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 the stockbroker. HTI was incorporated on October 15, 2012, as a Maryland corporation that elected to be taxed as a real estate investment trust (REIT). HTI invests in multi-tenant medical office buildings and, as of year-end 2017, owned a portfolio consisting of 8.4 million-square-feet including 164 properties, with a total purchase price of $2.3 billion.
As a publicly registered non-traded REIT, HTI was permitted to sell securities to the investing public at large, including numerous unsophisticated retail investors who bought shares through the offering upon the recommendation of a broker or money manager. HTI terminated its offering in November 2014 after raising approximately $2.2 billion in investor equity.
Recently, third party real estate investment firm MacKenzie Capital Management(“MacKenzie”) initiated an unsolicited mini-tender offer to purchase up to 200,000 shares of HTI for $7.99 per share. In response, HTI launched its own tender offer to purchase up to 200,000 shares for $8.50 a share, “in order to deter MacKenzie and other potential future bidders that may try to exploit the illiquidity of the shares and acquire them from the company’s stockholders at prices substantially below their estimated [net asset value per share].”
In April 2019, the HTI board approved a $17.50 estimated NAV (net asset value) per share as of December 31, 2018. MacKenzie’s offer price is $9.51 per share less, or 54.3 percent, than the REIT’s NAV per share. HTI has suspended its share repurchase program while the self-tender offer is in effect and for 10 days afterwards.
Investors who accepted either MacKenzie or HTI’s tender offer, and who had acquired HTI shares through the offering at $25 per share, would incur substantial principal losses on their initial investment of over $16 a share (exclusive of commissions paid and distributions received to date)- nearly two thirds of the principal invested.
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 HTI 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, and then on a limited basis, and often at a disadvantageous price.
If you have invested in HTI, or another non-traded REIT, and you have suffered losses in connection with your investment (or are currently unable to exit your illiquid investment position without incurring considerable losses), you may be able to recover your losses in FINRA arbitration. Investors who wish to discuss a possible claim may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at firstname.lastname@example.org for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York, New Jersey, 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).