Established in 2016, Highlands REIT is a Chicago-based non-traded real estate investment trust (non-traded REIT) that was set up to house nearly all of the non-core assets of InvenTrust Corp., which is another non-traded REIT (formerly known as Inland American Real Estate Trust).
These non-core assets included almost two dozen properties; several office assets, parcels of unimproved land, a couple of correctional facilities, a bank branch, and a shopping mall.
These are mostly real estate in locations that were:
- Considered as not desirable
- Already dealing with legal issues
- Real estate marked for special use
- Properties considered to be functionally obsolete or aging
- Single-tenant assets
- Properties with leasing metrics already deemed suboptimal
These were the assets that InvenTrust Corp no longer wanted. The ownership transfer and spin-off into Highlands Real Estate Investment Trust was to protect InvenTrust from liability and losses.
However, what this transfer did was set up a non-traded REIT — Highlands REIT — that was even more illiquid and risky. This was in part because so many of the assets that were moved over were already undesirable or facing legal troubles. Because of this, many of Highlands REIT's properties ended up foreclosing.
Yet these problems did not stop brokerage firms and their financial advisors from recommending Highlands REIT to investors. Many of the brokers who sold Highlands REIT to customers made misrepresentations and omissions when it came to disclosing the risks, such as the poor conditions of the properties involved.
Our Highlands REIT investment lawyers represent investors throughout the United States who suffered losses in this non-traded real estate investment trust. Contact Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) today to schedule your free consultation.Highlands REIT’s Assets Were Trouble for Investors From Early On
The setting up of Highlands REIT and the subsequent transfer of assets may have been positive for InvenTrust, which was able to improve its balance sheet. But for the Highlands REIT and its investors, there were issues from the beginning that have only grown.
The company saw a loss in revenue streams, which were no doubt exacerbated in 2020 when COVID-19 hurt the real estate and leasing markets. It also has dealt with a lot of debt from its unviable commercial properties.
Highlands REIT investors contend that they were led to believe that the plan after the spin-off from InvenTrust was to sell off the portfolio. Instead, Highlands executives began buying apartment buildings in 2017 and sold an empty Texas prison for $3.6M in 2018 for much lower than the $21.1 it was bought for.
There have been questions as to whether these executives made some of these decisions for their financial benefit rather than because they were looking out for shareholders. A lack of dividend payments to Highlands REIT investors has been another issue of contention.
The share price for Highlands REIT has been low for some time, with the stock recording a $0.16/share price on the over-the-counter (OTC) markets in early December 2021. This is a drop from its already low $0.26/share price on CFX Alternative Trading, which is a secondary market for private placements, in early 2017.Why Non-Traded REITs Are Unsuitable for Most Investors
Like other non-traded real estate investment trusts, Highlands REIT’s illiquidity has made it difficult for investors to exit. Also, when this type of investment is doing poorly it may not be possible to get out at all.
Non-traded REITs are not suitable for most investors, especially conservative investors, retirees, and retail investors. This is why financial advisors and their firms must conduct the proper due diligence. This makes sure that not only is an investment safe before recommending it to a customer, but also it is the right fit for them given their investing goals, experience, and risk tolerance levels.Skilled Non-Traded REIT Fraud Lawyers
Please contact SSEK Law Firm if you suffered losses in Highlands REIT. Our knowledgeable non-traded REIT law firm has helped thousands of investors to recoup damages from the broker-dealers whose financial advisors should have never recommended this type of product to them.