Apple REIT 8 Investors who recently tried to cash out of the REIT are calling and telling us they think the REIT might be out of cash after they received a response to their recent redemption requests. In a January 24th letter, Glade Knight, the Apple REIT founder and chairman, told Apple REIT 8 investors that the REIT no longer had sufficient funds to meet their redemption requests in full. This leaves investors with a security that is practically illiquid. Seeing as redemption requests are now exceeding the funds available to meet them, Apple REIT 8 will have no choice but to suspend their redemption programs indefinitely. In that event, the REIT will become completely illiquid, and investors will have no access to their funds in the foreseeable future.
REITs invest in a diversified set of income producing real estate properties and mortgages, and they must distribute 90 percent of net earnings to investors. REITs allow investors to partake in real estate investing without directly owning property, which may lock up large amounts of money for long periods of time. The most popular REITs are publicly traded on a stock exchange such as the New York Stock Exchange (NYSE) - they are relatively transparent in their finances and operations and are covered extensively by investment analysts. Non-traded REITs are not listed or registered with securities regulators and are supposed to be available only to accredited investors - $1 million or more in assets or $200,000.00 in annual income. Non-traded REITs disclose their finances publicly and offer shares to the public, but they do not list their shares on an exchange, which is one of many risk factors associated with them.
Apple REIT 8's inability to meet redemption requests is material investment information, which cannot go undisclosed. Perhaps the lack of disclosure stems from the fact that David Lerner Associates (NYSEMKT:DLA), the Long Island securities broker that single-handedly placed these high commission-paying products into the portfolios of retirees seeking safety and income, is trying to break escrow on Apple REIT 10. It could also very well be that DLA has decided that disclosing bad news on Apple REIT 8 would be bad for sales of their latest self-enrichment schemes.
The Financial Industry Regulatory Authority (FINRA) is also inquiring into Apple REIT 8's operations. FINRA recently filed a complaint describing how Apple REIT 8 is paying monthly distributions nearly 4 times over the net income its hotels are earning. To date, FINRA has not taken any formal action for restitution on behalf of investors in Apple REIT 8. This does not mean that Apple REIT 8 investors cannot make personal claims for their losses. Investors who have suffered losses in Apple REIT 8 are encouraged and are certainly entitled to file arbitration claims for damages against DLA in order to recover their lost principal.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. Please see our Instablog profile (left column) for ways to contact us and get answers to any of your questions about this blog post and/or any related matter.