Clarion Partners Real Estate Income Fund: Securities Investigation 

Clarion Partners Real Estate Income Fund: Investigating Claims 

The White Law Group is investigating potential securities claims involving FINRA-registered broker dealers who may have improperly recommended Clarion Partners Real Estate Income Fund. Inc. to investors. 

Clarion Partners Real Estate Income Fund Inc. is a closed-end management investment company operating as a Maryland corporation and elected as a real estate investment trust (REIT) for tax purposes. It offers four classes of common stock: Class S, Class T, Class D, and Class I, according to SEC filings.  

The company invests in private commercial real estate (Private CRE) and publicly traded real estate securities (Publicly Traded Real Estate Securities), with a focus on U.S. properties but may include international investments.  

Investments include equity and debt in real properties, mortgage debt, mezzanine debt, and various real estate-related securities such as commercial mortgage-backed securities and real estate investment trusts (REITs). 

Overvaluation of Non-Traded REITs 

Investment News, last May, reported a potential overvaluation of non-traded REITs, particularly those focusing on commercial real estate, by up to 30%. The persisting trend of remote work in many American businesses post-pandemic, coupled with increasing interest rates, has negatively impacted commercial real estate.  

According to Investment News, the Dow Jones U.S. Real Estate Index declined nearly 15.7% over the past year, contrasting with a slight increase of just over one percentage point in the S&P 500 index during the same period.  

Additionally, a recent report from real estate data firm CoStar Group Inc highlighted a new high in the U.S. office vacancy rate, reaching 12.9% in the first quarter, surpassing levels seen during the 2008 financial crisis.  

These developments pose concerns for investors in non-traded REITs, given their significantly limited share redemption programs, thereby exacerbating the “liquidity issue” associated with these products. 

Complex and High-Risk Investments – Clarion Partners Real Estate Income Fund

Non-traded REITs are complex investment products. The following are just a few of the risks involved in these investments. 

Lack of liquidity: Non-traded REITs typically have limited liquidity compared to publicly traded REITs. Investors may face challenges in selling their shares, as there is no established public market for them. Redemption programs, if available, often have restrictions and may only allow redemptions at certain times and at prices below the initial investment. 

Valuation uncertainty: Since non-traded REITs do not trade on public exchanges, their value may be difficult to determine accurately. Share prices are often set by the REIT’s management and may not reflect the true underlying value of the real estate assets. Investors may face uncertainty about the value of their investment until a liquidity event occurs. 

High fees and commissions: Non-traded REITs typically have high upfront fees and ongoing expenses, including sales commissions, management fees, and other operational costs. These fees can significantly reduce investors’ returns and may not be fully transparent at the time of investment. 

Limited transparency: Non-traded REITs are not subject to the same disclosure requirements as publicly traded REITs. Investors may have limited access to information about the REIT’s financial performance, portfolio composition, and management practices, making it challenging to assess the investment’s risks and potential returns accurately. 

Broker Due Diligence 

According to FINRA these products are an ongoing concern for the regulator and firms must ensure they are suitable for an investor’s risk profile and investment strategy. Many of these non-traded REITs were promised to provide steady growth, and invulnerability from volatile markets, which is not the case.  

Brokerage firms are required to perform adequate due diligence on any investment they recommend and to ensure that all recommendations are suitable for the investor considering that investor’s age, investment experience, net worth, risk tolerance, investment objectives, and income.  Firms that fail to perform adequate due diligence or that make unsuitable recommendations can be held responsible for investment losses in a FINRA arbitration claim.   

Potential Lawsuits to Recover Investment Losses   

If you are concerned about an investment in Clarion Partners Real Estate Income Fund Inc. and would like to discuss your litigation options, please call the securities attorneys of The White Law Group at 888-637-5510 for a consultation.  

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Seattle, Washington. The firm represents investors in FINRA arbitration claims throughout the country.  For more information on the firm, visit https://whitesecuritieslaw.com.