In a letter dated March 14, 2014, Inland American Real Estate Trust notified investors that it was offering to buy back about 6% of the outstanding shares. Investors were provided with a form allowing them to elect to offer for sale, all, or some of their shares at prices ranging from $6.10 to $6.50 per share. This is well below the $10 that most investors paid when they bought their shares from the company.
Inland American is a non-publicly traded REIT and as investors now know, illiquid.
The company is only committing $350 million to this buyback so it is highly likely that the amount of shares investors want to sell at this price will far exceed the amount that investors will offer. This means that many investors will still be stuck owning their shares with the only sales option being one of the privately operated secondary markets where shares of Inland American have been trading for about $6.
Inland American was the largest REIT offered by Inland Group, Inc. the Oak Brook that formed the REIT in 2004. During 2007, Inland Group was raising $300 million a month.Inland American was their largest REIT, raising about $8 billion between 2005 and 2009, which is purportedly the record amount ever raised by any unlisted REIT.
Many investors were sold unlisted REITs like Inland American with the promise of regular and dependable distributions of income (like a bond) , an assurance that the value was not likely to decline and with an expectation of making a profit within 5-7 years. Most investors did not understand that they might have trouble liquidating the investment should they need cash.
Investors who were misled by their broker as to the true nature of non traded REITs may wish to consider filing a FINRA arbitration to recover damages. Call to discuss your legal rights with an experienced securities attorney.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.