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Articles Tagged with TNP Strategic Retail Trust

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Investors in Strategic Realty Trust (“SRT”) 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. SRT,  formerly known as TNP Strategic Retail Trust, is a non-traded real estate investment trust (REIT) which owns a portfolio of shopping centers that are anchored by such grocers as Publix, Kroger, and Wal-Mart. It is a non-traded REIT sponsored by Thompson National Properties, LLC.

Money Bags
A company known as Mackenzie Realty Capital has just extended a tender offer to purchase shares of the REIT for just $1.00 per share. According to Mackenzie’s letter to investors, SRT has given no indication when it might liquidate, and its charter does not require it to do so on any particular schedule.

Further, although SRT redeems shares on a quarterly basis, repurchases are limited to death or disability of a stockholder.  SRT estimated the REIT’s net asset value per share as $5.86 as of April 2019, a 41.4% decline of from the original offering price of $10 per share.  Shares of SRT have reportedly changed hands at even lower prices of between $2.30 and $2.50 a share in the limited secondary market.

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According to stock fraud lawyers, the Financial Industry Regulatory Authority has and will continue to relentlessly target non-traded real estate investment trusts, or REITs. Specifically, the regulatory authority is focusing on how broker-dealers sell these investments and potential shortcomings in their strategies. According to the Executive Vice President of Member Regulation Sales Practices at FINRA, Susan Axelrod, examiners at FINRA have been scrutinizing “numerous retail sellers of non-traded REITs.” Axelrod also stated that, “In several instances, FINRA examiners have found that firms selling these products failed to conduct reasonable diligence before selling a product and failed to make a determination that the product was suitable for investors.”

FINRA Targets Non-traded REITs

Investment fraud lawyers note that independent broker-dealers have a responsibility to perform adequate due diligence when selling any investment, especially complex, illiquid products. Since the 2008 market collapse, FINRA has been aggressive with broker-dealers who failed to do so. Axelrod stated to the Securities Industry and Financial Markets Association’s Complex Products Forum that, “FINRA examiners have noted that in the instances of REITs that have experienced financial difficulties, red flags existed and should have been considered by firms prior to the product being offered to firm clients.”

Another problem with non-traded REITs, according to Axelrod, is that “non-traded REITs may also borrow funds to make distributions if operating cash flow is insufficient, and excessive borrowing may increase the risk of default or devaluation. In addition, non-traded-REIT distributions may actually be a return on principal.”

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