The Worst Investment in the World! Behringer Harvard's Priority Income Fund
(Jun 2015)
I. Introduction
What could be worse than a non-traded REIT? Well, REIT-sponsor Behringer Harvard has managed to create something even worse than a non-traded REIT: The Priority Income Fund. On May 9, 2013, Behringer Harvard and the manager of publicly traded BDCs, Prospect Capital Management, announced the initial public offering for their new joint-effort Priority Senior Secured Income Fund (PSSI) now renamed Priority Income Fund.i
The best thing that can be said of the Priority Income Fund...
A Non-traded REIT Investor Fights Back
(Jun 2015)
On June 5, 2015, I wrote that American Realty Capital's latest listing of a non-traded REIT was further evidence of the harm caused by sponsors of non-traded REITs. I also pointed out that, contrary to the common pattern in non-traded REIT listings, Schorsch and ARC used their control of the non-traded REIT version of GNL to tie the hands of shareholders and management in the subsequent GNL traded REIT and to opportunistically transfer wealth to themselves. I pointed out that similar...
Nicolas Schorsch and American Realty Capital Lay Another Egg
(Jun 2015)
GNL: American Realty Capital Lays Another Egg
On Tuesday, non-traded REIT American Realty Capital Global Trust Inc. - rechristened Global Net Lease, Inc. - began trading on the NYSE under the ticker GNL. GNL is at least the 42nd non-traded REIT to have listed, or merged into or been acquired by another REIT since 1997 and adds to the mounting wealth toll non-traded REITs have extracted from unsophisticated investors.
My co-authors and I have determined that the non-traded REIT industry has...
Oil and Gas DPPs From Just Two Sponsors Have Caused $3.7 Billion in Losses
(Feb 2015)
We have written extensively about direct participation programs, or DPPs. See our blog posts on non-traded REITs and our discussion about equipment leasing DPPs. Oil and gas DPPs are another strain of the DPP epidemic: illiquid exposure to an existing underlying asset, loaded with confiscatory fees, conflicts of interest and unnecessary risk.
Oil and gas DPPs use some of investors' money to drill and operate oil and gas wells. Oil and gas DPPs are sponsored and managed either by investment...
Monogram Residential Trust's Proposed Listing is Further Evidence That Even the Non-Traded REITs Winners Are Losers
(Sep 2014)
The non-traded REIT, Monogram Residential Trust, rebranded from the Behringer Harvard Multifamily REIT I this April, is "exploring a potential listing on a national securities exchange", Monogram's CEO Mark Alfieri wrote in a letter to investors last month. Monogram's managers and senior advisors are optimistic that such a liquidity event will "maximize shareholder value". They claim that the REIT's main problem has been a lack of monetization. We disagree.
We have analyzed all of Monogram's...
United Development Funding IV Left Investors $34.8 Million Worse Off
(Jun 2014)
On Wednesday last week, another non-traded REIT listed on a public exchange. United Development Funding IV (ticker: UDF), which sold as a non-traded REIT for $20 per share, closed its first day of trading on the NASDAQ at $19.60. As we have argued extensively in the past, we think that non-traded REITs are a very bad deal for investors, and UDF IV was no exception.
We have gone through all of UDF IV's SEC filings and applied the gross proceeds, distributions, and other cash flows to a liquid,...
FINRA Enforcement Actions: Month in Review
(Jun 2014)
MAY 2014 SELECTED FINRA ENFORCEMENT ACTIONS
FIRMS FINED
ABN AMRO Clearing Chicago LLC (CRD #14020, Chicago, Illinois)
ABN AMRO Clearing Chicago LLC consented to a censure and $95,000 fine for allegedly failing "to report short interest positions to the New York Stock Exchange and FINRA on certain settlement dates, and submitt[ing] to FINRA an inaccurate short-interest position report." FINRA found that the firm's supervisory system did not provide for supervision reasonably designed to achieve...
Non-traded REITs' Annualized Returns Were 4.82% Compared to Traded REITs' 10.44%.
(May 2014)
We have posted previously about how non-traded REITs which have had "liquidity events" have destroyed $27.7 billion in investor wealth compared to traded REITS. See our other blog posts on Non-Traded REITs. In this post, we calculate that the 27 non-traded REITs we discussed in prior posts have an internal rate of return (IRR) of 4.82%, which is 5.62 percentage points lower than the 10.44% IRR of a liquid, diversified REIT mutual fund over the same time period, with the same cash flows.
To...
FINRA Enforcement Actions: Month in Review
(May 2014)
APRIL 2014 SELECTED FINRA ENFORCEMENT ACTIONS
FIRMS FINED
The Huntington Investment Company (CRD #16986, Columbus, Ohio)
The Huntington Investment Company consented to a $25,000 fine and censure. The firm consented to an entry of "findings that it failed to provide notice to the MSRB via the Electronic Municipal Market Access System (EMMA) that no preliminary official statements or official statements were to be prepared for bond anticipation note offerings in which the firm participated."...
