What Went Wrong with Dividend Capital REIT: What Many Investors Didn’t Know

by InvestorLawyers on September 17, 2012

in Arbitration,Private Placements,Securities Fraud,Suitability

Securities fraud attorneys have been investigating claims on behalf of investors who suffered Dividend Capital Trust investment losses, but what exactly went wrong?

What Went Wrong with Dividend Capital REIT: What Many Investors Didn't Know

According to investment fraud lawyers, while most REITs experience value changes every day because they are traded on stock exchanges, “non-traded,” “private,” or “unlisted” REITs were not traded on exchanges with regulations. Furthermore, these investors of non-traded REITs paid additional layers of fees because the investments were mostly sold by brokers. Generally, investors were promised stable prices and healthy income generation from these investments, but the decline in the commercial real estate market and management problems have resulted in a significant decline in the value of many non-traded REITs.

Many brokers unsuitably recommended non-traded REITs; after all, they were extremely profitable to them thanks to the hefty fees associated with the investment. Many brokers told investors that the REITs values would remain the same while providing income, but many non-traded REITs have temporarily — or indefinitely — suspended payments to investors. That said, securities fraud attorneys note that most public REITs that have been responsibly managed are providing reliable income to their investors.

Reportedly, there are several factors about non-traded REITs that investors either didn’t know or were never told:

  • If liabilities exceeded asset value, the REITs could go under water.
  • Distributions to investors were not guaranteed.
  • Non-traded REIT front-end fees amounted to as much as 15 percent of the investment’s per share price.
  • The secondary market for these investments was insignificant at best, nonexistent at worst. Non-traded REIT investors who wanted to sell their products were left with no buyers or took a huge hit and were forced to sell their investments at a discount.
  • These investments carried a significant risk.
  • In many cases, payments received by investors were a return of capital, not a return on investment.

If you suffered significant losses as a result of your investment in the Dividend Capital REIT, you may be able to recover losses through securities arbitration. To find out more about your legal rights and options, contact an investment fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

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