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Carter Validus Mission Critical REIT and REIT II Agree to Merge

Investors in Carter Validus Mission Critical REIT Inc. (“CVMC REIT I”) and/or Carter Validus Mission Critical REIT II Inc. (“CVMC REIT II”) may have FINRA arbitration claims, if their investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the stockbroker or advisor.

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CVMC REIT I was incorporated on December 16, 2009 as a Maryland corporation that elected to be taxed as a real estate investment trust (REIT).  As a publicly registered non-traded REIT, CVMC REIT I was permitted to sell securities to the investing public at large, including unsophisticated retail investors who bought shares upon the recommendation of a broker or money manager.  CVMC REIT I began offering securities in December 2010 and terminated its offering in June 2014 after raising approximately $1.7 billion in investor equity.  CVMC REIT I invests in purpose-built facilities and owns a portfolio of 61 properties, as of the March 2019.

CVMC REIT II was incorporated on January 11, 2013 as a Maryland corporation that elected to be taxed as a real estate investment trust (REIT).  As a publicly registered non-traded REIT, CVMC REIT II was permitted to sell securities to the investing public at large, including numerous unsophisticated retail investors who bought shares upon the recommendation of a broker or money manager.  CVMC REIT II began offering securities in May 2014, and after raising $1.2 billion in investor equity in its initial primary offering, CVMC REIT II launched a follow-on offering that terminated in November 2018 after raising an additional $86.9 million.  CVMC REIT II invests in net leased data centers and healthcare assets and owned a portfolio of 85 properties as of March 2019.

As part of the merger, the CVMC REIT I and CVMC REIT II will enter into a definitive agreement to merge stock and cash to create a new company, though keeping the CVMC REIT II name.  CVMC REIT I stockholders will receive $1.00 per share in cash and 0.4681 shares / per each share of CVMC REIT I of the new CVMC REIT II.

The Board of CVMC REIT I approved a $5.33 net asset value per share of the company’s common stock as of June 30, 2018.

Non-traded REITs pose many risks that are often not readily apparent to retail 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 generally charge investors for certain due diligence and administrative fees, ranging anywhere from 1-3%.

Furthermore, non-traded REITs are generally illiquid investments.  Unlike traditional stocks and mutual funds, non-traded REITs do not trade on a national securities exchange.  Many uninitiated investors in non-traded REITs have come to learn too late that their ability to exit their investment position is limited.  Typically, investors in non-traded REITs can only exit their investment through redemption directly with the sponsor on a limited basis, and often at a disadvantageous price, or through sales in a limited secondary market.

Investors who wish to discuss a possible claim may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.  Attorneys at the firm are admitted in New York, New Jersey, Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).