How do asset management fee rates based upon gross asset values present a potential conflict of interest for nontraded REIT sponsors?
If asset management fees are calculated on the gross asset values of the REIT, the sponsor may have an incentive to use more debt to finance a portfolio than if the fee were based upon another equity-based measure, such as the aggregate NAV of the shareholder interests.
“Always, but especially in this day of lawsuits and ever increasing regulations, the responsibility for a financial advisor t do their own due diligence on products they sell falls squarely on themselves. No one is going to take greater interest in protecting their practice than they are. We use the Blue Vault Partners Nontraded REIT Review to keep us informed of the performance of every single nontraded REIT. Finally, complete transparency is available for advisors using nontraded REITs. Every advisor using REITs in their practice should make the small annual investment of subscribing to Blue Vault’s reporting services.”