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Articles Posted in Non-Traded REITs

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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.

money blowing in wind
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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Investors in Moody National REIT II (“Moody 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 Whirlpool
Moody II is a non-traded real estate investment trust (non-traded REIT).  According to secondary market quotes, Moody II shares have decreased in value   Investors who were relying on Moody II’s most recent estimated NAV (net asset value) of $23.50 a share announced by its sponsor could be in for an unwelcome surprise, as shares have reportedly been sold on the limited secondary market for prices as low as between $7.50 and $8.00 a share.

Moody II was formed in July 2014 to acquire a portfolio of hospitality properties (a/k/a hotels and resorts) focusing primarily on the select-service segment of the hospitality sector with premier brands including, but not limited to, Marriott, Hilton and Hyatt. According to the investments’ Fact Sheet, Moody REIT’s objectives are to “Preserve, protect and return stockholders’ capital contributions. Pay regular cash distributions to stockholders. Realize capital appreciation upon the ultimate sale of the real estate assets acquired by Moody National REIT II, Inc.”

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Investors in Healthcare Trust, Inc. (“HTI”) 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 a stockbroker or advisor.

Piggybank in a Cage
HTI,  a publicly registered non-traded real estate investment trust, announced that it has amended the company’s distribution policy and share repurchase program to end cash distributions and suspend redemptions.   Future distributions to shareholders will be paid in shares of common stock instead of cash, and share repurchases under the REIT’s share repurchase plan (or “SRP”) were suspended.  These announcements leave investors with no cash income from the REIT, and limited options if they wish to sell shares.

HTI states that it made these changes to preserve liquidity and maintain additional financial flexibility in light of the COVID-19 pandemic.  In a filing with the U.S. Securities and Exchange Commission (“SEC”), HTI indicated that any future distributions, if and when declared, will be paid on a quarterly basis in arrears in shares of common stock valued at the net asset value per share.  The number of shares paid will continue to be based on the prior cash distribution rate of $0.85 per share per year, the company said.

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Investors in New York City REIT (“NYC REIT”, formerly known as American Realty Capital New York City 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.

Wastebasket Filled with Crumpled Dollar Bills
NYC REIT is a former public, non-traded REIT that listed on the New York Stock Exchange (“NYSE”) on August 18, 2020 under the ticker symbol “NYC”.  Investors who were relying on NYC REIT’s most recent estimated NAV of $20.26 a share (valued as of June 30, 2019) were in for an unwelcome surprise, as despite a reverse split of its shares of 2.43 to 1, NYC REIT shares closed their first day of trading at $17.60 a share.

This price doesn’t sound so bad until one accounts for the reverse split- after the 2.43 to 1 reverse split, pre-split shares of NYC REIT are effectively worth only about $7.24 a pre-split share.  While drastically below the sponsor’s stated value of $20.26 a share, this price is only modestly below the $8.75 to $9.50 a share purchase of NYC REIT in the illiquid private market before share listed.  Shares of the REIT were originally sold to the public for $25.00.

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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 Maze
PECO was formed in Maryland in October 2009 as a non-traded real estate investment trust (or “REIT”), to acquire grocery-anchored shopping centers. In November 2018, PECO officially merged with Phillips Edison Grocery Center REIT II (“Phillips Edison II), a move that caused significant loss to its investors. Investors who purchased shares in PECO at the initial offering acquired shares at $10.00 per share, and while PECO’s sponsor has said that it currently has an estimated net asset value (“NAV”) of $8.75 per share, shares on the limited private secondary market have reportedly traded between $4.50 and $5.50 per share in recent months.

Making matters worse, in March 2020 PECO announced that it would suspended monthly distributions, as well as share repurchases or redemptions, albeit indicating that these  suspensions will be temporary.  As measures to guard against liquidity issues, PECO also reportedly borrowed $200 million from a revolving credit facility and announced plans to reduce expenses.

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Investors in Strategic Student & Senior Housing Trust, Inc. (“SSSHT REIT” or “the 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 whirlpool
SSSHT REIT, a publicly registered non-traded real estate investment trust (or “REIT”) sponsored by SmartStop Asset Management LLC, has reportedly suspended its distributions to shareholders, due to concerns over the COVID-19 pandemic’s possible adverse financial impact on the Company.

The REIT’s Board has also suspended its share redemption program (SRP), effective May 3, 2020.  No redemption requests made for the first quarter of 2020 will be honored.  SSSHT indicates that it does not intend to honor investor redemption requests, until further notice.

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Investors in Healthcare Trust, Inc.  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 Bags
According to filings with the SEC, on April 3, 2020, Healthcare Trust announced that its board of directors announced an estimated NAV per share of $15.75 as of December 31, 2019.  This marks a 10% decline from the previous estimated NAV per share of $17.50 per share as of December 31, 2018. Previously, Healthcare Trust lowered its annual distribution rate from $1.45 to $0.85 per share on March 1, 2018, after lowering distributions and previously from $1.70 per share to $1.45 per share in 2017.

But shares of Healthcare Trust, which initially sold for $25.00/share, may be worth even less, and have reportedly changed hands in the limited and illiquid secondary market at prices of between $7.75 and $8.25 a share as of the date of this writing.  Unfortunately for many investors in Healthcare Trust, it would appear that investors who attempt to exit their illiquid investment will incur a substantial loss.

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