As reported in the Wall Street Journal recently, publicly traded REITS have in the past two years attracted investors because of their possible insulation from turmoil outside the United States, high yields, and the fact that these REITS could benefit if unemployment comes down and the corresponding need for office space, hotels, and apartments go up. If it turns out that publicly traded REITs are not insulated from turmoil around the world or it turns out that employment does not improve as expected, then owners of publicly traded REITs can sell their interest and decide how to reinvest.
This is often far different than what occurs when a non-traded REIT investor wants to liquidate his position because the investment no longer looks attractive. Specifically, when a non-traded REIT owner decides to head for the exits, there are often many other investors feeling the same way and the non-traded REITS are not structured for mass redemptions. That means that the non-traded REIT investor is often stuck with the investment, even if unemployment and world events make it an undesirable investment. This is just one of myriad problems we believe exist for investors in non-traded REITS.
For more on problems with non-traded reits, see our blog reitattorneys.com
