Español Inner
Español
Skyscrapers at midtown New York City with the East River on the background

Articles Posted in Non-Traded REITs

Published on:

by

Piggy Bank in a CageAs recently reported, third-party real estate investment firm MacKenzie Realty Capital (“MacKenzie”) launched an unsolicited tender offer to purchase up to 1 million shares of Carter Validus Mission Critical REIT, Inc. (“Carter Validus”) shares for $3.36 per share.  The tender offer is set to expire on June 25, 2018.  While the Carter Validus Board has recommended that shareholders reject the offer, the non-traded REIT’s share repurchase program is already fully subscribed for 2018.  Further compounding the problem, Carter Validus recently reported that its largest tenant by revenue — Bay Area Regional Medical Center, LLC in Webster, TX — has declared bankruptcy.  Currently, investors seeking immediate liquidity on their Carter Validus investment have limited options at their disposal.

Headquartered in Tampa, Florida, Carter Validus is a publicly registered, non-traded REIT that is focused on investing in net leased data centers and healthcare properties.  As recently reported, Carter Validus’ portfolio consists of 66 properties, including 3 data centers and 63 healthcare properties.  The REIT’s offering, declared effective by the SEC in December 2010, closed in June 2014 after raising approximately $1.7 billion in investor equity.

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.  Many ordinary investors may be unaware of the high up-front commissions (typically between 7-10% of the initial investment) associated with non-traded REITs like Carter Validus.  Further, some investors may have been improperly steered into Carter Validus, without first being fully informed of the investment’s complex nature and inherent risks.

Continue reading
Published on:

by

Money in WastebasketInvestors in Cole Credit Property Trust IV, Inc. (“Cole Credit IV”) appear to have incurred substantial principal losses, based on the pricing of a recent tender offer.  Recently, third party real estate investment firm MacKenzie Realty Capital, LP (“MacKenzie”) initiated a tender offer to purchase shares of Cole Credit IV at a price of $6.01/share.  Therefore, investors who invested in Cole Credit IV through the offering at $10/share will incur substantial losses on their initial investment of approximately 40% (exclusive of commissions paid and distributions received to date).

Cole Credit IV’s real estate portfolio is geographically diverse, and is focused on investments in “income-producing, necessity single-tenant retail properties and anchored shopping centers subject to long-term net lease,” as stated on the company’s website.  As a publicly registered non-traded REIT, Cole Credit IV 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.  Cole Credit terminated its offering on April 4, 2014.

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 like Cole Credit IV generally charge investors for certain due diligence and administrative fees, ranging anywhere from 1-3%.

Continue reading
Published on:

by

Piggy Bank in a CageInvestors 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.

Continue reading
Published on:

by

investing in real estate through a limited partnershipInvestors in numerous non-traded REITs and real estate limited partnerships may have recently encountered difficulty in exiting their investment position through redemption of shares with the sponsor.  As we have highlighted in several previous blog posts, non-traded REITs and similar limited partnership investments (often sold via private placement), are extremely complex and risky investments.

Unlike exchange traded REITs that trade on deep and liquid national securities exchanges, publicly registered non-traded REITs are sold through an offering or successive offerings to the retail investing public, often over the course of several years.  Once the offering has closed, investors may find that their ability to redeem shares with the sponsor is severely restricted, or in some instances, outright suspended.  This is particularly problematic for retail investors who quite often were steered into the investment by a financial advisor who, in some instances, may have failed to fully disclose the nature of the investment, including its illiquid nature.

In the same vein, investments in real estate limited partnerships are often conducted via a private placement, pursuant to Regulation D as promulgated by the SEC.  As a general rule, a private placement investment in real estate carries with it many of the same risks embedded in investing in non-traded REITs.  These risks include: (1) high fees and commissions, (2) a general lack of transparency concerning the investment (while publicly registered non-traded REITs will typically provide more information than a private placement, the fact remains that many non-traded REITs are structured as blind pools, and accordingly an investor will not be able to readily ascertain the nature of the underlying property portfolio), and (3) difficulty exiting an illiquid investment position.

Continue reading
Published on:

by

investing in real estate through a limited partnershipInvestors 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.

Continue reading
Published on:

by

Money in WastebasketAs recently reported, the Board of Directors of The Parking REIT, Inc. have unanimously authorized a suspension of the company’s cash distributions and stock dividends, effective immediately.  In conjunction with filing a Form 8-K with the SEC on March 23, 2018, the company issued a press release indicating, inter alia, that “The Board is focused on preserving capital in order to maintain sufficient liquidity to continue to operate the business and maintain compliance with debt covenants, including minimum liquidity covenants…”

Headquartered in Las Vegas, NV, The Parking REIT (f/k/a MVP REIT II, Inc.) holds a real estate investment portfolio consisting of 44 parking facilities across 15 states, with an estimated aggregate asset value of $280 million.  As a publicly registered non-traded REIT, The Parking REIT is a particularly complex and risky investment vehicle.  Among the risks associated with non-traded REITs are their characteristically high up-front fees and commissions (as high as 15% in some instances), as well their illiquid nature.

Unlike exchange traded REITs, non-traded REITs do not trade on a national securities exchange, and therefore cannot be readily sold and resold on a liquid exchange.  Further, as is the case with The Parking REIT, investors may unfortunately encounter a scenario where the Board elects to reduce or altogether suspend distributions and/or dividends.  For many investors in non-traded REITs, one of their primary reasons for investing in the first instance has to do with the enhanced yield often associated with non-traded REITs.  However, when the prospect of steady income through distributions disappears, the investor is left with an illiquid investment position that cannot be easily or readily exited.

Continue reading
Published on:

by

investing in real estate through a limited partnershipStrategic Realty Trust, Inc. (“SRT”), formerly known as TNP Strategic Retail Trust, Inc. is a non-traded REIT that owns a portfolio of shopping centers.  SRT has reportedly recently been the subject of a tender offer under which a third-party investor known as MacKenzie Realty Capital has offered to purchase shares for just $3.81/share.  According to SEC filings, the most recent Net Asset Value for SRT estimated by the issuer was $6.27/share.  SRT shares were originally sold at $10 a share to investors, meaning that most investors have likely incurred principal losses.

Over the past several years, many retail investors were steered into investing in non-traded REITs such as SRT by stockbrokers or financial advisors.  Frequent selling points for non-traded REIT investments include presenting these securities as steady income-producing investments and as solid long-term investments due to their underlying investments in real estate. Some investors may not have been 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 have limited options available to exit their investment position.  For example, SRT suspended its share redemption program effective as of January 15, 2013.  During the years ended 2013 and 2014, SRT did not redeem any shares under the redemption program.  Thereafter, on April 1, 2015, SRT’s Board approved the reinstatement of the share redemption program, but only as it relates to the death or qualifying disability of the shareholder.

Continue reading
Published on:

by

Money MazeReal estate investment firm MacKenzie Realty Capital (“MacKenzie”) is offering to purchase shares of The Parking REIT, Inc. (f/k/a MVP REIT II, Inc., hereinafter “The Parking REIT”) for $12.17 per share.  The pricing of MacKenzie’s unsolicited tender offer suggests that investors who wish participate in order to generate liquidity will lose money on their investments based on their initial purchase price.

As recently reported, The Parking REIT has merged with MVP REIT, Inc. (“MVP REIT I”), and as a result of the merger, the newly formed entity holds a real estate investment portfolio consisting of 44 parking facilities across 15 states, with an estimated aggregate asset value of $280 million.

The Parking REIT is a publicly registered non-traded real estate investment trust (“REIT”).  Unlike exchange traded REITs, non-traded REITs are particularly complex and risky investment vehicles that — as their name implies — do not trade on a national securities exchange.  Unfortunately, retail investors are often uninformed by their broker or money manager of the illiquid nature of non-traded REITs.  Investors may be unaware that their options to sell shares  are limited and often disadvantageous as to pricing and timing, and generally include direct redemption with the issuer, potential sale of shares through a fragmented and illiquid secondary market, or in limited instances — a tender offer by a third-party.

Continue reading
Published on:

by

House in HandsInvestors in Strategic Realty Trust, Inc. (“SRT”) may have arbitration claims to be pursued before the Financial Industry Regulatory Authority (“FINRA”), if their SRT 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 financial advisor.  SRT, formerly known as TNP Strategic Retail, is a San Mateo, CA based non-traded real estate investment trust (“REIT”) that seeks to invest in certain West Coast urban and street retail properties.

Over the past several years, many retail investors were steered into investing in non-traded REITs such as SRT by stockbrokers or financial advisors.  Frequent selling points for non-traded REIT investments include presenting these securities as steady income-producing investments and as solid long-term investments due to their underlying investments in real estate.  Some investors may not have been 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 have limited options available to exit their investment position.  For example, SRT suspended its share redemption program effective as of January 15, 2013.  During the years ended 2013 and 2014, SRT did not redeem any shares under the redemption program.  Thereafter, on April 1, 2015, SRT’s Board approved the reinstatement of the share redemption program, but only as it relates to the death or qualifying disability of the shareholder.

Continue reading
Published on:

by

Money BagsIn the past six months alone, several third-party real estate investment firms have launched unsolicited tender offers to purchase InvenTrust Properties Inc. (“InvenTrust”) shares at a significant discount.  InvenTrust investors 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.  According to its website, InvenTrust is a “[p]remier, pureplay REIT that owns, leases, redevelops, acquires and manages open-air centers in key growth markets…”

Based on publicly available information through filings with the SEC, InvenTrust was incorporated as Inland American Real Estate Trust, Inc. in October 2004 as a Maryland REIT (the company changed its name in April 2015).  As a publicly registered, non-traded REIT, InvenTrust 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.  Through the initial offering, shares were purchased at $10 per share.

Recently, several unsolicited tender offers have been made by certain third-party real estate investment firms for InvenTrust shares.  For example, on or about September 2017, MacKenzie Realty Capital (“MacKenzie”) launched an unsolicited tender offer to purchase up to 10,000,000 shares at a price of $1.49 per share.  More recently, Liquidity Partners Trust I, filed disclosure paperwork with the SEC in connection with their tender offer for purchase of up to 2,000,000 shares of InvenTrust at a price of $1.55 per share.

Continue reading
Contact Information
60 E 42nd St 46th floor
New York , NY 10165
Phone: (866) 966-9598 Phone: (212) 838-3221 Fax: (212) 937-3139

Attorney Advertising

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Please do not include any confidential or sensitive information in a contact form, text message, or voicemail. The contact form sends information by non-encrypted email, which is not secure. Submitting a contact form, sending a text message, making a phone call, or leaving a voicemail does not create an attorney-client relationship.

Copyright © 2017 – 2024, Law Office of Christopher J. Gray, P.C.
JUSTIA Law Firm Blog Design