Recently, several non-traded REITs have attempted name changes in order to put some distance between themselves and the negative news that has been associated with their previous name. A March 2012 letter to investors indicates that Cornerstone Healthcare REIT has done this. Cornerstone REIT is now known as Sentio Healthcare Properties Inc. The funds and REITs sold under Cornerstone Ventures Inc.’s Cornerstone Real Estate Funds have been under investigation by securities fraud attorneys for more than a year.
Sentio Healthcare Properties, or Healthcare REIT, appears to be one of the most troubled Cornerstone REITs. According to securities arbitration lawyers, the REITs value may have suffered a significant decline.
Typically, REITs carry a high commission which motivates brokers to make the recommendation to investors despite the investment’s unsuitability. The commission on a non-traded REIT is often as high as 15 percent. Non-traded REITs, like the Cornerstone REITs, carry a relatively high dividend or high interest, making them attractive to retired investors. However, non-traded REITs are inherently risky and illiquid, which limits access of funds to investors. This becomes a major problem for investors, especially retired individuals, who may need to access their funds when the need arises.
Securities fraud attorneys’ investigation of Cornerstone REITs focuses on what liability brokerage firms have for the sale of the investments. Prior to recommending an investment to a client, brokers and firms are required to perform the necessary due diligence to establish whether or not the investment is suitable for the client, given their age, investment objectives and risk tolerance. Brokerage firms offering the Cornerstone REIT will most likely be unable to demonstrate that the necessary due diligence was performed, based on what attorneys know about the investment.
Many investors are concerned about their Cornerstone REIT investments, and rightly so. Do not be fooled by the investment’s name change. To find out more about your legal rights and options, contact a securities arbitration lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.