Investor Lawyers Blog
Investors in CIM Real Estate Finance Trust Inc. (referred to below as referred to below as “CIM 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.
CIM REIT, originally sold as Cole Credit Property Trust IV, originally sold shares to the public for $10 each. Since then, the price of the REIT shares has decreased, reaching an estimated net asset value (NAV) per share of $7.77 as of December 31, 2019 and declining even further at later dates.
Now, an Israel-based investment fund, has made a filing with the Securities and Exchange Commission (“SEC”) to launch an unsolicited tender offer to purchase shares of CIM REIT a publicly registered non-traded real estate investment trust. The fund previously made a filing with the SEC in April 2023 to launch an unsolicited tender offer. The previous offer included the purchase of up to 22 million shares of CIM Real Estate Finance Trust Inc. for $4.57 per share. The fund’s current offer is to purchase up to 22 million shares of common stock at a an even lower purchase price equal to $4.21 per share.
These figures align with reported secondary market prices of around $4.20 a share for CIM REIT, although the REIT’s stated net asset value per share is $6.57.
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 generally charge investors for certain due diligence and administrative fees, ranging anywhere from 1-3%.
Furthermore, non-traded REITs are generally illiquid investments. Unlike traditional stocks and mutual funds, non-traded REITs do not trade on a national securities exchange. Many uninitiated investors in non-traded REITs have come to learn too late that their ability to exit their investment position is limited. Typically, investors in non-traded REITs can only exit their investment through redemption directly with the sponsor on a limited basis, and often at a disadvantageous price, or through sales in a limited secondary market. As in this case, third party tender offers may also offer liquidity, but at a price that may or may not reflect the shares’ fair value.
Stockbrokers and financial advisors who sell non-traded REITs and other non-conventional investments have an obligation to recommend these investments only when they have a reasonable basis to recommend them to an individual customer. Advisors also may not sell non-traded REITs or other investments via a misleading sales presentation that omits to disclose material risks.
Investors with questions about claims against a stockbroker or investment advisor concerning CIM REIT or other non-traded REITs or non-conventional investments 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. Attorneys at the firm are admitted in New York, 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).