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Investors in the Walton Land Fund companies (“Walton”) 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.

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Walton has marketed a series of highly speculative private placements focused on vacant, undeveloped properties that do not generate income.  The private placements are structured as limited partnerships, and include the following:

Walton U.S. Development Fund, LP

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Investors in Phillips Edison & Co. (“PECO”, formerly known as Phillips Edison Grocery Center REIT I) got bad news when PECO announced its plans to suspend monthly distributions, share repurchases, and its distribution reinvestment plan, indicating that the suspensions will be temporary.  PECO also reportedly borrowed $200 million on its $500 million revolving credit facility in order to increase its liquidity.

Money Maze
Monthly distributions and the distribution reinvestment plan were suspended after the March 2020 distribution,  which PECO paid in cash on April 1, 2020. The share repurchase program, including death, qualifying disability or determination of incompetence (DDI) requests, was also suspended.

PECO began selling shares in or about August 2010 as a publicly registered, non-traded REIT. and raised approximately $1.8 billion from investors.  PECO owns grocery store-based shopping centers and oversees a portfolio of 317 properties.

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As previously reported, American Finance Trust, Inc. (“AFIN” or the “Company”), formerly known as American Realty Capital Trust V, Inc., listed its shares on Nasdaq Global Select Market (“Nasdaq”), under the symbol AFIN effective July 19, 2018.  The Company publicly estimated its net asset value as $23.56 a share during 2018, yet shares have traded below $5.00 a share during 2020, and closed at $6.76 a share on April 13, 2020.

Building Demolished
AFIN announced on April 13, 2020 that its Board of Directors (the “Board”) has approved a “short-term stockholder rights plan” to protect the long-term interests of the Company, citing volatile in its share price that has resulted from the ongoing COVID-19 pandemic. AFIN says that the plan is designed to reduce the likelihood that any person or group (including a group of persons that are acting in concert with each other) would gain control of AFIN through open market accumulation of stock by imposing significant penalties upon any person or group that acquires 4.9% or more of the outstanding shares of the AFIN’s common stock without the approval of the Board.

Shares of the former non-traded REIT originally sold for $25.00 each, and the company terminated its share repurchase program at the end of June prior to listing on Nasdaq.

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Investors in Griffin-American Healthcare REIT III (“GAH REIT III”), 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 broker or financial advisor.

Money Maze
GAH REIT III recently announced that it will cut its annual distribution rate in half to $0.30 a share, from $0.60 a share, citing the possible impact of the COVID 19 epidemic on its operations  GAH REIT III also suspended its share repurchase plan.

GAH REIT III is a publicly registered non-traded real estate investment trust (“REIT”) incorporated in January 2013 as a Maryland REIT and is registered with the SEC.  As such. GAH REIT III was permitted to sell securities to the investing public at large, including retail investors who bought shares on the recommendation of a broker or money manager.

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FS Energy and Power Fund (“FSEP” or the “Company”)  has terminated the company’s quarterly tender offer and suspended the share repurchase program, citing difficult market conditions and events relating to crude oil production.  The decision leaves shareholders who may wish to sell their shares with limited options for liquidity..

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FSEP suspended regular cash distributions to shareholders after March 31, 2020.  As a result of this tender offer termination, no shares will be purchased and all shares previously tendered will be returned to shareholders. The board also decided to suspend the share repurchase program for an indefinite period of time and will reassess the company’s ability to recommence the program in the future.

FSEP launched in July 2011 to invest primarily in privately-held U.S. companies in the energy and power industry and closed its public offering in November 2016.  Upon information and belief, as a publicly registered, non-traded BDC, FSEP was marketed and recommended to numerous retail investors nationwide

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Investors in Energy 11, L.P. (“Energy 11”) may be able to recover investment losses through FINRA arbitration. 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.

Oil Drilling Rigs
On March 19, 2020, Energy 11 announced that it would suspend distributions to limited partners until further notice, citing “recent volatility in the market and oil prices in particular” that “has caused uncertainty to our cash flow for the remainder of 2020.”  Energy 11’s letter announcing the suspension is accessible here. ex_178082

Energy 11 has published an estimated per common unit value of its common units of $13.82 as of December 31, 2019.  However, this value may be premised in part on oil prices of over $50 a barrel that prevailed in 2019.  Oil prices have since plummeted to less than $30 a barrel as of this writing in March 2020.

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Investors in Hospitality Investors Trust (“HIT”), also known as American Realty Capital Hospitality Trust or ARC Hospitality, 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.

Money Maze
HIT, a public, non-traded real estate investment trust (“REIT”) with a focus on hospitality properties in the United States, announced a 33.6% decrease in its net asset value (“NAV”) to $9.21 per share, following a share repurchase program in October, 2018 in which shares were purchased at $9.00 per share.

As a publicly registered non-traded REIT, HIT 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.  Original investors of HIT could purchase shares at $25.00 per share.  However, the REIT’s estimated NAV is currently $9.21, and even worse, shares on the secondary market have reportedly been sold at prices between $3.75 and $3.99 a share.

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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.

Money Maze
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%.

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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.

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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].”

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Investors in Cole Credit Property Trust IV Inc. (“Cole IV”, now known as CIM Real Estate Finance Trust) 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.

money whirlpool
Cole IV was formed as a non-traded real estate investment trust, also known as a REIT, that invests in income-producing single-tenant retail properties with long-term net leases with credit-worthy tenants.  Investors who purchased shares in Cole IV at the initial offering acquired shares at $10 per share, but currently has a reported estimated net asset value (“NAV”) of $8.65 per share.  Even worse, shares on the secondary market are valued between $6.35 and $6.55 per share.

Although investors may be disappointed at the low $8.65 a share NAV, this net asset value or NAV may not even reflect the actual value that shareholders would realize if Cole IV were liquidated, listed on an exchange or merged with a public company.  Financial analysts frequently assume that non-traded investments such as Cole IV 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 less than $13 a share as of January 2020.

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