Investors in Lightstone Real Estate Income Trust, Inc. (“Lightstone 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.
Lightstone REIT was incorporated on September 9, 2014 as a Maryland corporation that elected to be taxed as a real estate investment trust (REIT). As a publicly registered non-traded REIT, Lightstone REIT was permitted to sell securities to the investing public at large, including numerous unsophisticated retail investors who bought shares upon the recommendation of a broker or money manager. Lightstone REIT began offering securities in February 2015 and terminated its offering in March 2017 after raising approximately $85.6 million in investor equity. Lightstone REIT originates, acquires, and manages a diverse set of real estate properties across the United States.
The Board of Lightstone REIT recently approved a 50% decrease in monthly distributions from an annual rate of 8.0 percent to 4.0 percent. The stated purpose of this reduction is due to liquidity and operating costs concerns as well as a belief that the original 8% was no longer sustainable based upon the funds available from operations.
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 Lightstone REIT 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.
Investors who wish to discuss a possible claim concerning a non-traded REIT or other investment(s) may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at email@example.com 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).