19 Pages Posted: 1 May 2012 Last revised: 3 May 2012
Date Written: March 1, 2012
Despite the widespread reduction in U.S. real estate values over the past few years, the share prices of many non-traded REITs have remained at or near their initial offering levels, giving investors the illusory sense of low price volatility and preserved value. Somewhat belatedly, non-traded REITs have recently been the subject of increased regulatory scrutiny.
In this paper we discuss the structure and features of non-traded REITs, highlighting the high fees and significant conflicts of interests that could lead to loss of shareholder value. We also examine the financial statements of non-traded REITs and highlight several aspects that may be cause for concern amongst investors. Finally, we discuss the potential unsuitability of non-traded REITs for retail investors, as well as the implications of our findings to the even less transparent private REIT market.
Keywords: real estate, REIT, non-traded
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