REITs are financial products with underlying real-estate assets expected to appreciate, assets that might include, for instance, apartment buildings, developments, mortgages, etc. Non-traded REITs are not freely traded on any exchange. Investors must rely on the issuing company for evaluations, which are difficult if not impossible to independently verify. As a category, the reputation of non-traded REITs turned sour beginning around 2010, after an influx of billions of yield-seeking investments dollars in 2008. Common to many non-traded REITs are complaints of high commissions and management fees, undisclosed risks, and unexpected liquidity problems.
Phoenix-based Cole Credit Property Trust III executed an IPO on June 20, 2013, transforming itself from a non-traded REIT to a traded company on a major exchange. This was actually only one event in a remarkable chain of ongoing events: a controversial takeover battle through April with a rejected buyout bid which may be the subject of litigation; an IPO unfortunately scheduled on a day with a 2% slump in the markets AND as talk of rising interest rates put price pressure on the entire REIT sector; the company’s announcement of a limited Dutch-auction tender offer on all shares; and speculation about how the market would price Cole in a free market.