Our law firm is handling claims on behalf of investors in Inland Western REIT, which is know known as Retail Properties of America, Inc. Many investors in Inland Western REIT were advised by their brokers that the value of their investment would come back following an initial public offering (“IPO”) of the REIT. However, this has proven to be anything but the case. At the IPO, Retail Properties was offered at $8, well below the expected price of $10 to $12. Moreover, it is believed that the $8 offering price is the result of a reverse stock split and that the real value, split-adjusted, is $3 per share.
Many investors purchased Inland Western REIT n/k/a Retail Properties of America, Inc. at the recommendation of their brokers who advised them that it was a low risk, safe investment. In some cases, brokers put a substantial portion of their client’s portfolio in Inland Western REIT n/k/a Retail Properties of America, Inc., creating an unsuitable over-concentration in a single product. Investors who have sustained significant losses in Inland Western REIT n/k/a Retail Properties of America, Inc. include elderly investors and retirees.
FINRA Rules Regarding REITs
In October of 2011, FINRA issued a new Investor Alert called Public Non-Traded REITs-Perform a Careful Review Before Investing to help investors understand the benefits, risks, features and fees of these investments. While investors may find non-traded REITs appealing due to the potential opportunity for capital appreciation and the allure of a robust distribution, investors should also realize that the periodic distributions that help make non-traded REITs so appealing can, in some cases, be heavily subsidized by borrowed funds and include a return of investor principal. Additionally, early redemption of shares is often very limited, and fees associated with the sale of these products can be high and erode total return.
According to FINRA, “Confronted with a volatile stock market and an extended period of low interest rates, many investors are looking for products that offer higher returns in turbulent times. However, investors should be wary of sales pitches that might play up non-traded REITs’ high yields and stability, while glossing over the lack of liquidity, fees and other risks.”
REITs pool the capital of numerous investors to purchase a portfolio of properties–from office buildings to hotels and apartments, even timber-producing land–which the typical investor might not otherwise be able to purchase individually. There are two types of public REITs: those that trade on a national securities exchange and those that do not. FINRA’s alert focuses on publicly registered non-exchange traded, or simply non-traded REITs.
Public Non-Traded REITs outlines the features, complexities, risks and costs associated with non-traded REITs.
Public Non-Traded REITs-Perform a Careful Review Before Investing also warns investors about private REITs–generally sold only to accredited investors–which not only do not trade on an exchange, but are also generally exempt from Securities Act registration. FINRA cautions that it is extremely difficult for investors to make an informed decision about private REITs due to their lack of disclosure documents.
KlaymanToskes has successfully obtained recoveries for clients over the last several years in these same types of illiquid investment products. The danger of clients investing in illiquid products like these is that they are not freely tradable in the market place, but instead are dependant on valuation procedures which may not properly value the securities. Over the years, these valuation procedures have created conflicts of interest. This conduct appears to repeat itself as we have seen this many times before.
If you sustained losses in Inland Western REIT n/k/a Retail Properties of America, Inc. and wish to discuss your legal options at no obligations, including whether you can bring a claim or lawsuit against your brokerage firm, please contact our law firm.