As recently reported, third party real estate investment firms Everest REIT Investors I LLC and Everest REIT Investors III LLC, two private affiliated entities, commenced an unsolicited tender offer to purchase approximately 8.8 million shares of CNL Healthcare Properties, Inc. (“CNL Healthcare”) common stock for $7.50 each. Unless amended, this unsolicited tender offer will expire on August 31, 2018. As of December 31, 2017, CNL Healthcare reported a net asset value (NAV) of $10.32 per share. Thus, the recent tender offer pricing represents an approximate 27% discount on CNL’s recent NAV pricing and suggests that investors may have incurred principal losses on their investments.
Headquartered in Orlando, FL, CNL Healthcare is a Maryland REIT incorporated in June 2010 for the purpose of acquiring a portfolio of geographically diverse healthcare real estate real estate-related assets, including certain senior housing communities, medical office buildings, and acute care hospitals.
Investors in CNL Healthcare may have claims to bring in FINRA arbitration, if the investment was recommended by a broker or financial advisor who lacked a reasonable basis for the recommendation, or if the financial advisor misrepresented the nature of the investment, including its risk components.
Non-traded REITs like CNL Healthcare pose many risks that are often not readily apparent to retail investors, or adequately explained by the financial advisors who recommend these complex investments. To begin, one significant risk associated with non-traded REITs has to do with their high up-front commissions and fees, as high as 7-10% in some instances. In addition to high commissions, non-traded REITs generally charge investors for certain due diligence and administrative fees, ranging anywhere from 1-3%. Such high commissions and fees act as an immediate “drag” on investment performance.
Furthermore, non-traded REITs are generally illiquid investments. Unlike stocks and mutual funds, non-traded REITs do not trade on a deep and liquid national securities exchange. Therefore, many investors come to find out too late that their ability to exit their investment position is severely limited. Typically, investors in non-traded REITs can only exit their investment through redemption directly with the sponsor, and then on a limited basis, and often at a disadvantageous price. Or, investors may be able to sell shares through a limited and fragmented secondary market. Finally, investors may be presented with limited market-driven opportunities — such as a tender offer — to sell their shares.
Investors with losses in CNL Healthcare or other non-traded REITs may contact 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.