By Tim Husson, PhD
Non-traded REITs are real estate investments sold to retail investors despite significant liquidity, transparency, and other risks. We've done a great deal of work on non-traded REITs (including a paper here and blog posts here), and have warned that their dividend payments and debt levels are often not sustainable. Almost all non-traded REITs are reported in customer accounts at acquisition cost, despite widespread declines in real estate values.
FINRA has recently required non-traded REITs to report updated share values. The results so far have been very revealing, as most all non-traded REITs now report values significantly below their offering prices. InvestmentNews now reports that several large non-traded REITs recently reported enormous declines in per-share values, highlighting again the discrepancy between the price and the value of these investments.
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