KBS Cap Markets Non-Traded REITs May Be Too Risky for Some Retail Investors

If you have sustained losses from investing in KBS Cap Markets Non-Traded REITs or any other non-traded REITs, do not hesitate to contact the securities fraud law firm of Shepherd Smith Edwards and Kantas, LTD, LLP right away to request your free case evaluation. While publicly registered non-exchange traded real estate investment trusts have become popular in the wake of investors looking for financial products that come with attractive yields, there are certain risks involved that could prove detrimental to some. Non-traded REITs are also often accompanied by high commissions and fees, which cam prompt some brokers to push these products even if they aren’t in the best interests of a client.

An REIT is an investment firm that purchase and manages real estate and related assets. When thousands of investors financially back an REIT, this can generate a purchasing power allowing the real estate investment trust to purchase significant properties that an individual investor would not be able to afford. With non-traded REITS, performance is related to how well the real estate and related assets do. Unlike traded REITs, non-traded REITs are considered illiquid for about eight years or longer.

However, as our securities fraud law firm mentioned earlier in this blog post, there are risks involved. In addition to high fees that could potentially eat into overall returns, early share redemption can be limited, and the periodic distributions that make non-traded REITs so attractive in certain instances may have to be subsidized by borrowing funds and a return of investor principal. Other potential risks and complexities involved (more details can be found on the Financial Industry Regulatory Authority’s Web site):

• There is no guarantee on distributions, which may go beyond operating cash flow. An REITS’ Board of Directors gets to decide whether to pay any distribution. Distributions may be suspended or stopped. Also, a lot of factors can impact the composition of these payments.

• REIT status and distribution come with tax consequences.

• Valuation complexities and illiquidity can come from not being traded on public markets. Should a liquidity event occur, this doesn’t necessarily mean that your investment’s value will have risen. It may have even declined or been lost.

• Early redemption can be costly and may even be restrictive.

• Front-end fees (selling expenses and compensation, organizational costs, offering expenses, issuer costs) can take a toll.

• Unspecified properties.

• Limited diversification of portfolios.

• The inherent risks involved in investing in real estate.

In addition to queries about KBS Cap Markets Non-Traded REITs, lately our securities fraud attorneys have also been offering case evaluations to clients who invested in Apple REITs, of which David Lerner Associates was the sole underwriter, and Wells Timberland REITs and Wells REIT IIs.

We may be able to help you recoup your losses.

More Blog Posts:
Investor Complains to FINRA About Behringer Harvard Holdings, LLC-Related Real Estate Investment Losses, Institutional Investor Securities Blog, January 24, 2012
Ameriprise Must Pay $17 Million for REIT Fraud, Stockbroker Fraud Blog, July 12, 2009
David Lerner & Associates Ignored Suitability of REITs When Recommending to Investors, Claims FINRA, Stockbroker Fraud Blog, June 8, 2011