Investors in American Finance Trust and Lightstone Value Plus REIT V may have viable arbitration claims before the Financial Industry Regulatory Authority (FINRA) if a stockbroker or investment advisor made an unsuitable recommendation to the investor to purchase them, or made a misleading sales presentation in recommending them.
Publicly registered non-exchange traded REITs like American Finance Trust and Lightstone Value Plus REIT V are complex investment vehicles that carry substantial risk, including significant fees and lack of liquidity (often making redemption difficult for a shareholder seeking to exit an investment). Many retail investors are steered into purchasing non-traded REITs upon the recommendation of their broker or financial advisor who will typically tout the investment’s income component to their clients seeking an income stream. Unfortunately, many investors who purchase shares in non-traded REITs are not fully informed of the many complexities and risks associated with such an investment.
American Finance Trust (“AFT”) is a non-traded REIT that was formed in January 2013 and subsequently launched by American Financial Advisors, LLC. More recently, in February 2017, AFT (with $2.1 billion in assets) and American Realty Capital-Retail Centers of America (with $1.25 billion in assets) announced shareholder approval for a merger of the two non-traded REITs.
AFT was initially priced at $25 per share when it commenced its public offering in 2013. Currently, investors seeking to redeem their shares may do so through a limited secondary market. For example, Central Trade and Transfer — a secondary market for private placements and certain alternative investments — has recently listed AFT shares for $15.50 per share. Thus, AFT investors wishing to sell some or all of their position will be forced to sustain a substantial loss in order to exit their illiquid investment in AFT.
The Lightstone Value Plus REIT V (“Lightstone”) is another non-traded REIT. In July 2017, Behringer Harvard Opportunity REIT II Inc. (“Behringer II”) rebranded and changed its name to Lightstone. Many retail investors bought into Behringer II, which commenced its offering to investors in January 2008 and closed its offering in March 2012, after raising approx. $265 million in capital from investors.
Behringer II (now Lightstone) shares were initially sold to investors at $10 per share. According to Central Trade and Transfer, Lightstone shares are now listed for only $5.75 per share.
With respect to both AFT and Lightstone, many retail investors may have bought into these non-traded REITs without first being fully informed of the risks associated with these complex and illiquid investments. As members and associated persons of FINRA, brokerage firms and their financial advisors must ensure that adequate due diligence is performed on any investment that is recommended to investors. Further, firms and their brokers must ensure that investors are informed of the risks associated with an investment, and must conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and risk profile.
If you have invested in AFT or Lightstone, or another non-traded REIT, and you have suffered losses in connection with your investment, you may be able to recover your losses in FINRA arbitration. To find out more about your legal rights and options, 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.