We first wrote about Columbia Property Trust REIT (CXP) in early January. At that time we reported how after a 4 to 1 reverse split, many investors saw the share price of Columbia decrease by 45%.
Nontraded REITs (Real Estate Investment Trust) are hugely popular but aren’t for everyone. They are far more speculative than many people realize and are often difficult, if not impossible, to sell. Many nontraded REITs require investors to hold their shares for 8 years or more.
Columbia Property Trust was once known as Wells Real Estate Investment Trust. Like many similar REITs, it carried a share price of $10.00, although those prices are artificial. In our opinion, an investment has no value if you can’t sell it when you need cash. When Columbia finally went public (a liquidity event in industry parlance) the actual value of the shares became known. Shares purchased in 2004 for $10.00 are worth about $5.50 now.
What went wrong? Like many nontraded REITs, Columbia Property Trust offered big commissions to brokers and carried high fees. Unfortunately, those fees and high commissions are usually not adequately disclosed to investors. Worse, the artificial $10.00 share price masks the real value of the investment.
If a 45% drop in value wasn’t enough, Columbia twice cut distributions in recent years.
Add it together and you have a speculative investment, terrible liquidity, big losses and few answers. Now that the company went public and the shares listed, many investors are just finding out that they lost money.
While no broker or investment advisor can guarantee an investment’s success, we have seen far too many older and retired investors holding Columbia Property Trust and similar REITs. That is an automatic red flag; older investors generally need access to their money and might not be around in a decade or so when the investment can be sold.
Although we believe that CXP has dropped by almost half its value, we recently spoke to when retired couple who claim their investment dropped by 75%.
According to one expert witness consulting firm, the reverse 4 to 1 split is nothing more than a financial sleight of hand. That makes the public believe that the REIT shares have doubled in value. While that may be technically true for the share price, each investor now only has one quarter (1/4) of their original shares.
A recent securities industry person explained it more succinctly, “These IPOs of non traded REITs are the financial equivalent of putting a turd in a gift box.”
It doesn’t take long for investors to figure out from their statements that they have lost much of their money in Columbia Property Trust. If you are one of those folks and purchased your shares on the advice of a stockbroker or other financial professional, you may have a claim.
If you lost money in a REIT or other illiquid investment, it may be possible to get back your hard earned money. Visit our REIT fraud page. If you have specific questions or wish to speak to a lawyer about your possible case, contact us online, by email or by phone (202) 800-9791.
Tagged: REIT, REIT fraud, Columbia Property Trust, Wells Real Estate Investment Trust, REIT loss