New Challenges for Non-traded Real Estate Investments Trusts

Posted on January 21st, 2014 at 3:23 PM

From the Desk of Jim Eccleston at Eccleston Law Offices:

Non-traded real estate investments trusts (REIT) posted a record $20 billion in sales in 2013. Likewise, many non-traded REIT sponsors have been able to borrow money at less than 4% especially if they are borrowing using a variable rate, which has given REIT managers a bit of extra cash flow from which to cover their distributions to investors.

The industry, however, could face two speed bumps. First, new industry rules requiring broker-dealers to list on clients account statement a per-share price for each non-traded REIT which subtracts the high sales commissions and charges, will happen in early first quarter of 2014. New rules have been hammered out by Finra and non-traded-REIT industry around valuation disclosure of REITs and other illiquid investment since September 2011.

The other looming question facing the industry is the potential for interest rates to rise further giventhe Federal Reserve’s announcement this month to bull back its bond-buying program. Interest rate moves are important to the industry as they can affect the ability to borrow and, in turn , the sustainability and amount of distributions able to be paid to investors. 

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services. 

Related Attorneys: James J. Eccleston


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