Stock fraud lawyers are currently investigating claims on behalf of investors who have experienced significant losses as a result of their investment in Behringer Harvard Multifamily REIT I.
“With an unlisted REIT, it’s generally understood that distributions must be paid to investors before assets are acquired, and therefore, before operating income covers distributions,” says Robert S. Aisner, president and CEO of Behringer Harvard Holdings, Behringer Harvard’s parent company. “Distributions at that phase are largely a return of the investor’s capital.”
However, many stock fraud lawyers would argue that this fact is not “generally understood” by, or explained to, investors by their financial advisor or brokerage firm.
Reportedly, Behringer Harvard’s Multifamily REIT I was acquiring aggressively throughout the recession, but has slowed its multifamily acquisitions significantly. In fact, in 2010 around $885 million was spent by the company to purchase apartments. However, the company wasn’t even in the top 10 of most active buyers in 2011.
Unlike public REITs, non-traded REITs aren’t traded on the securities exchange. As a result, these investments are illiquid for a significant amount of time, often eight years or more. According to FINRA, the Financial Industry Regulatory Authority, selling a non-traded REIT before the initial period is up can “be high-risk and erode total return.” As a result, these investments aren’t suitable for many investors, such as retired individuals who need to have easy access to their funds.
“The nontraded-REIT space is a very difficult and questionable business model, with the up-front loads and the difficulty that probably exists in terms of generating a decent return,” says Dave Bragg, director of REIT research at a market research firm. “I think the broader (unlisted) industry is troubled. I’m not surprised that there’s more and more negative press.”
If you have suffered significant REIT losses in Behringer Harvard Multifamily REIT I, or another unlisted REIT, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a stock fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.