Inland American Real Estate Trust Inc. (IARE) has lowered its estimated share value by 42.4%, because the company sold or spun off different assets over the last year. Among these were its hotel portfolios, now a listed real estate investment trust known as Xenia Hotels & Resorts Incorporated.
Inland American submitted a filing with the U.S. Securities and Exchange Commission, stating that $4 was its most current estimated share value. Prior to that, concluding 2013, the nontraded REIT said that its most recent valuation was at $6.94/per share value. Inland American Real Estate Trust Inc. said it was reducing its yearly distribution from 50 cents to 13 cents.
Inland American president and chief executive Thomas P. McGuinness noted that Xenia constituted a significant chunk of its assets, with each stockholder getting one share of Xenia common stock for every eight Inland American common stock shares held at end of business on January 20. That was the spin-off date. Because of this, stockholders of Inland American now own common stock shares in both Xenia and Inland.
Inland American was among the nontraded REITs that sustained losses during the real estate crisis. Unfortunately, not only did nontraded REITs take a financial hit but also so did many of their investors. Quite a number of them even submitted formal claims against broker-dealers that sold them non-traded REIT shares. Allegations included misrepresentations, failure to discuss risks or fees, and other claims.
Also known as unlisted REITs, non-traded REITs are illiquid investments that come with high commissions. Those who run non-traded REITs get to decide when investors are able to redeem their shares and at what price.
Non-traded REITs don’t trade on national security exchanges. Their illiquidity can run for up to eight years or longer. Early redemption is frequently limited. Accompanying fees may take up a chunk of total returns.
The Financial Industry Regulatory Authority issued a Tip Sheet to the public About Non-Traded REITs. Among its recommendations:
· Don’t put too much of your savings in one REIT or even in a number of them if they belong to the same family.
· Don’t invest according only to distributions in the non-traded REIT. Distributions may be suspended or stop completely.
· Know that redemption policies may be modified over time.
· Know that reinvested distributions may be subject to redemption policies, which means they can become illiquid for quite some time.
· Just because a non-traded REIT is supposedly going to go public doesn’t mean it will happen soon or ever.
· Consider hard before investing proceeds from a non-traded REIT into another non-traded REIT, especially if you would be buying them from the same securities firm, which undoubtedly would be making a commission.
More Blog Posts:
Net Asset Value of Tony Thompson’s Former Nontraded REIT Strategic Realty Trust Plunges, Stockbroker Fraud Blog, July 22, 2014
California Regulators Probe Inland American Real Estate Trust REIT, Stockbroker Fraud Blog, May 15, 2014
Non-traded REITS Exhibit Unbelievable Resistance to FINRA Disclosure Rules, Institutional Investor Securities Blog, March 19, 2014