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.