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Investors in Illiquid REITs and Real Estate Limited Partnerships May Encounter Considerable Difficulty in Redeeming Shares for Cash

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investing in real estate through a limited partnershipInvestors in numerous non-traded REITs and real estate limited partnerships may have recently encountered difficulty in exiting their investment position through redemption of shares with the sponsor.  As we have highlighted in several previous blog posts, non-traded REITs and similar limited partnership investments (often sold via private placement), are extremely complex and risky investments.

Unlike exchange traded REITs that trade on deep and liquid national securities exchanges, publicly registered non-traded REITs are sold through an offering or successive offerings to the retail investing public, often over the course of several years.  Once the offering has closed, investors may find that their ability to redeem shares with the sponsor is severely restricted, or in some instances, outright suspended.  This is particularly problematic for retail investors who quite often were steered into the investment by a financial advisor who, in some instances, may have failed to fully disclose the nature of the investment, including its illiquid nature.

In the same vein, investments in real estate limited partnerships are often conducted via a private placement, pursuant to Regulation D as promulgated by the SEC.  As a general rule, a private placement investment in real estate carries with it many of the same risks embedded in investing in non-traded REITs.  These risks include: (1) high fees and commissions, (2) a general lack of transparency concerning the investment (while publicly registered non-traded REITs will typically provide more information than a private placement, the fact remains that many non-traded REITs are structured as blind pools, and accordingly an investor will not be able to readily ascertain the nature of the underlying property portfolio), and (3) difficulty exiting an illiquid investment position.

Investors in the following non-traded REITs and real estate limited partnerships may have recently discovered that their ability to exit their investment and redeem shares has been restricted (perhaps as to timing and amount), or altogether suspended:

  • American Finance Trust
  • ARC Healthcare Trust III
  • ARC New York City REIT
  • Behringer Harvard Opportunity REIT I
  • Highlands REIT
  • Hospitality Investors Trust (formerly known as ARC Hospitality)
  • InvenTrust Properties
  • KBS Legacy Partners Apartment REIT
  • KBS REIT II
  • Rancon Realty Fund IV
  • Strategic Realty Trust
  • Summit Healthcare REIT (formerly Cornerstone Core REIT)
  • Uniprop MHC Income Trust II
  • United Development Funding III

Investors may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.