Third-party real estate investment firm Everest REIT Investors I, LLC (“Everest”) recently launched an unsolicited tender offer to purchase up to 780,000 shares of common stock in Cole Credit Property Trust IV, Inc. (“Cole Credit IV”), at $6.60 per share.

Cole Credit IV was formed in July 2010 and is structured as a publicly registered, non-traded REIT. Shares issued through its offering were priced at $10 per share. As of December 31, 2017, Cole Credit IV had raised approximately $3.4 billion in investor equity. While the non-traded REIT has most recently estimated its share value at $9.37 per share, Cole Credit IV further “states that such figure is based on numerous assumptions and judgments and there can be no assurances that such amount would be realized upon a liquidation of assets or other liquidity event.”

Non-traded REITs pose a great deal of risks that are often not readily apparent to retail investors, and may not be adequately explained by the financial advisors and stockbrokers who recommend these complex investments. One significant risk associated with non-traded REITs concerns their high up-front commissions, typically between 7-10%. In addition to high commissions, non-traded REITs like Cole Credit IV generally charge investors for certain due diligence and administrative fees, ranging anywhere from 1-3%.

Likely the greatest risk associated with non-traded REITs involves their illiquid nature. Unlike traditional stocks and mutual funds, non-traded REITs do not trade on a national securities exchange. Unfortunately, many uninitiated investors in non-traded REITs have come to learn too late that their ability to exit their investment position is limited. Investors in non-traded REITs can sometimes exit their investment through redemption directly with the sponsor, but such redemptions are limited, both as to timing (often redemptions are only done on a quarterly basis), as well as amount (any redemption will be subject to certain terms, including an overall limit on the aggregate number of shares that the REIT will permit to be redeemed at a given time). Investors may also be able to sell shares through tender offers from time to time, or via a limited secondary market.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in connection with complex non-conventional investments, including non-traded REITs and business development companies (BDCs). Investors may contact us via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York and 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).

Investors in Carter Validus Mission Critical REIT, Inc. (“Carter Validus”) may have arbitration claims to be pursued before FINRA, in the event the investment recommendation was unsuitable, or if the financial advisor’s recommendation was predicated on a misleading sales presentation. Headquartered in Tampa, FL, Carter Validus is structured as a Maryland real estate investment trust (“REIT”). As a publicly registered, non-traded REIT, Carter Validus was permitted to sell securities to the investing public at large, including numerous unsophisticated retail investors who bought shares through the IPO upon the recommendation of a broker or financial advisor.

In connection with its IPO, Carter Validus offered up to 150,000,000 shares of common stock at $10 per share. As set forth in its Registration Statement as filed with the SEC, Carter Validus seeks to acquire “income-producing commercial real estate with a focus on medical facilities, data centers and educational facilities.” As more fully described below, recent secondary market pricing for Carter Validus shares, at a bid-ask spread of between $3.15 – $3.30 per share, suggests investors who opted to sell their shares through a limited secondary market have sustained a principal loss of approximately 67%, excluding distributions.

Non-traded REITs like Carter Validus pose many risks to investors that are often not readily apparent, or in some instances adequately explained by the financial advisors recommending these complex and esoteric investments. To begin, one significant risk associated with non-traded REITs has to do with their high up-front fees and commissions, which act as an immediate drag on investment performance. In connection with its IPO, Carter Validus charged investors a “selling commission” of 7%, in additional to a “dealer manager fee” of 2.75%, and certain “organization and offering expenses” of 1.25%. Thus, in aggregate, investors who participated in the IPO were charged 11% in commissions and fees from the outset.

Moreover, investors in non-traded REITs often come to find out too late that their investment is characteristically illiquid in nature and cannot readily be sold (as opposed to publicly traded REITs which are listed on national securities exchanges and trade at publicly quoted prices). Often, non-traded REITs are structured in such a way that investors must wait for a prolonged period of time (e.g., 5-7 years) before a potential “liquidity event” will occur and allow the investor to freely sell out of their investment position at a reasonably efficient price. In the meantime, investors’ options to access liquidity on their investment are rather restricted, including redeeming shares directly with the sponsor (and then, typically at disadvantageous terms, including timing for any redemption, as well as pricing efficiency and transparency), or alternatively, selling shares on a limited and inefficient secondary market.

Financial advisors who sell non-traded REITs and other non-conventional investments are obligated to recommend such investments only when they have a reasonable basis to recommend them to an individual customer. Further, brokers may not recommend non-traded REITs or other complex investments via a misleading sales presentation that omits to disclose material risks. A hallmark of non-traded REITs is their high up-front commissions and illiquid nature, risks which many investors may overlook at the time of purchase.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in connection with non-conventional investments, including non-traded REITs. Investors may contact us via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York and 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).

Investors in American Finance Trust (“AFIN”) may have arbitration claims to be pursued before FINRA, if their AFIN 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 broker. AFIN was initially structured as a publicly registered, non-traded real estate investment trust (REIT). As such, many unsophisticated retail investors participated in the AFIN IPO upon the recommendation of a financial advisor at a price of $25 per share.

In the wake of AFIN’s listing as a publicly-traded stock, AFIN’s stock price has languished at far below the $25 a share price that many investors paid for AFIN stock at the recommendation of stockbrokers or advisors. As of October 18, 2018, AFIN shares closed at $14.26 a share.

Earlier this year — as we have discussed in several recent blog posts — the board of directors of AFIN announced the approval of a plan to list the REIT’s common stock on the Nasdaq Global Select Market (“NasdaqGS”), under the symbol ‘AFIN’. In connection with this planned “liquidity event,” AFIN’s board also approved a phased liquidity plan, pursuant to which certain amendments were made to AFIN’s corporate charter:

• 2-to-1 reverse stock split: pursuant to this reverse split, every two shares of AFIN (par value $0.01) are to be converted into one share of common stock (par value $0.02);
• Share reclassification: the phased liquidity plan also calls for reclassification of shares of common stock into Class A common stock, Class B-1 common stock, and Class B-2 common stock (the Class B-1 shares will convert into Class A shares 90 days after the listing, and the Class B-2 common stock will convert into Class A shares 180 days after the listing).

Subsequent to these amendments, AFIN’s board further announced that it would convert its Class B-1 shares, which represent approximately 25% of AFIN shares outstanding, into Class A shares one week earlier than previously planned, on October 10, 2018. At this time, Class B-2 shares remain scheduled to convert to AFIN Class A shares on January 15, 2019.

Due to AFIN’s languishing share price, investors may be forced to either sell their investment position at a loss, or hold indefinitely in hopes of a recovery. Alternatively, investors seeking immediate liquidity at a small premium to the current prevailing market price may wish to participate in a recent tender offer on AFIN shares by institutional investor MacKenzie Realty Capital, Inc. (“MacKenzie”). As recently reported, MacKenzie has made a tender offer for all Classes of AFIN shares – including Class A shares and Class B-2 shares – at prices of $15 and $14.01 per share, respectively. Unsurprisingly, MacKenzie’s disparate pricing on Class A and B-2 shares suggests that B-2 share issuance in January 2019 will have a considerable negative impact on AFIN’s share price.

Attorneys at Law Office of Christopher J. Gray, P.C. have successfully resolved a number of disputes on behalf of investors, including losses sustained due to investments in various complex and esoteric financial products, including non-traded REITs. Investors may contact an attorney by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York and 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).

Investors in Strategic Storage Growth Trust, Inc. (“Strategic Storage” or the “Company”) may have arbitration claims to be pursued before FINRA, in the event that 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 broker. As recently reported, Strategic Storage’s board of directors has elected to suspend its distribution reinvestment plan, as well as its share redemption program, as it seeks to shore up its finances and explore potential liquidity options. Given the fact that one of the Company’s stated primary investment objectives is to “grow net cash flow from operations in order to provide sustainable cash distributions… over the long-term” many retail investors who invested because of the Company’s income component are now faced with the prospect of holding an illiquid, non-traded investment that no longer provides valuable monthly income.

According to publicly available documents filed with the SEC, Strategic Storage was formed on March 12, 2013 as a Maryland corporation for the “[p]urpose of engaging in the business of investing in self storage facilities and related self storage real estate investments.” The Company’s portfolio currently consists of 26 operating self storage facilities, in addition to two properties in development. Strategic Storage launched its offering in January 2015, in the process raising approximately $193 million through issuance of Class A shares and approximately $79 million through issuance of Class T shares.

Strategic Storage is structured as an operating business, but qualifies as a REIT for federal income tax purposes. For many investors, their primary motivation to invest in a REIT is to capture an enhanced income stream from the tax-advantaged REIT structure. Importantly, however, Strategic Storage is a non-traded REIT, meaning that the investment is illiquid in nature and not easily sold (typically, many non-traded REIT’s offer a share redemption program, but these programs are often limited both as to when an investor may redeem and the amount of shares available for actual redemption).

With regard to income or distributions, many non-traded REITs pose significant risks, including their initial structure as a blind pool, as well as the nature of the income paid to investors. Many non-traded REITs are blind pools, meaning that an investor considering a capital commitment will have either no information (or very limited information) as to the nature and quality of the assets to be purchased by the REIT. Further, with respect to the nature of income paid by non-traded REITs, quite often distributions are paid to investors via “return of capital,” meaning that investors are essentially being paid back with their own initial contribution. This is extremely problematic, and unsurprisingly, many non-traded REITs — including Strategic Storage — have elected to suspend their distributions, and in certain instances their share redemption programs, leaving retail investors mired in an illiquid investment that no longer pays valuable income.

Strategic Storage investors may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

As recently announced, the board of directors of Hines Real Estate Investment Trust, Inc. (“Hines REIT” or the “Company”) — one of three publicly registered non-traded REITs sponsored by Hines — has unanimously voted for approval of a plan of liquidation and dissolution of the Company (“Liquidation Plan”). Under the Liquidation Plan, which calls for shareholder approval, the Company will sell seven of its West Coast office building assets in a cash transaction valued at $1.162 billion to an affiliate of Blackstone Real Estate Partners VIII. In addition, Hines REIT also seeks to liquidate the remainder of its portfolio, including Chase Tower in Dallas, TX, 321 North Clark in Chicago, and a grocery-anchored retail portfolio located in the Southeastern U.S.

Pursuant to the Liquidation Plan, Hines REIT shareholders will receive $0.08 per share, to be paid on or about July 31, 2018. Specifically, the Liquidation Plan entails a final distribution of $0.07 per share, as well as an additional $0.01 per share stemming from a recent class action settlement. The class action settlement involves a lawsuit filed by Baltimore City in the Circuit Court of Maryland, alleging breach of fiduciary duty, waste of corporate assets, and misappropriation of assets surrounding certain payments made in connection with the Liquidation Plan.

Hines REIT shareholders previously approved the Liquidation Plan in November 2016; subsequent to shareholder approval, the Company declared an initial liquidating distribution of $6.20 per share in December 2016, as well as a $0.30 per share liquidating distribution in April 2017. Following the final distribution of $0.08 per share, Hines REIT investors will have received total special and liquidating distributions of approximately $7.59 per share, in addition to regular annual distributions. Shares were originally sold for $10 each.

As a non-traded REIT registered with the SEC, Hines 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. Among the many risks associated with non-traded REITs are their characteristic high up-front fees and commissions (as high as 15% in some instances), as well as their illiquid nature. Most non-traded REITs are structured to experience a future ‘liquidity event’ — which might entail listing the shares on an exchange or liquidating the entire portfolio — although such an event will typically only occur after a number of years (e.g., 7 or more years) from initial investment.

If you have invested in Hines REIT, or another non-traded REIT, and you have suffered losses in connection with your investment (or are currently unable to exit your illiquid investment position without incurring considerable losses), you may be able to recover your losses in FINRA arbitration. Investors 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.

Investors in Phillips Edison Grocery Center REIT II (“Phillips Edison II”) were recently solicited by third-party real estate investment management firm MacKenzie Realty Capital, Inc. (“MacKenzie”) in relation to a mini tender offer to purchase Phillips Edison II shares at $14.89 per share. Investors who purchased Phillips Edison II shares through the initial offering acquired their shares at $25 per share (and at $23.75 per share for shares subsequently acquired through the dividend reinvestment program). Accordingly, investors seeking immediate liquidity who elect to participate in the MacKenzie tender offer will incur substantial losses of approximately 40% on their initial investment (excluding commissions and fees, as well any dividend income received to date).

Phillips Edison II was incorporated in June 2013 and is a publicly registered, non-traded REIT. As set forth in its prospectus, Phillips Edison II was “formed to leverage the expertise of our sponsors… and capitalize on the market opportunity to acquire and manage grocery-anchored neighborhood and community shopping centers located in strong demographic markets throughout the United States.” As a publicly registered non-traded REIT, Phillips Edison II was permitted to sell securities to the investing public at large, and as such, the non-traded REIT was marketed nationwide to numerous unsophisticated retail investors. In certain instances, some investors were not fully informed by their financial advisor as to the complex nature and risks associated with non-traded REITs.

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. To begin, one significant risk associated with non-traded REITs has to do with their high up-front commissions, typically between 7-10%; in the case of Phillips Edison II, its prospectus indicates that investors were charged a “selling commission” of 7%. In addition to high commissions, non-traded REITs like Phillips Edison II generally charge investors for certain due diligence and administrative fees, ranging anywhere from 1-3%; as set forth in its prospectus, Phillips Edison II charged investors a 3% dealer manager fee of up to 3% of gross offering proceeds. Such high commission and fees act as an immediate “drag” on an investment.

Furthermore, non-traded REITs like Phillips Edison II are generally illiquid investments. Unlike traditional stocks and mutual funds, non-traded REITs cannot be readily sold and resold on deep and liquid national securities exchanges. Typically, investors in non-traded REITs can only exit their investment position through redemption directly with the sponsor, and even then on a limited basis, and often at a disadvantageous price. Or, investors may be able to sell shares through a limited and fragmented secondary market. Finally, investors may be presented with limited market-driven opportunities — such as a tender offer — to sell their shares at a disadvantageous price.

Investors in Phillips Edison II and other non-traded REITs may have viable FINRA arbitration claims if their stockbroker or financial advisor made an unsuitable recommendation to purchase the investments or solicited the investments via a misleading sales presentation. Investors may contact 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.

Investors in Griffin Capital Essential Asset REIT, Inc. (“Griffin Essential”), may have substantial losses based on a tender offer to purchase shares for $6.89 a share — or $3.11 a share less than the offering price of $10 a share. As recently reported, on December 1, 2017, third-party real estate investment firm MacKenzie Capital Management (“MacKenzie”) made an unsolicited tender offer for shares of Griffin Essential at $6.89 per share, in cash. The Board of Directors of Griffin Essential has recommended that its shareholders reject the offer. However, the Board also advised that, as of September 30, 2017, its share redemption program (“SRP”) for 2017 was fully subscribed, thus leaving investors seeking liquidity via redemption with little recourse.

Griffin Essential is a Maryland REIT incorporated in August 2008 for purposes of acquiring a portfolio of geographically diverse single tenant properties across a wide range of industries. From 2009 – 2014, Griffin Essential conducted a series of offerings in connection with its capital raise. In aggregate, the non-traded REIT issued 126,592,885 shares of common stock for gross proceeds of approximately $1.3 billion. As a publicly registered non-traded REIT, Griffin Essential was permitted to sell securities to the investing public at large, including numerous unsophisticated retail investors who bought shares through the IPO upon the recommendation of a broker or money manager.

Investors who purchased shares of Griffin Essential through the offering acquired their shares for approximately $10 per share. Therefore, it would appear that investors who participated in the MacKenzie tender offer incurred substantial losses on their initial investment in excess of 30% (exclusive of commissions and distributions).

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. To begin, one significant risk associated with non-traded REITs has to do with their high up-front commissions and fees, as high as 15% in some instances. Furthermore, non-traded REITs are generally illiquid investments. Unlike stocks and mutual funds, non-traded REITs do not trade on a deep and liquid national securities exchange. Therefore, many investors in non-traded REITs come to find out too late that their ability to exit their investment position is severely limited. Typically, investors in non-traded REITs can only exit their investment position through redemption directly with the sponsor, and then on a limited basis, and often at a disadvantageous price. Or, investors may be able to sell shares through a limited and fragmented secondary market. Finally, investors may be presented with limited market-driven opportunities — such as a tender offer — to sell their shares.

Investors may be able to pursue claims through FINRA arbitration in the event that a non-traded REIT 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 broker. Investors 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.

Investors in NorthStar Healthcare Income, Inc. (“NHI REIT”) are likely facing substantial principal losses based on recently reported transactions. Although liquidity is limited, NHI REIT investors may be able to sell shares through a limited and fragmented secondary market. Recently, NHI REIT shares were listed for sale on a secondary platform at $6.70 per share. Thus, for investors who bought in through the IPO at $10 per share, it would appear that they have sustained losses of roughly 1/3 on their initial capital outlay (these losses are exclusive of distribution income received to date).

NHI REIT investors also may have arbitration claims to be pursued before FINRA, 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 broker. According to its prospectus, NHI REIT was formed as a Maryland corporation in October 2010 for the purpose of acquiring, originating and managing a “[d]iversified portfolio of equity and debt investments in healthcare real estate, with a focus on the mid-acuity senior housing sector.”

Headquartered in New York, New York, NHI REIT is a publicly registered non-traded real estate investment trust. As of November 2015, NHI REIT’s portfolio consisted of 20 investments, including 16 equity investments with a total cost of $942.7 million, and 4 debt investments with a principal amount of $145.9 million. Pursuant to its offering, which closed December 17, 2015, NHI REIT offered up to $500,000,000 in shares of its common stock at a price of $10.20 per share, in addition to $200,000,000 in shares offered under the REIT’s amended and restated distribution reinvestment plan, at a price of $9.69 per share.

Non-traded REITs like NHI REIT pose many risks that are often not readily apparent to retail investors, or adequately explained by the financial advisors recommending these relatively obscure investments. To begin, non-traded REITs are typically characterized by very high fees and up-front commissions (as high as 15% in some instances). For example, as set forth in its prospectus, NHI REIT charges a selling commission of up to 7% of gross offering proceeds (except on shares acquired through reinvestment), a dealer-manager fee of up to 3%, an acquisition fee of 2.25% for properties acquired by the REIT, as well as additional organizational and offering fees.

Aside from their high fee structure, non-traded REITs are illiquid in nature, and under most circumstances cannot readily be sold for a number of years after purchase. Unlike traditional stocks and mutual funds, non-traded REITs do not trade on a deep and liquid national securities exchange. Therefore, many investors in non-traded REITs come to learn too late that their ability to exit their investment position is limited. For instance, non-traded REIT investors typically can only redeem shares directly with the sponsor on a limited basis, and even then, often at a disadvantageous price.

Investors with questions about an investment in NHI REIT, or similar non-traded investment products, 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.

Investors in American Realty Capital New York City REIT (“ARC NYC REIT”), may have arbitration claims to be pursued before the Financial Industry Regulatory Authority (“FINRA”), if their ARC NYC REIT 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 broker or financial advisor. According to its website, ARC NYC REIT is structured to provide its investors with a combination of current income and capital appreciation through strategic investments in high-quality commercial real estate located throughout the five boroughs of New York City.

As recently reported, the Board of ARC NYC REIT has elected to suspend distributions, effective March 1, 2018. According to the Board, the suspension of future distributions was made in order to enhance the non-traded REIT’s ability to execute on acquisitions, as well as conduct repositioning and leasing efforts related to its property portfolio. As a publicly registered non-traded REIT, ARC NYC REIT was incorporated in December 2013 and is registered with the SEC. Accordingly, ARC NYC REIT was permitted to sell securities to the investing public at large, including numerous unsophisticated retail investors who bought shares through the initial public offering (“IPO”) upon the recommendation of a broker or money manager at $25 per share. Secondary market transactions in ARC NYC REIT shares have reportedly taken place at prices of between $13.75 and $14.25 a share (although the sponsor indicates the NAV of ARC NYC REIT shares is $20.26 a share).

Unlike traditional stocks and publicly traded REITs, non-traded REITs do not trade on a national securities exchange. Therefore, many investors in non-traded REITs like ARC NYC REIT, have limited options when it comes to exiting their investment position. For example, investors in non-traded REITs typically can only redeem shares directly with the sponsor on a limited basis, and often at a disadvantageous price. Or, investors may be able to sell shares through a limited and fragmented secondary market. Finally, investors may be presented with limited market-driven opportunities — such as a tender offer — to sell their shares at a disadvantageous price.

In general, many non-traded REITs pose significant risks, including their initial structure, as well as the nature of the income paid to investors. As to their initial structure, many non-traded REITs are blind pools, meaning that an investor considering a capital commitment may have little or no no information as to the nature and quality of the assets to be purchased by the REIT. With respect to the nature of distributions paid by non-traded REITs, often distributions are paid to investors in part via “return of capital” rather than distribution of income from underlying assets, meaning that investors are essentially being paid back, in part, with their own initial capital contribution.

Investors in ARC NYC REIT, or another non-traded REIT who have suffered losses in connection with their investment (or are currently unable to exit their illiquid investment position without incurring losses) 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.

Investors in certain REITs based in Las Vegas may have arbitration claims against brokers or financial advisors if a FINRA-registered broker dealer that recommended the investment did not live up to its obligations under applicable rules. As members and associated persons of FINRA, brokerage firms and their financial advisors must ensure that adequate due diligence is performed on any investment that is recommended to investors. Further, firms and their brokers must ensure that investors are informed of the risks associated with an investment, and must conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and risk profile. Either an unsuitable recommendation to purchase an investment or a misrepresentation concerning the nature and characteristics of the investment may give rise to a claim against a stockbroker or financial advisor.

Vestin Realty Mortgage I (Previously Vestin Fund I and DM Mortgage Investors)

Vestin Realty Mortgage I (VRM I) was formerly known as DM Mortgage Investors. On March 17, 2000, DM Mortgage Investors registered up to 100,000,000 shares with the Securities and Exchange Commission (SEC) at $1 per share. This registration was later amended to cover the issuance of up to 10,000,000 shares at $10 per share. On June 29, 2001, DM Mortgage Investors changed its name to Vestin Fund I, and later changed its name to Vestin Realty Mortgage I (VRM I) and began trading on the Nasdaq Capital Market on June 1, 2006. In March 2012, VRM I ceased being a REIT, but continued trading on the Nasdaq.

Vestin Realty Mortgage II (Previously Vestin Fund II)

Vestin Fund II registered up to 50 million shares with the SEC at $10 per share on December 21, 2000. In May 2005, Vestin Fund II merged into newly formed VRM II and in June 2006 VRM II began trading on the Nasdaq as VRTB.

VRM II’s maximum market capitalization was approximately $240 million. VRM II’s total return from inception on May 1, 2006 to April 11, 2017 was -93%. On March 8, 2017 VRM II announced that it notified the Nasdaq Stock Market of its intent to voluntarily delist its common stock, and that it intends to voluntarily deregister its common stock under the Securities Exchange Act of 1934 as a cost savings step to reduce expenses associated with the Company’s Nasdaq listing and compliance with SEC reporting requirements.

MVP REIT

MVP REIT is a non-traded REIT sponsored by MVP Capital Partners, LLC which at relevant times was owned by VRM I and VRM II. Beginning in September 2012 and continuing through 2015, MVP REIT issued $77 million of stock, or 14% of its proposed $500 million offering. Most of the $77 million in MVP REIT shares were issued to an entity known as SERE Holdings, which then appears to have sold the shares to investors through a brokerage firm.

MVP REIT II

MVP REIT II is a second non-traded REIT from sponsor MVP Capital Partners, LLC that was registered in September 2015 and sought to raise up to $550 million. As of September 30, 2016, the REIT had reportedly raised $45 million, or 9% of its maximum offering amount. The Board of Directors extended the close of offering from October 1, 2016, to December 31, 2016, and announced $50 million preferred stock offering after the closing date of common shares offering was determined.

Risks of Non-Traded REITs

As publicly registered non-traded REITs, MVP REITs I and II were permitted to sell shares to the investing public at large, oftentimes upon the recommendation of a broker or financial advisor. Some investors may not have been properly informed by their financial advisor or broker of the complexities and risks associated with investing in non-traded REITs. Further, a significant risk associated with non-traded REITs has to do with liquidity. Unlike traditional stocks and certain publicly- traded REITs, non-traded REITs do not trade on a national securities exchange, leaving investors with limited options if they wish to sell their shares after the initial purchase- especially if the issuer is not redeeming shares.

If you have invested in MVP REIT I or II or another non-traded REIT, and you have suffered losses in connection with your investment (or are currently unable to exit your illiquid investment position), you may be able to recover your losses in FINRA arbitration. Investors 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.

Investors in American Realty Capital Healthcare Trust III Inc. (“ARC HT III”) may be able to recover losses on their investment in FINRA arbitration. ARC HT III is a publicly registered non-traded real estate investment trust (“REIT”) sponsored by AR Global and based in New York, NY. As its name suggests, this non-traded REIT is focused primarily on investing in healthcare-related assets including medical office buildings, seniors housing and other healthcare-related facilities. ARC HT III currently owns a portfolio of 19 properties purchased for a total of $128.3 million.

ARC HT III raised approximately $168 million in investor equity prior to cancellation of its securities offering, due in large part to a series of ARC related scandals. On July 19, 2017, ARC HT III announced an estimated net asset value (“NAV”) per share of $17.64. Investors who participated in the offering bought in at $25 per share. Additionally, on July 18, 2017, the ARC HT III Board determined that it would cease paying distributions beginning in August 2017. One of the risks associated with investing in non-traded REITs concerns the viability of the distribution payment. At its discretion, the board of a non-traded REIT may well decide to substantially reduce, or altogether suspend, payments of distributions to investors. This is troubling, particularly because many investors are advised to purchase non-traded REITs as a means of earning enhanced income.

On December 21, 2017, ARC HT III shareholders will vote at the annual meeting to be held at 4pm at The Core Club in New York, NY, on an important proposal. Specifically, shareholders will be asked to vote on a plan of liquidation and dissolution of the company. Pursuant to the proposed plan of liquidation, ARC HT III shareholders will receive $17.67 – $17.81 per share of stock held. As part of the contemplated liquidation, the non-traded REIT anticipates paying an initial liquidation distribution of $15.75 per share, expected to be paid within two weeks of closing the asset sale. In connection with the transaction, ARC HT III will sell its underlying property portfolio for $120 million to the affiliated entity – Healthcare Trust Inc. In order for the plan of liquidation to become effective, shareholders must vote to approve both the contemplated purchase of ARC HT III by Healthcare Trust Inc., as well as the proposal to liquidate the company.

Given the initial purchase price of $25, ARC HT III shareholders who receive $17.81 will take a nearly 30% haircut on their investment. Even when factoring in distributions previously paid to shareholders, it would appear that ARC HT III shareholders will incur losses on their investment.

If you have invested in ARC HT III, or another non-traded REIT, and you have suffered losses in connection with your investment (or are currently unable to exit your illiquid investment position without incurring considerable losses), you may be able to recover your losses in FINRA arbitration. To find out more about your legal rights and options, 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.

Over the past several years, many retail investors were steered into investing in non-traded REITs such as SRT by their broker or money manager based on the investment’s income-producing potential. Unfortunately, many investors were not informed of the complexities and risks associated with non-traded REITs, including the investment’s high fees and illiquid nature. Currently, investors who wish to sell their shares of SRT may only do so through direct redemption with the issuer or by selling shares on an illiquid secondary market, such as Central Trade & Transfer.

In November 2008, SRT filed a Form S-11 with the Securities and Exchange Commission (“SEC”) in order to raise capital for its IPO. By August 2009, SRT initiated its IPO at $10 per share for up to $ 1 billion in investor capital. Unfortunately for SRT investors who purchased shares at $10, the secondary market now lists SRT shares at a deep discount. For example, Central Trade & Transfer has recently listed shares of SRT with a bid-ask spread of $4.60 – $4.50 per share.

The recent pricing in SRT suggests that investors in this non-traded REIT may well have suffered considerable investment losses of approximately 55% on their initial investment of $10.00 per share.

If you have invested in SRT, or another non-traded REIT, and you have suffered losses in connection with your investment (or are currently unable to exit your illiquid investment position without incurring considerable losses), you may be able to recover your losses in FINRA arbitration. To find out more about your legal rights and options, 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.

Publicly registered non-exchange traded REITs like American Finance Trust and Lightstone Value Plus REIT V are complex investment vehicles that carry substantial risk, including significant fees and lack of liquidity (often making redemption difficult for a shareholder seeking to exit an investment). Many retail investors are steered into purchasing non-traded REITs upon the recommendation of their broker or financial advisor who will typically tout the investment’s income component to their clients seeking an income stream. Unfortunately, many investors who purchase shares in non-traded REITs are not fully informed of the many complexities and risks associated with such an investment.

American Finance Trust (“AFT”) is a non-traded REIT that was formed in January 2013 and subsequently launched by American Financial Advisors, LLC. More recently, in February 2017, AFT (with $2.1 billion in assets) and American Realty Capital-Retail Centers of America (with $1.25 billion in assets) announced shareholder approval for a merger of the two non-traded REITs.

AFT was initially priced at $25 per share when it commenced its public offering in 2013. Currently, investors seeking to redeem their shares may do so through a limited secondary market. For example, Central Trade and Transfer — a secondary market for private placements and certain alternative investments — has recently listed AFT shares for $15.50 per share. Thus, AFT investors wishing to sell some or all of their position will be forced to sustain a substantial loss in order to exit their illiquid investment in AFT.

The Lightstone Value Plus REIT V (“Lightstone”) is another non-traded REIT. In July 2017, Behringer Harvard Opportunity REIT II Inc. (“Behringer II”) rebranded and changed its name to Lightstone. Many retail investors bought into Behringer II, which commenced its offering to investors in January 2008 and closed its offering in March 2012, after raising approx. $265 million in capital from investors.

Behringer II (now Lightstone) shares were initially sold to investors at $10 per share. According to Central Trade and Transfer, Lightstone shares are now listed for only $5.75 per share.

With respect to both AFT and Lightstone, many retail investors may have bought into these non-traded REITs without first being fully informed of the risks associated with these complex and illiquid investments. As members and associated persons of FINRA, brokerage firms and their financial advisors must ensure that adequate due diligence is performed on any investment that is recommended to investors. Further, firms and their brokers must ensure that investors are informed of the risks associated with an investment, and must conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and risk profile.

If you have invested in AFT or Lightstone, or another non-traded REIT, and you have suffered losses in connection with your investment, you may be able to recover your losses in FINRA arbitration. To find out more about your legal rights and options, 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.

KBS I launched through its initial public offering (“IPO”) in early 2006 for issuance of up to 200 million shares. Through its IPO at $10 per share, KBS I raised $1.7 billion prior to closing in May 2008. The company’s portfolio includes nearly 200 properties, in addition to participation in various real estate loan receivables.

KBS I has gradually written down its estimated share value over the years, but no liquidity event has yet provided a public market that would establish the true value of KBS I shares. One secondary market that provides a limited platform for investors in non-traded REITs, Central Trade & Transfer, has recently listed shares of KBS I with a bid-ask spread of $1.90 – $1.80 a share, suggesting that investors in KBS I may have suffered principal losses of as much as 80% on their initial investments of $10.00 a share.

If you have invested in KBS I, or another non-traded REIT, and you have suffered losses in connection with your investment (or are currently unable to exit your illiquid investment position without incurring considerable losses), you may be able to recover your losses in FINRA arbitration. To find out more about your legal rights and options, 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.

While an appropriate allocation of REITs in a retail investment portfolio may well be suitable and warranted in order to achieve diversification and earn decent income, non-traded REITs are an altogether different and often risky investment vehicle. The primary risks associated with non-traded REITs include: (1) a lack of liquidity – non-traded REITs do not trade on an exchange, and therefore, any secondary market for resale will be restricted; (2) pricing inefficiency – in lockstep with their lack of liquidity, investors in non-traded REITs may find that the price offered for share redemption is substantially lower than the price at which shares were initially purchased; (3) high up-front fees – compounding the risk with non-traded REITs are the often steep up-front fees charged investors (as high as 10% for selling compensation) simply to buy in and purchase shares; and (4) confusion over source of income – often, investors in non-traded REITs are unaware that dividend income may actually include return of capital (including possible the proceeds from sale of shares to other, later investors).

THE NEW HAMPSHIRE BUREAU OF SECURITIES REGULATION PROCEEDING AGAINST LPL FINANCIAL

In April 2015, the New Hampshire Bureau of Securities Regulation (the “Bureau”) initiated a regulatory proceeding against LPL Financial (“LPL”) in connection with the Boston-based brokerage firm’s sale of non-traded REITs to numerous investors. Aware of their complex nature and risks, the Bureau alleged that sales of non-traded REITs to New Hampshire residents were unsuitable under the circumstances and that LPL failed to properly supervise its associated members selling the non-traded REITs.

The case involved an elderly resident of New Hampshire, age 81, who was steered into investing approximately $250,000 in a non-traded REIT by an LPL adviser. The investor ultimately suffered significant losses in the non-traded REIT. During the course of its investigation into the matter, the Bureau concluded that LPL sold hundreds of non-traded REITS to New Hampshire residents, often in clear violation of LPL’s own internal policies and guidelines. LPL allegedly failed to follow its own guidelines concerning gathering accurate financial information from clients, ensuring appropriate concentration in any alternative investments such as non-traded REITs, and conducting a suitability analysis in connection with sales to investors.

As a result of the Bureau’s investigation into LPL, the Boston-based brokerage firm agreed to pay a fine of $750,000 for its alleged misconduct. Furthermore, LPL agreed to allow for a third-party review of its non-traded REIT sales in order to determine whether and in what amount restitution was warranted.

As of April 2017, based on this third-party review, LPL is responsible for refunding roughly 200 New Hampshire residents who had invested in non-traded REITs in the aggregate amount of $8 million (approx. $40,000 per client).

DO YOU HAVE A CASE INVOLVING A NON-TRADED REIT?

If you have invested in a non-traded REIT that you believe was unsuitably recommended, and you have suffered significant losses as a result, you may be able to recover your losses in FINRA arbitration. To find out more about your legal rights and options, contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

CHARACTERISTICS AND SOME DISADVANTAGES OF NON-TRADED REITS

To begin, a non-traded REIT is not listed for trading on a securities exchange. Consequently, the secondary market for non-traded REITs is typically very limited in nature. Furthermore, while some of an investor’s shares may be eligible for redemption after a certain passage of time (e.g., one year), and, even then, on a limited basis subject to certain restrictions, such redemption offers may well be priced below the purchase price or current price of the non-traded REIT. Thus, lack of liquidity and pricing inefficiency are two disadvantages to non-traded REITs, as opposed to REITs that trade on an exchange (e.g., NYSE: BXP – Boston Properties).

Beyond such liquidity and pricing concerns, non-traded REITs often are sold with very high front-end fees. These fees may include selling compensation and expenses (not to exceed 10%), as well as additional offering and organizational costs which are essentially passed along to the investor from the outset. Conversely, purchasing a REIT which trades on a major exchange will only entail the associated brokerage commission. Because of the fees associated with non-traded REITs, they are rarely suitable for an investor with a short-term time horizon; even long-term investors must remain mindful of the liquidity issues.

Finally, with non-traded REITs, investors may not always be aware of the anticipated source of returns on the underlying investments. Often, with a non-traded REIT, income is passed along to the investors from distributions over several years – and it may also be the case that the income distributions include return of capital from other investors. And upon liquidation, investors in a non-traded REIT may receive less than their initial investment depending on the value of the underlying assets. On the other hand, investors who purchase exchange traded REITS are typically seeking capital appreciation on the share price, in addition to income via dividends or distributions to shareholders.

RESOURCE OFFICE INNOVATION REIT

Recently, one such non-traded REIT – Resource Office Innovation REIT (“Resource Office”) – elected to suspend its public offering, effective April 21, 2017. Resource Office’s suspension of its offering was approved by its Board in connection with a plan to restructure its $1.1 billion IPO into a NAV REIT, as well as a perpetual life entity that will give the company the ability to conduct offerings for indefinite duration. In addition to suspending its offering, Resource Office’s Board voted to suspend the company’s distribution reinvestment plan effective May 1, 2017, as well as its share repurchase program effective May 21, 2017.

If you have invested in a non-traded REIT that you believe was an unsuitable recommendation, and you have suffered significant losses as a result, you may be able to recover your losses in FINRA arbitration. To find out more about your legal rights and options, contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

VEREIT (formerly known as American Realty Capital Properties) is one of the largest real estate investment trusts (REITs) in the world. VEREIT was founded in 2010 and is based in Phoenix, Arizona.

In the complaint Vanguard alleges that VEREIT cost investors billions of dollars in a multiyear accounting fraud. From February 2013 to July 2014 VEREIT implemented an “acquisition strategy” purchasing seven major real estate companies at an average of $3 billion. VEREIT’s assets grew from $132 million to $21.3 billion in 2014. During this growth VEREIT allegedly assured investors that its internal controls “were effective” and that the company financial statements “were accurate and could be trusted.”

Investors allege that VEREIT actually did not have an adequate system of controls over its financial reporting and that company financial statements were “riddled with errors.” According to the complaint VEREIT hid its fraud from investors until Oct. 29, 2014 when it disclosed an audit report which “determined that the company ‘intentionally’ misreported and [had] ‘intentionally not corrected’ certain calculations and that prior statements by the company ‘should no longer be relied upon.” After the revelation VEREIT’s stock price fell by 36%.

Non-traded REITs, like VEREIT, carry greater risk than more traditional investments such as stocks and bonds. Because of the greater risk attached to these investments, they are better suited for sophisticated and institutional investors. Broker-dealers have the duty to conduct proper due diligence in order to determine if an investment is suitable for a customer. This includes looking at the investors age, risk tolerance, net worth and investment experience.

If you believe you have been the victim of a possible violation of the securities laws, you may wish to consult an attorney to find out more about your legal rights and options. Investors may contact a securities attorney at Law Office of Christopher J. Gray at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

Non-traded real estate investment trusts (REITs) are investments that pose a significant risk that the investor will lose some or all of his initial investment. Non-traded REITs are not listed on a national securities exchange, limiting investors’ ability to sell them after the initial purchase. Such illiquid and risky investments are often better suited for sophisticated and institutional investors, rather than retail investors such as retirees who do not wish to have their money tied up for years, or risk losing a significant portion of their investment. Non-traded REITs usually have higher fees for investors than publicly-traded REITs and can be harder to sell.

A partial list of non-traded REITs is as follows (not all of the REITs listed have performed poorly):

American Realty Capital – Retail Centers of America, Inc.

American Realty Capital Daily Net Asset Value Trust, Inc.

American Realty Capital Healthcare Trust II, Inc.

American Realty Capital Hospitality Trust, Inc.

American Realty Capital New York City REIT, Inc.

American Realty Capital Trust V, Inc.

Behringer Harvard Opportunity REIT I

Behringer Harvard Opportunity REIT II

Carey Watermark Investors Incorporated

Carter Validus Mission Critical REIT

CNL Growth Properties

CNL Healthcare Properties Inc.

CNL Lifestyle Properties, Inc.

Cole Credit Property Trust IV, Inc.

Cole Credit Property Trust V, Inc.

Cole Office & Industrial REIT

Cole Real Estate Income Strategy (Daily NAV), Inc.

Corporate Property Associates 17 – Global, Inc.

Corporate Property Associates 18 – Global

Dividend Capital Diversified Property Fund Inc.

Global Income Trust, Inc.

Griffin Capital Essential Asset REIT, Inc.

Griffin-American Healthcare REIT III

GTJ REIT, Inc.

Hines Global REIT, Inc.

Hines Real Estate Investment Trust, Inc.

Industrial Income Trust, Inc.

Inland Real Estate Income Trust, Inc.

InvenTrust Properties Corp.

Jones Lang LaSalle Income Property Trust, Inc.

KBS Legacy Partners Apartment REIT, Inc.

KBS Real Estate Investment Trust I, Inc.

KBS Real Estate Investment Trust II, Inc.

KBS Real Estate Investment Trust III

KBS Strategic Opportunity REIT, Inc.

Northstar Healthcare Income, Inc.

Northstar Real Estate Income II, Inc.

Northstar Real Estate Income Trust, Inc.

Phillips Edison Grocery Center REIT I, Inc.

Phillips Edison Grocery Center REIT II, Inc.

Realty Finance Trust, Inc.

RREEF Property Trust

Steadfast Income REIT

Strategic Realty Trust Inc.

TIER REIT Inc.

United Realty Trust, Inc.

Brokers and financial advisors are required to make investment recommendations that are consistent with their clients’ risk tolerance, net worth, investment objectives and experience in the market. However, due to the high sales commissions brokers typically earn for selling REITs – as high as 15%- brokers can be tempted to make “one size fits all” recommendations to investors in order to reap commissions. These high up-front fees and commissions can negatively affect performance over time, as illustrated by the estimated $50 billion that non-traded REITs have cost customers.

If you have suffered significant losses as a result of unsuitable recommendations of non-traded REITs or other non-conventional investments by a stockbroker or financial advisor, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact an investor rights attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

In the AWC, in which Finlay neither admitted nor denied the FINRA charges, FINRA found that Finlay failed to adequately disclose information to the customer about the REIT and also allegedly falsified a firm document that misrepresented the customer’s net worth and income.

As a result of the charges, Finlay’s license was suspended for 18 months. FINRA also fined Finlay $15,000 and ordered him to pay disgorgement of $6,639. The case is FINRA Disciplinary Proceeding No. 2013035576601

Finlay was registered with Cadaret, Grant & Co. from 4/ 1998-12/2013. He is not currently registered as a stockbroker or financial advisor.

Non-traded and private placement real estate investment trusts (REITs) are highly risky products that pose a significant risk that the investor will lose some or all of his initial investment. Non-traded REITs are not listed on a national securities exchange, limiting investors’ ability to sell them after the initial purchase. Such illiquid and risky investments are often better suited for sophisticated and institutional investors, rather than retail investors such as retirees who do not wish to have their money tied up for years, or risk losing a significant portion of their investment.

Brokers and financial advisors are required to make investment recommendations that are consistent with their clients’ risk tolerance, net worth, investment objectives and experience in the market. However, due to the high sales commissions brokers typically earn for selling REITs – as high as 15%- brokers can be tempted to make “one size fits all” recommendations to investors in order to reap commissions. Brokerage firms such as Cadaret, Grant & Co. are required by FINRA rules to supervise brokers and investment advisors- even those who work in independent branch offices- to ensure that the brokers make only suitable recommendations.

If you have suffered significant losses as a result of unsuitable recommedations of REITs or other non-conventional investments by a stockbroker or financial advisor, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact an investor rights attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.