrutiny into a number of brokerage and investment firms who market and manage non-traded REITs. Investors have complained that they were sold non traded REITs as low-risk, high yield investments, which may be inaccurate. Furthermore, a number of these investors report that they are unable to redeem their shares and feel stuck in an uncertain investment.
In response to these reports, Girard Gibbs’ securities fraud lawyers have filed a class action lawsuit against David Lerner Associates, Inc. and Apple REITs alleging violations in connection with the sale of these investments.
In addition, we are also currently investigating similar allegations against Behringer Harvard REITs.
>> More about Non-Traded REIT Lawsuits
Confused About Non Traded REITs?
If you or someone you know is confused about the value of a non-traded REIT or how redeem shares, please contact us. Free and confidential consultations are available with one of our securities attorneys by calling toll-free (866) 981-4800 or filling out the form to the right.