Montana Investment Loss Attorneys

Montana, the Yellowstone State attracts millions of visitors each year for the rugged beauty of its National Park. Montana is also in the public conversation due to its popular television series, Yellowstone, which has attracted even more visitors and real estate investors and cowboys looking for a ranch of their own. One study has pointed to tens of millions of dollars that the show and film industry in general has brought into the state. News articles have also reported that investment firms claim of an increase in buyers, as one industry executive put it: “We’ve had an influx of all sorts of wealthy individuals looking for ranches. They're looking to own really amazing large properties.” The popularity for real estate investments has spread beyond just Montana residents to also retail and senior investors, who may be looking for a piece of the action without necessarily buying an entire ranch. The growing popularity of Real Estate Investment Trusts (REITs) may meet this demand; however, investors should be aware that not all REITs and property investments are equal.

Montana investors, facing what is a problem nationally, may find that their portfolios have suffered extreme losses from their financial advisers recommending real estate investments that happen to be unsuitable for most retirees and retail investors, particularly in non-traded REITs. Montana investors seeking to recover lost investment funds may have legal recourse against their brokerage firms, who have a duty to supervise their representatives and to ensure proper risk disclosures are made when recommending such non-traded products. Choosing an experienced investment loss law firm such as Malecki Law, can make all the difference, as it is experienced in the applicable federal and state securities laws, and has recovered tens of millions of dollars for misled investors, whether due to fraud, misrepresentations and omissions at the time of recommendation, general negligence, or related firm supervisory failures.

A real estate investment trust (REIT), is a legal entity owning income-producing real estate, such as office buildings, apartments, shopping malls, as well as hotels and other travel-related accommodation properties that — given the growing popularity and tourists visiting Yellowstone and the state — might sound like a sure thing in Montana. However, distinctions must be made. A publicly traded REIT lists its shares on a securities exchange and the market establishes a fair value for the shares. In contrast, a non-traded REIT is an opaque venture because it does not list its shares on any exchange and the true value of its shares may be obscured or not accurately stated. While many real estate investors seek dividends, dividends are not guaranteed in non-traded REITs because the distributions may be funded entirely or in part by new investor cash or borrowed funds – leveraged money that can place the REIT at greater risk of default and devaluation, including loss of one’s entire investment principal. Because non-traded REIT shares do not trade on national securities exchanges, they cannot be easily priced or sold. Unsophisticated investors may then find themselves in a bind when they later learn that they cannot exit their investments when they need to, and that few buyers are available when compared to a publicly traded REIT.

The above speaks to the liquidity risk of non-traded investments generally. In 2015, the U.S. Securities and Exchange Commission (SEC) released an Investor Bulletin that explained the risk of illiquid products like non-traded REITs:

“Non-traded REITs are illiquid investments, which mean that they cannot be sold readily in the market. Instead, investors generally must wait until the non-traded REIT lists its shares on an exchange or liquidates its assets to achieve liquidity. These liquidity events, however, might not occur until more than 10 years after your investment.”

Malecki Law’s investment loss attorneys understand that these risks are not always explained up front, which firms and their financial advisors have a duty to disclose. Our team recognizes that retirees and seniors, especially, do not typically have a time horizon of ten years for their investments to bear fruit. Younger investors may be able to afford the wait, but not seniors who may already be retired and out of the workforce and, therefore, require liquidity to be able to access their money for daily living and the increased medical expenses typical with aging. The additional aforementioned risk that dividends may suddenly stop in these non-traded products can further impact a retiree’s ability to meet their income needs.

In the same bulletin, the SEC, moreover, warns that non-traded REITs come with extremely high upfront fees:

“Non-traded REITs typically charge high upfront fees to compensate a firm or individual selling the investment and to lower their offering and organizational costs. These fees can represent up to 15 percent of the offering price, which lowers the value and return of your investment and leaves less money for the REIT to invest. In addition to the high upfront fees, non-traded REITs may have significant transaction costs, such as property acquisition fees and asset management fees.”

Malecki Law’s investment loss lawyers know that the above is material to consider for senior and non-senior investors alike, since 15% allocation to just fees alone means that an investment would need to return a gain of 15% to break even, and 16% to make a profit of even 1%. That is a highly speculative risk for almost any investor to absorb. While an investor may not see this price come off the top, this is because these high fees are built-in, and therefore, can give an inflated value of what the investment might actually be worth.

If you are a Montana retiree or investor who has suffered investment losses in your retirement account and believe you have been sold non-traded REITs or other alternative, non-traded products (e.g., business development corporations, known as BDCs) without proper disclosures of the aforementioned risks, then you should contact an investment loss law firm like Malecki Law for a free initial consultation. Most of our customers choose a contingency fee arrangement instead of being billed hourly, meaning we do not get paid unless we make a financial recovery for you first.