Investors in Resource Real Estate Opportunity REIT (“Resource REIT”) and m Resource Real Estate Opportunity REIT II (“Resource REIT II”) 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.
Resource REIT and Resource REIT II shares have reportedly traded in private transactions at significantly lower prices than their reported NAVs (net asset values). Resource REIT shares are listed at an estimated NAV of $11.10 a share, but reportedly have changed hands for between $6.50 and $6.66 a share. Resource REIT II shares, with a reported NAV of $9.08 a share, reportedly have changed hands for between $4.50 and $5.00 a share.
Resource REIT reportedly raised $645.8 million in investor capital prior to closing its offering in December 2013. As of June 30, 2020, the company’s $920 million portfolio reportedly included 28 multifamily properties and one performing loan. Resource REIT II’s primary offering reportedly launched in February 2014, closed in February 2016 and raised $645 million in investor capital. As of June 30, 2020, the REIT’s $717 million investment portfolio reportedly included 17 multifamily properties.
In February 2020, Resource REIT and Resource REIT II each announced the partial suspension of their share redemption programs. The two REITs reportedly intend to merge with a third REIT, Resource Apartment REIT III Inc., in a series of separate stock-for-stock transactions with a goal of combining three portfolios of suburban apartment communities in markets with income and employment growth.
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 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.
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. The firm has handled numerous cases against financial advisors who allegedly made misleading or unsuitable recommendations of alternative investments. 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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