One of the biggest names in the world of non-publicly-traded real estate investment vehicles is catching a lot of heat for disappointing performance and what some clients see as excessive costs.
FINRA is now getting investor complaints that some BehringerHarvard accounts have lost 96% of their value over the last six years.
There's some suggestion that the funds were paying out unrealistic dividends, effectively returning principal to investors who might have thought they owned a longer-term chunk of real estate.
With a reported $5.5 billion in BehringerHarvard securities in the market, there is plenty of pain to work through here if the firm -- or more likely, a smaller competitor -- scares investors away.
Liquidity failure contributed to the death of private debt-backed securities sponsors like Provident Royalties, which ominously enough at least one of the aggrieved investors was also sold into.
Provident's rise and implosion destroyed several brokerage firms that sold the securities. One of the biggest, Securities America, became a target for speculation that it, too, would have to shut down after absorbing a $400 million judgement last year.
As it happens, Securities America stopped selling BehringerHarvard in 2010 after the securities raised too many internal red flags.
Meanwhile, with FINRA cracking down hard on "unsuitable" private REIT sales, look to see more of this on the horizon.