Securities Lawyers Blog
The securities lawyers of Gana Weinstein LLP continue to report on non-traded real estate investment trust (Non-Traded REIT) and investor loss recovery options. According to First Capital REIT’s website the fhe company claims that “when you invest with First Capital Real Estate Trust Incorporated you join those investors who benefit from the dual strategy that makes our REIT stand out from our competitors. We focus on acquiring existing stabilized cash-flowing assets to support stable, consistent distributions to our stockholders.”
However, the company has subsequently reported that multiple investments that First Capital REIT made have filed a voluntary petition for relief in Bankruptcy Court. Thereafter, the company in November 2016, sought to protect cash. It’s been reported that First Capital REIT was failing to pay employees on time and missed filing financial statements with the SEC for more than a year. According secondary market estimates on the value of First Capital REIT the company’s shares have traded at just $4.90/share or over a 50% loss from the $10.00/share offering price.
Our firm handles where brokers recommend investments in direct participation products (DPPs), private placements, Non-Traded REITs, and other alternative investments. These products are almost always unsuitable for middle class investors. In addition, the brokers who sell them are paid additional commission in order to hype inferior quality investments providing perverse incentives for brokers to sell high risk and low reward investments.
According to studies, non-traded REITs have historically have underperformed even safe benchmarks, like U.S. treasury bonds – meaning that non-traded REITs provide paltry investment returns considering the risk an investor takes. Alternative investment products like oil and gas partnerships, REITs, and equipment leasing programs are only appropriate for a narrow band of investors under certain conditions due to the high costs, illiquidity, and huge redemption charges of the products, if they can be redeemed at all.
However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them. These products have become so popular among brokers without providing any benefit to investors that many states now limit investors from investing more than 10% of their liquid assets in Non-Traded REITs. Many states impose these limitations because its understood that that they provide virtually no benefit to investors in relationship to their risks.
Investors often fail to understand that they have lost money until many years after agreeing to the investment. In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. The investment lawyers at Gana Weinstein LLP represent investors who have suffered investment losses due to allegations of wrongdoing. The majority of these claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.