Monday, April 2, 2012

Latest Non-Traded REIT Valuations: Not Good...

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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