HOUSTON, April 3, 2012 (GLOBE NEWSWIRE) -- The Law Firm of Shepherd Smith Edwards & Kantas LLP (www.reitlosses.com) continues to investigate claims of investors who purchased Real Estate Investment Trusts ("REITs") because of a recommendation by a broker or investment advisor. These products have become popular investments for brokers and investment advisors to recommend, particularly for income seeking clients. This is especially true since the Federal Reserve Board has pushed interest rates so low, with no indication that they intend to bring them back up in the near future.
The fact that REITs pay income that is not directly tied to prevailing interest rates, combined with the fact that REITs on the whole have outperformed the S&P500 over the last 10 years, when reinvesting the dividends, means that many more people are likely to be enticed into these non-traditional investments in order to get higher returns. However, many investors have been burned in these investments from undisclosed risks and features that come with this kind of investment.
Non-traded REITs are not listed on any stock exchange, such as the New York Stock Exchange. As a result, investors in non-traded REITs do not have the ready liquidity typically associated with stocks, bonds, mutual funds, etc. While some REITs permit an investor to redeem their money from the trust directly, many have a set holding period before the investor is allowed to do so. In some circumstances, an investor can be prohibited from redeeming his shares and accessing his or her money for as much as 7 years after the initial purchase. This can greatly increase the risks of the investment, as it prevents an investor from reacting to changes in the market as a whole as well as changes to his or her own financial needs and risk tolerances.
Further, the income from an REIT is not fixed; it is typically a percentage of the income earned by the underlying real estate. Many investors are not aware at the time of their purchase of the fluctuations that can occur in their investment. If the REIT is not profitable for a given period of time, the investor is likely not entitled to any income at all. Not all REITs are created equal either. Most REITs invest in a specific type of real estate, such as rental homes, office buildings, self-storage businesses, or hotels. This means that the investor is subject to the risks of the fluctuations of that specific market. For example, if an investor's REIT only owns office buildings which it rents and the overall rental value of office space goes down, then the investor's income will decrease, even if the rental value of homes is rising at the same time.
When brokers or investment advisors recommend REITs to their clients, many do not disclose the multitude of risks inherent in this type of investment. If you have lost money in REITs, whether they were traded or non-traded, as a result of your broker or investment advisor's recommendation, contact the law offices of Shepherd Smith Edwards & Kantas LLP for information about a potential claim to recover some or all of your loss.
Shepherd Smith Edwards & Kantas LLP has a team of attorneys, consultants and others with more than 100 years of combined experience in the securities industry and in securities law. Since 1990, we have represented thousands of investors nationwide to recover losses. We have represented clients in Federal and state courts and in arbitration through the Financial Industry Regulatory Authority (FINRA), the New York Stock Exchange Inc. (NYSE), the American Arbitration Association (AAA) and in private arbitration actions. Collectively, we have represented clients in more than 1,000 matters in negotiation, mediation, arbitration and litigation.