AR Global REITs: When will they cut distributions?

AR Global REITs are paying distributions that exceed cash flow

Are you concerned about investment losses in AR Global REITs? If so, the securities attorneys at The White Law Group may be able to help you recover your losses by filing a FINRA Arbitration claim against the brokerage firm that sold you the investment.

Distributions Exceed Cash Flow

A recent article in Investment News states that investors in a number of AR Global-sponsored real estate investment trusts face the potential danger of a cut in distributions, according to industry analysts and consultants.

Reportedly, seven AR Global REITs failed to match or exceed their distributions in the first quarter of 2016 by wide margins.

Typically, nontraded REITs overpay distributions to investors in their initial stages while the companies buy properties, find tenants and negotiate leases. Eventually, REITs cash flow and distributions should match, or investors will see the value of the REIT decrease, according to industry observers.

Nontraded REITs often use 6% to 7% initial annual distribution rate as a marketing tool for advisers to tempt clients. Often investors are fooled by dividend quantity. Unfortunately, if the REIT is paying dividends beyond its earning power, it is burning capital.

The AR Global nontraded REITs in question are illiquid, high-yield investments, with annual distributions ranging from 6.1% to 8.3%.

Unfortunately, these distributions are not sustainable forever. According to analysts, the AR Global REITs are paying out a lot more than they’re earning. The REITs have to either acquire more assets with decent yields or cut the distributions.

According to Investment News, five of the AR Global REITs in the quarter that ended in March had dividends that far exceed cash flow, while two REITs, American Realty Capital Global Trust II Inc. and American Realty Capital New York City REIT Inc., had negative cash flow.

Investigation of AR Global REITs

The White Law Group is investigating the liability that brokerage firms may have for recommending high risk alternative investments like AR Global REITs.

Brokerage firms that sell such products are required to perform adequate due diligence on the investments to ensure a reasonable likelihood of success. They must evaluate whether the investments are suitable in light of the client’s age, net worth, investment experience, and investment objectives.  Firms that fail to perform adequate due diligence, or that make unsuitable recommendations, can be held responsible for losses in a FINRA arbitration claim.

If you suffered losses investing in an AR Global REIT and would like a free consultation with a securities attorney, please call The White Law Group at 888-637-5510.

The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.

For more information on The White Law Group, visit https://whitesecuritieslaw.com.