Inland American Real Estate Trust Under Investigation

 

Inland American Real Estate Trust Inc. is being investigation by the Securities and Exchange Commission according to that firm’s quarterly report. The SEC’s investigation is reportedly focusing on fees. Inland American is the industry’s largest nontraded real estate investment trust, and has $11.2 billion in real estate assets. Inland American is one of five REITs sponsored by The Inland American Real Estate Group of Companies Inc.

In addition to issues over fees, nontraded REITs have been cited for valuation problems. Over the past year, a number of nontraded REITs have been forced by regulators to stop valuing their REITs at the purchase price (which was false and misleading to investors) and disclose to investors an estimated true value. This has resulted in a wave of sharp decreases from previously reported values that have shocked investors. A related REIT, Retail Properties of America Inc., formerly known as Inland Western Retail Real Estate Trust Inc., recently had an initial public offering at $3.20 per share when just last June, that REIT’s management said its estimated value was $6.95 per share.

The Financial Industry Regulatory Authority (FINRA) is also investigating the nontraded REIT industry, and has commenced enforcement actions against some broker-dealer managers like Pacific Cornerstone Capital.

InvestmentNews recently reported that the following nontraded REITs had suffered steep losses, as follows:

Behringer Harvard Short-Term Opportunity Fund ? down 96%?
Cornerstone Core Properties REIT ? down 71.88%?
Behringer Harvard Opportunity REIT I ? down 58.80 %?
Behringer Harvard REIT I ? down 53.60%?
KBS Real Estate Investment Trust Inc. ? down 48.40%?
Inland Western Retail Real Estate Trust Inc. ? down 30.50%.

Page Perry is an Atlanta-based law firm with over 170 years of collective experience maintaining integrity in the investment markets and protecting investor rights.