CNL Reit, a non-traded real estate investment trust has suspended distributions to its investors. CNL Healthcare properties describes itself as “is a non-traded real estate investment trust (REIT) that seeks to provide income and growth with a strategic focus on the seniors housing and healthcare sectors.”
The issue is that being non-traded makes the investment both illiquid and highly risky. When an adverse event occurs, including the suspension of distributions, the customers who were sold the investment they have no opportunity to sell it. Further, non-traded REITs are often sold with promises of returns without an adequate explanation of the substantial risks.
FINRA has warned, “Accordingly, firm communications concerning real estate programs must balance any presentation of the potential benefits of such investments with disclosure concerning potential risks.” http://www.finra.org/sites/default/files/NoticeDocument/p253836.pdf
FINRA has further cautioned that “some REITS even allow borrowing in excess of 100 percent of net assets. Leveraging, including the use of borrowed funds to pay distributions, can place the REIT at greater risk of default and devaluation, which can result in investment losses when it comes time to redeem or liquidate shares, as well as a reduction in, or suspension of, distributions.” http://www.finra.org/investors/alerts/public-non-traded-reits-careful-review
Sean M. Sweeney is a shareholder at Halling and Cayo, a full service law firm in Milwaukee, WI and the head of its Securities Litigation team.
He represents individual and institutional investors in FINRA arbitration and court nationwide. He recovers investment losses from fraud or breach of duty from their broker-dealer.
Contact him at (414) 755-5020 or via e-mail at SMS@hallingcayo.com to see if he can help recover your funds.