On the heels of new regulatory decrees and financial reporting requirements, the nontraded REIT industry is going through a period of transition. Sponsors in the industry recognize that changes need to be made to the old model in order to thrive under the new regulatory regime. However, with transition comes uncertainty, and as financial markets well know, investors do not like uncertainty. The result has been a significant decline in fundraising volume for nontraded REITs.

Coming out of the recession, the nontraded REIT looked like a godsend to investors. After the stock market collapsed and home values dwindled, the investment promised dividends of 6 percent or higher on top of stable valuations. They sold like hotcakes on a Sunday morning. Unfortunately, the ingredients were not well mixed and there has been a stinging aftertaste ever since.

It is not that a nontraded REIT is a bad concept. Like the well-known, publicly traded REITs — companies like Simon Property