Third-party real estate investment firm Everest REIT Investors I, LLC (“Everest”) recently launched an unsolicited tender offer to purchase up to 780,000 shares of common stock in Cole Credit Property Trust IV, Inc. (“Cole Credit IV”), at $6.60 per share.
Cole Credit IV was formed in July 2010 and is structured as a publicly registered, non-traded REIT. Shares issued through its offering were priced at $10 per share. As of December 31, 2017, Cole Credit IV had raised approximately $3.4 billion in investor equity. While the non-traded REIT has most recently estimated its share value at $9.37 per share, Cole Credit IV further “states that such figure is based on numerous assumptions and judgments and there can be no assurances that such amount would be realized upon a liquidation of assets or other liquidity event.”
Non-traded REITs pose a great deal of risks that are often not readily apparent to retail investors, and may not be adequately explained by the financial advisors and stockbrokers who recommend these complex investments. One significant risk associated with non-traded REITs concerns 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%.
Likely the greatest risk associated with non-traded REITs involves their illiquid nature. Unlike traditional stocks and mutual funds, non-traded REITs do not trade on a national securities exchange. Unfortunately, many uninitiated investors in non-traded REITs have come to learn too late that their ability to exit their investment position is limited. Investors in non-traded REITs can sometimes exit their investment through redemption directly with the sponsor, but such redemptions are limited, both as to timing (often redemptions are only done on a quarterly basis), as well as amount (any redemption will be subject to certain terms, including an overall limit on the aggregate number of shares that the REIT will permit to be redeemed at a given time). Investors may also be able to sell shares through tender offers from time to time, or via a limited secondary market.
The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in connection with complex non-conventional investments, including non-traded REITs and business development companies (BDCs). Investors may contact us via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at email@example.com for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York, New Jersey and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).