Inland American REITs have proven to be disastrous for many investors. These non-traded REITs, which were sold to investors as a conservative investment with little risk, have turned out to be anything but conservative. Even before losing a great deal of value, these products, by their very nature, were costly for investors. Many such products had a built in commission of up to 15%.
Another drawback for this product type is the fact that such securities are not traded. Unlike traded REITs, whose value is determined by trading markets on a daily basis, non-traded REITs often times have their values determined by the very company offering them. Further, investors who wish to get out of non-traded REITs are subject to the issuer’s redemption program. Many companies suspended such programs as their holdings lost value.
Holders of non-traded REITs like Inland American may be able to get out of their investment and recoup their investment loss through FINRA arbitration.
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