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Shepherd Smith Edwards and Kantas Investigates Claims Involving Non-traded REIT Preferred Apartment Communities

Preferred Apartment Communities Investors Pay High Commissions

Throughout the United States, our non-traded real estate investment trust (REIT) attorneys at Shepherd Smith Edwards and Kantas (SSEK Law Firm) are speaking to investors whose registered brokers or investment advisors persuaded them to invest in Preferred Apartment Communities, which is a non-traded REIT. 

This investment has paid stockbrokers up to 7% commission and comes with additional fees, including around 4-5% in brokerage firm fees and offering costs. 

Preferred Apartment Communities is a multi-family real estate investment trust with part of its portfolio involved in retail connected to student housing and grocery stores. At one point in 2016, it was selling at $1K per share and came with a 6% yield.

The company’s shares are redeemable after five years. Investors who sell them back soon after purchase have to pay a redemption fee that can be as high as up to 13%.  

Unlike other non-traded REITs, Preferred Apartment Communities chose to first list the company, create cash flow and then set up a non-traded, illiquid investment. It has been very popular among stockbrokers, who have recommended the company’s stocks and complex investments to customers. During one quarter in 2016 alone, the non-traded REIT raised over $100M from investors and it was the brokers and investment advisors who helped make this happen. 

Raising Money Fast – A Possible Red Flag? 

Questions, however, have been asked as to whether the money was coming in too fast and if the funds were being properly invested in acquired properties, as advertised. Also, in this circumstance, many have asked the following:

  • Were Preferred Apartment Communities non-traded REITs suitable for all the investors to whom they were sold?
  • Are they compatible with the degree of risk each buyer could handle in their portfolios?
  • Did they help or hinder an investor’s goals?
  • Were brokerage firms and their registered representatives recommending these private placements because it was in a customer’s best interests or because of the high commission and fees that they were paid? 
  • Did the broker-dealer properly supervise their stockbrokers so as to prevent inappropriate investment recommendations or excessive trading?

Non-traded REIT Fraud Law Firm

At SSEK Law Firm, our Preferred Apartment Communities fraud lawyers can help you explore your legal options. Non-traded REITS are not for every investor and whether not to recommend them should be assessed for suitability on a customer-by-customer basis. Contact us today if you have invested in stocks and investments from this REIT in question and we can help you determine whether you have a case.

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