Several high-profile non-traded REITs have taken financial hits since the housing bubble burst, and they continue to falter as the unstable economy puts undue pressure on the small businesses that tend to support them. However, few have had to take as drastic measures as KBS REIT. Early last week KBS REIT announced that investor distributions would stop indefinitely as the trust underwent restructuring in order to manage what chief executives called “debt obligations and cash flow” problems.
The announcement came shortly after financial figures for the fourth quarter of 2011 were released. The once-profitable non-traded REIT announced that the value of its shares had plummeted nearly 29% (from $7.32 per share to just $5.16). Many investors were already worried about the stability of the REIT considering that shares were already valued significantly below the $10 initial offering; this recent news has only caused those worries deepen.
The financial downturn and worldwide economic crisis is once again being blamed for the non-traded REIT’s poor performance. KBS REIT I is comprised of 81% office spaces and 9% industrial real estate (the remaining 10% is in bank branches). Officials hint that the stagnation of small business growth and the decrease of incoming revenue caused by poor occupancy rates at its properties were responsible for the losses. In 2010, 92% of KBS REIT’s properties had tenants in-place. That number dropped to 85% just one year later.
Though investment advisors have promoted non-traded REITs as a stable and even “safe” investment opportunity when the real estate market was booming, FINRA and the SEC have released investor alerts warning individuals that non-traded REITs, such as KBS REIT I, should be thoroughly investigated by potential investors, and the benefits of investing should be carefully weighed against the risks.
If you have questions about your rights as an investor in a non-traded REIT such as KBS, or would like to learn about the possibility of recouping any losses you’ve suffered, please contact one of our investment law and securities fraud attorneys by calling toll-free at 866-981-4800 or filling out the form to the right.