REITs seemed like an ideal investment tool; pool a significant amount of money together from hundreds of investors, buy real estate properties with it, and then divide the profits gathered among those who invested. As good as all that sounds, today they are some of the investments with the most problems. The main issue which has affected all REITs though, is the real estate crash which deeply reduced the values of most the properties which they held. Particularly, the nontraded REIT sector is one which has faced tremendous losses as a result of the limited resell ability that it offers to those who invest. MTS Research Advisors recently conducted an analysis of eight of the largest nontraded REITs, and found that they had lost $11.3 billion, or 37% of their equity value in the last seven years.
Last week, CNL Lifestyle Properties, a large nontraded real estate investment trust, announced that it saw losses of $19.9 million for the quarter which ended in June, which amounted to a loss of seven cents per share. This was a larger loss when compared to the same period last year, where they experienced a loss of $15.7 million, which amounted to a loss of five cents per share. This announcement was compounded by the fact that they reported a new estimated per share value of $7.31, a drop of 27% as compared to the initial value of the shares which was $10. Furthermore, CNL Lifestyle properties will be cutting its dividends to investors from an annual distribution of 6.25% of the initial price of the shares to an annual distribution of 5.81% of the new value of the shares. This would mean that if the new rates were calculated using the initial share price of $10, then the new annual distribution would be 4.25%, down 2% from the 6.25% which was being paid out annually.
CNL Lifestyle Properties is one of the many REITs which have seen losses leading to cuts in dividend payments and share prices. KBS Real Estate Investment Trust has seen a devaluation in share prices of more than 48%, currently estimated at $5.16 per share down from the $10 per share it initially sold at. Dividend Capital Total Realty Trust is another example of a nontraded REIT which has seen a large decrease in share values. It was originally traded at $10 per share, but in July it was revalued at $6.69 per share, a drop of 33%.
What this has demonstrated is the appearance of a market which is not as safe as some investment advisors made it seem. The nontraded REIT market was described by many as a place where one could have a steady influx of money from their investment, while being relatively protected from the volatility of the market. This has not been the case, as most nontraded REITs have experienced difficulties in their portfolios.
If you have invested in a nontraded REIT and have experienced losses as a result of it, you may be able to recover some of your losses. Please contact one of the attorneys at Sonn & Erez to discuss your legal options. Sonn & Erez is a nationally recognized securities firm representing individual and institutional investors who are victims of securities fraud, Ponzi schemes, and financial adviser negligence. For more information, contact Sonn & Erez at 1-844-689-5754.