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American Finance Trust (AFIN) Shares Subject to Tender Offer

stock market chartAs previously reported, on June 29, 2018, the board of directors of American Finance Trust, Inc. (“AFIN” or the “Company”), formerly known as American Realty Capital Trust V, Inc., announced the approval of a plan to list AFIN common stock on the Nasdaq Global Select Market (“Nasdaq”), under the symbol ‘AFIN’.  The company listed its shares effective July 19, 2018.  Although most investors paid $25.00 a share for AFIN shares in the Company’s offerings, AFIN shares have consistently traded well below that price level since the Nasdaq listing.  AFIN shares have traded as low as $13.15 a share, and closed on July 30, 2018 at $14.93 a share.

As of July 26, 2018, an investor known as MacKenzie Realty Capital, Inc. has now announced a tender offer for shares of AFIN, offering $15.00 per Class A Share (AFIN), $11.27 per Class B-1 Share, and $10.00 per Class B-2 Share.  The performance of the Company since it started trading on July 19 and the relatively low tender offer price may have caught some investors by surprise, since AFIN published an estimated net asset value of $23.56 in June 2018.

Because AFIN was registered with the SEC, the non-traded REIT was permitted to sell securities to the investing public at large, including numerous unsophisticated investors who bought shares through the initial public offering (“IPO”) upon the recommendation of a broker or money manager.  AFIN commenced its initial public offering in April 2013, which closed approximately six months later, raising $1.6 billion in investor equity.  Investors who participated in the IPO paid $25 per share.  AFIN later merged with another REIT known as American Realty Capital Retail Centers of America in a controversial 2017 transaction.

While it is now publicly traded, AFIN was initially sold as a public, non-traded REIT.  Non-traded REITs pose many risks that may not be readily apparent to investors, or adequately explained by the financial advisors and stockbrokers who recommend these complex investments.  One significant risk associated with non-traded REITs has to do with their high up-front commissions, typically between 7-10%.  In addition to high commissions, non-traded REITs like AFIN generally charge investors for certain due diligence and administrative fees, ranging anywhere from 1-3%.

Stockbrokers and financial advisors who sell non-traded REITs and other non-conventional investments have an obligation to recommend these investments only when they have a reasonable basis to recommend them to an individual customer.  Advisors also may not sell non-traded REITs or other investments via a misleading sales presentation that omits to disclose material risks.  Investors with questions above claims concerning non-traded REITs or other non-conventional investments may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at for a no-cost, confidential consultation.

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