Phillips Edison & Co. (“PECO”), an internally managed real estate investment trust focused on grocery-anchored shopping centers, recently announced that it has resumed share repurchases upon a stockholder’s death, disability, or incompetency (DDI). The repurchase price will be equal to the lesser of $5.75 and the company’s most recent estimated net asset value per share of common stock. The REIT’s most recent net asset value per share was $8.75, as of March 31, 2020 (meaning that purchases would be at $5.75 if the estimated NAV per share is not reduced below that price).
Previously, in 2019, the board suspended standard repurchases under the company’s share repurchase program, but continued DDI repurchases. In March 2020, the board also suspended DDI repurchases under the share repurchase program.
PECO also will make distributions for January 2021 to stockholders of record at the close of business on January 15, 2021 equal to a monthly amount of $0.02833333 per share, or $0.34 per share annualized.
Earlier this year, PECO announced the final results of its tender offer to purchase up to 17.4 million shares of common stock at $5.75 per share. A total of 13.5 million shares were tendered for a total cost of $77.6 million.
Phillips Edison & Company Inc. (formerly known as Phillips Edison Grocery Center REIT I Inc.) is one of the nation’s largest owners and operators of grocery-anchored shopping centers. The company oversees a portfolio of 309 properties PECO was formed in Maryland in October 2009 as a non-traded real estate investment trust (or “REIT”), to acquire grocery-anchored shopping centers. In November 2018, PECO officially merged with Phillips Edison Grocery Center REIT II.
Investors who purchased shares in PECO at the initial offering acquired shares at $10.00 per share likely have incurred principal losses. While PECO’s sponsor has said that it currently has an estimated net asset value (“NAV”) of $8.75 per share, shares on the limited private secondary market have reportedly traded for less than $6.00 per share in recent months. Also, as noted above, PECO has also announced the repurchase of its own shares from shareholders pursuant to a tender offer for $5.75 a share.
As a publicly registered non-traded REIT, PECO was permitted to sell securities to the investing public at large, including unsophisticated retail investors who bought shares upon the recommendation of a broker or money manager and may have been unaware of the potential for losses of invested principal, or interruption of the income stream that is often a selling point for these types of investments.
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 PECO 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. While PECO has resumed share repurchases based upon a stockholder’s death, disability, or incompetency, other investors may have difficulty selling shares if they want or need to access the funds invested in PECO.
Investors in PECO 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.
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).
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