The law firm of Oakes & Fosher is presently interested in hearing from investors who believe they experienced losses while being invested in a non-traded REIT known as Presidio Property Trust–formerly known as NetREIT.
What Are Non-Traded REITs?
Non-traded REITs, or real estate investment trusts, are an alternative type of investment not sold on any public securities exchanges. Rather, they are private investment funds designed to fund the purchase of real estate properties. Due to their private nature, there is a significant lack of oversight associated with these products. They are very poorly regulated by both securities firms and regulatory authorities like the SEC and FINRA. This often provides less than scrupulous brokers ample opportunity to misrepresent these products as safe and lucrative. The truth is that non-traded REITs are incredibly speculative and illiquid products that drain investor principals due to their extremely high cost structure.
Publicly traded equities are accompanied by what is known as a guaranteed redemption. This means that investors can liquidate their shares for the stated market value at a moments notice. This is not the case for alternative investments like non-traded REITs. In order for investors to liquidate their shares for products such as these, they often have to look to third party investment companies. However, these buy out prices are often significantly less than what investors are told their shares are currently valued at.
The ugly truth about products like Presidio Property Trust, is that they are often only recommended out of significant conflicts of interest. Broker commissions for these types of products can be as high as ten percent of the principal investment. These commissions compounded with other excessive and unnecessary fees can drain an investor’s principal of up to 17 percent right of the bat. These commissions prove to be the main motivation for less than scrupulous brokers recommending products like these to investors that are financially unsuited for them.
Presidio Property Trust
NetREIT was established in 1999 as a private investment fund designed to lease commercial properties. The fund primarily owns properties in Southern California, Colorado, and North Dakota. Beginning in 2010, the REIT began leasing model homes to home builders all over the United States through its subsidiary NetREIT Dubose Model Home REIT. NetREIT purchases, in their own words, “out-of-the-mainstream properties.” These are properties that are specifically passed over by traditional investors as the locations are often believed to be less desirable. While the company prides itself on seeing a diamond in the rough, the simple fact is that they purchase real estate in undesirable locations because they can acquire it for cheaper.
NetREIT officially changed its name to Presidio Property Trust on October 18th, 2017. With this rebranding name change came an initial offering period. Presidio shares were now being sold to investors at $10 a share. However, almost immediately after the IPO closed, investor dividends for this product ceased. Many investors saw the dividends as a major selling point and chose to invest in Presidio based on that fact alone. However, most investors were not made aware that investor distributions for alternative investments like non-traded REITs are entirely dependent upon the company’s success and are in no way guaranteed to investors. Any assertion by a securities broker to the contrary constitutes misrepresentation.
Presidio Property Trust’s value only went down from that point. In June 2018, only eight months after the REIT’s IPO, a third party company known as Mackenzie Capital Management began offering buy outs to Presidio investors at $2.60 per share. Any investors who accepted the buy out experienced a 70 percent loss on an investment they purchased just eight months prior. Investors had to choose, between exiting early at a 70 percent loss, or remain invested and risk losing everything. Most non-traded REITs only operate for a finite period of time, before they eventually enter their liquidation phase. It is at that point investors can receive the full value of their shares. However, Presidio Property Trust had an essentially infinite life as it was offering no information regarding when the liquidation phase may occur. Any investor who chose to forgo the buy out offer would have to wait until whenever this liquidation phase actually occurred; however, if the value of Presidio shares continue to drop even further, the shares may be almost completely worthless by that point.
Oakes & Fosher Can Help
Oakes & Fosher believes that Presidio Property Trust’s business plan of purchasing undesirable real estate to save money set them on the track toward failure. Non-traded REITs, by their nature, are incredibly speculative and illiquid; however, the business plan of Presidio took that to an entirely new level. We are very dedicated to representing investors who believe their securities broker misrepresented to them what kind of company Presidio Property Trust actually was or assured them they were financially suited for such a risky and illiquid investment. Our firm represents investors all across the nation. If you, or someone you know, experienced losses due to this unsuitable non-traded REIT, please contact Oakes & Fosher for a free and private consultation. Oakes & Fosher handles cases on a contingency basis, which means there are no fees charged unless we collect for you.
