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Articles Posted in Non-Traded REITs

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Investors in Sila Realty Trust Inc. (“Sila”), a publicly registered, non-traded real estate investment trust (formerly known as Carter Validus Mission Critical 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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Sila recently sent a letter to shareholders recommending they reject an unsolicited tender offer by CMG Partners and its affiliates, CMG Income Fund II LLC, CMG Liquidity Fund LLC and Blue River Capital LLC.  Under the tender offer, CMG is offering to buy up to300,000 shares of Sila stock for $3.57 each.  This price is approximately 59 percent less than the REIT’s most recent net asset value per share of $8.69, announced in December 2020. CMG’s offer expires on July 15, 2021, unless extended.  As well as being much lower than Sila’s estimated NAV per share, CMG’s offer price is also lower than certain reported secondary market transactions, which have reportedly taken place at prices over $6.00 a share during 2021.

Sila  merged with another REIT known as with Carter Validus Mission Critical REIT Inc. in late 2019.  Sila recently announced plans to sell its 29-property data center portfolio to subsidiaries of Mapletree Industrial Trust, a REIT listed on the Singapore Exchange, for more than $1.3 billion. The transaction is expected to be completed in one or more closings during the third quarter of 2021.  As of March 31, 2021, Sila reportedly owned 153 real estate properties, consisting of 29 data centers and 124 healthcare properties located in 70 markets across the United States with a total purchase price of approximately $3.2 billion, including capital expenditures on development properties placed into service.

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Phillips Edison & Co. (“PECO”), an internally managed real estate investment trust focused on grocery-anchored shopping centers,  recently announced that the REIT’s proposed one-for-four reverse stock split announced last November has apparently been delayed due to “market conditions,” according to filings with the SEC.  The proposed reverse split would have converted every four shares of issued common stock into one share of common stock.

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On March 25, 2021, PECO announced that the REIT is reviewing alternatives in order to provide liquidity to the Company’s stockholders.  Pending this review, PECO’s Dividend Reinvestment Plan (DRIP) has been suspended, beginning with the distribution payable April 1, 2021. Stockholders who would otherwise have elected to purchase via the DRIP will reportedly receive their full distribution ($0.02833333 per share) in cash.

Previously, in 2019, the board suspended standard repurchases under the company’s share repurchase program, but continued repurchases of shares from certain investors who had died or become disabled.

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New York City REIT (“NYC REIT”) declared a dividend of $0.10 per share on each share of NYC REIT’s Class A common stock and Class B common stock payable on January 15, 2021 to common stockholders of record at the close of business on January 11, 2021.  While the continuing dividends are welcome, they provide modest relief to shareholders whose shares’ value continues to languish, with NYC REIT shares trading at below $10.00 a share during most of 2021.

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Previously, on November 12, 2020, NYC REIT filed its quarterly report with the SEC, for the period ending September 30, 2020 and reported a net loss per common share of $(0.96), versus a loss of $(0.38) from the third quarter of 2019.  NYC REIT also disclosed that it had only collected 85% of the cash rents due on its portfolio properties, all located in New York City, and stated as follows as to its outlook going forward:  “The negative impacts of the COVID-19 pandemic has caused and may continue to cause certain of our tenants to be unable to make rent payments to us timely, or at all, which has had, and could continue to have, an adverse effect on the amount of cash we receive from our operations and therefore our ability to fund operating expenses and other capital needs, which, beginning in October 2020, include dividends to our common stockholders.”

NYC REIT’s share price has languished since the company listed its shares on the New York Stock Exchange on August 18, 2020.   Based on NYC REIT’s current share price, on a pre-split basis, investors who acquired their NYC shares pre-IPO—when the Company was still structured as a non-traded REIT—have suffered losses of 75% or more of the principal invested.

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Phillips Edison & Co. (“PECO”), an internally managed real estate investment trust focused on grocery-anchored shopping centers,  recently announced that it has resumed share repurchases upon a stockholder’s death, disability, or incompetency (DDI).  The repurchase price will be equal to the lesser of $5.75 and the company’s most recent estimated net asset value per share of common stock. The REIT’s most recent net asset value per share was $8.75, as of March 31, 2020 (meaning that purchases would be at $5.75 if the estimated NAV per share is not reduced below that price).

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Previously, in 2019, the board suspended standard repurchases under the company’s share repurchase program, but continued DDI repurchases. In March 2020, the board also suspended DDI repurchases under the share repurchase program.

PECO also will make distributions for January 2021 to stockholders of record at the close of business on January 15, 2021 equal to a monthly amount of $0.02833333 per share, or $0.34 per share annualized.

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Resource Real Estate Opportunity REIT (“Resource REIT”), Resource Real Estate Opportunity REIT  II (“Resource REIT II”) or Resource Real Estate Opportunity REIT III (“Resource REIT III”) recently completed previously-announced stock-for-stock merger transactions.  The three affiliated non-traded real estate investment trusts merged in early 2021, combining to form a $3 billion self-managed REIT named Resource REIT Inc.  In the merger transaction, the surviving entity Resource REIT II acquired Resource REIT I and Resource REIT III in separate stock-for-stock transactions.  The REITs also acquired their external advisors in a series of transactions and are now internally managed.

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Resource REIT launched in June 2010 and raised $645.8 million in investor equity prior to closing in December 2013.  Resource REIT II’s primary offering launched in February 2014, closed in February 2016 and raised roughly $645 million in investor equity. Resource REIT III’s offering was declared effective in April 2016 and raised roughly $111.4 million in investor equity. The offering closed in October 2019.

Prior to the merger, Resource REIT and Resource REIT II shares reportedly changed hands in private transactions at significantly lower prices than their reported NAVs (net asset values).  Resource REIT shares are listed at an estimated NAV of $11.10 a share, but reportedly changed hands for between $6.50 and $6.66 a share.  Resource REIT II shares, with a reported NAV of $9.08 a share, reportedly changed hands for between $4.50 and $5.00 a share.

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Investors Summit Healthcare REIT, Inc. (“Summit”) 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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Headquartered in Lake Forest, CA, Summit is structured as a Maryland corporation that qualifies as a real estate investment trust (“REIT”) for tax purposes.  Formed in 2004, Summit was formerly known as Cornerstone Core Properties REIT, Inc.  Following a strategic repositioning of the Company’s property portfolio to focus on healthcare real estate and related assets, the name change was formally adopted in October 2013.

Investors who purchased shares in Summit at the initial offering acquired shares at $8.00 per share, and while it currently has an estimated net asset value (“NAV”) of $2.82 per share, shares of Summit have reportedly traded on the limited secondary market for between $1.23 and $1.30 per share.  Recently, CMG Partners LLC, a known purchaser of distressed nontraded securities, sent Summit investors letters offering to purchase shares for  $0.60 per share.

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Investors in non-traded REITs such as Steadfast Apartment REIT, Steadfast Apartment REIT III and Steadfast Income REIT 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.

Money Maze
Steadfast Apartment REIT Inc. (“STAR”), a publicly registered non-traded real estate investment trust, has reportedly lowered its distributions to investors and and amended its share repurchase plan (SRP) to limit repurchase requests to investors who have died or have a qualifying disability.

As pf February 1, 2021, the annualized distribution payment for a share of common stock paid by STAR will be $0.5250.  Prior to the change, STAR distributed $0.90 per share on an annualized basis.  The lowered distributions will begin in March 2021, which is when the payment for February 2021 is remitted to investors.

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Investors in Phillips Edison & Company, Inc. (“PECO”) 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.

Money Whirlpool
PECO, an internally managed real estate investment trust focused on grocery-anchored shopping centers,  recently released the preliminary results of its tender offer to purchase up to 17.4 million shares of common stock from public shareholders at a price of $5.75 per share. Shareholders reportedly tendered approximately 13.5 million shares, and PECO reportedly expects to purchase 100 percent of the tendered shares for approximately $77.7 million beginning on or about January 7, 2021.

PECO also has announced a one-for-four reverse stock split, which reportedly is expected to take place around March 9, 2021, and as a result, every four shares of issued and outstanding common stock will be automatically combined and converted into one share of common stock. A corresponding reverse split of the outstanding OP units will also be effective at that time.

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NorthStar Healthcare Income, Inc. (“NorthStar Healthcare”) a public, non-traded REIT, has lowered its estimates net asset value or “NAV” to $3.89 a share.  Shares were originally sold for $10.00 a share.   NorthStar Healthcare had last reported a $6.25 NAV per share, as of June 30, 2019.

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NorthStar Healthcare reportedly engaged Duff & Phelps, a third-party independent valuation and consulting firm, to assist with the valuation, which is based on the estimated value of NorthStar Healthcare’s assets, less the estimated value of its liabilities, divided by the number of shares outstanding as of June 30, 2020.  Based on the valuation, the estimated value of NorthStar Healthcare’s healthcare properties, joint venture investments and healthcare debt investment was reportedly approximately $2.06 billion, or about 25 percent lower than the properties’ total cost.

In April 2020, NorthStar Healthcare’s board suspended all repurchases under the share repurchase program in order to preserve capital and liquidity. Distributions were suspended in February 2019.

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Investors in Resource Real Estate Opportunity REIT (“Resource REIT”) and  m Resource Real Estate Opportunity REIT  II (“Resource 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.

Money Maze
Resource REIT and Resource REIT II shares have reportedly traded in private transactions at significantly lower prices than their reported NAVs (net asset values).  Resource REIT shares are listed at an estimated NAV of $11.10 a share, but reportedly have changed hands for between $6.50 and $6.66 a share.  Resource REIT II shares, with a reported NAV of $9.08 a share, reportedly have changed hands for between $4.50 and $5.00 a share.

Resource REIT reportedly raised $645.8 million in investor capital prior to closing its offering in December 2013. As of June 30, 2020, the company’s $920 million portfolio reportedly included 28 multifamily properties and one performing loan.  Resource REIT II’s primary offering reportedly launched in February 2014, closed in February 2016 and raised $645 million in investor capital. As of June 30, 2020, the REIT’s $717 million investment portfolio reportedly included 17 multifamily properties.

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