Investors in Lightstone Value Plus REIT V (“Lightstone V”) 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 V (originally named Behringer Harvard Opportunity REIT II until July 2017) was formed as a non-traded real estate investment trust in January 2008, also known as a REIT, to invest in retail and other types of commercial properties. Investors who purchased shares in Lightstone V at the initial offering acquired shares at $10 per share, but currently has a net asset value (“NAV”) of $9.10 per share. Even worse, shares on the limited secondary market have reportedly traded at prices as low as between $5.95 and $6.25 per share.
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 V 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.
Although investors may be disappointed at the low $9.10 a share estimated NAV, this net asset value or NAV may not even reflect the actual value that shareholders would realize if Lightstone V were liquidated, listed on an exchange or merged with a public company. Financial analysts frequently assume that non-traded investments such as Lightstone V will trade at a discount to NAV if listed on a securities exchange. In a prominent example of this phenomenon, a large non-traded REIT known as American Finance Trust or AFIN listed its shares in 2018 had published an estimated NAV of $23.56 a share, yet shares later traded for as little as $10.08 after AFIN was listed on the Nasdaq Global Select Market. AFIN shares now trade at around $13.00 a share as of January 2020.
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 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,