Necessity REIT listed its shares on Nasdaq Global Select Market (“Nasdaq”) under the ticker symbol “AFIN” effective July 19, 2018. The Company later changed its name to The Necessity Retail REIT and adopted the ticker symbol “RTL” in February 2022. Before listing its shares on Nasdaq, Necessity REIT (then known as American Finance Trust) published an “estimated per share” net asset value of $23.56 in June 2018- leaving investors surprised when the REIT’s shares plummeted in value after being listed on Nasdaq only a month later in July 2018. The REIT’s shares have continued to languish, and as of January 2023, Necessity REIT shares were trading at below $7.00 a share- meaning that investors who bought shares in the initial offering would have lost well over half of their initial investment.

More recently, an investor in Necessity REIT known as Blackwells Capital, LLC (“Blackwells”) has called for corporate governance changes and new directors for the REIT. According to a recent news article, Blackwells reportedly notes that Necessity REIT trades at a 68.5% discount to its net asset value or “NAV” which, according to Blackwells, represents poor performance relative to comparable REITs. Blackwells reportedly filed a lawsuit against Necessity REIT in December, 2022, challenging Necessity REIT’s interpretation of the meaning of a July 2022 bylaw amendment concerning the appointment of directors to the REIT’s board. Blackwells has nominated two candidates for the Necessity REIT’s board, who have been rejected by the REIT, precipitating the lawsuit.

Initially offered as a non-traded REIT, Necessity REIT’s offering raised more than $1.6 billion in investor equity. Stockbrokers and financial advisors who sell non-traded REITs and other non-conventional investments have an obligation to recommend these investments only when they have a reasonable basis to recommend them to an individual customer. Advisors also may not sell non-traded REITs or other investments via a misleading sales presentation that omits to disclose material risks. A hallmark of non-traded REITs is their high up-front commissions, typically between 7-10%, which many investors may overlook at the time of purchase, and which may motivate financial advisors to recommend non-traded REITs instead of lower-commission alternatives such as publicly-traded REITs and ETFs.

As of Sept. 30, 2022, Necessity REIT reportedly owned 1,050 properties, comprised of 28.8 million rentable square feet, which were 92.6% leased, including 939 single-tenant net leased commercial properties, 900 of which are retail properties, and 111 multi-tenant retail properties.

Investors with questions about claims against a stockbroker or investment advisor concerning Necessity REIT or other non-traded REITs or non-conventional investments may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York, 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).

As previously reported, American Finance Trust, Inc. (“AFIN” or the “Company”), formerly known as American Realty Capital Trust V, Inc., listed its shares on Nasdaq Global Select Market (“Nasdaq”), under the symbol AFIN effective July 19, 2018.

The former non-traded REIT’s shares are therefore publicly traded, but not all shares are yet saleable. In connection with the listing, the Company’s shares were divided into three classes: Class A, Class B-1 and Class B-2. American Finance Trust has listed its Class A and former Class B-1 shares on NASDAQ, and the remaining Class B-2 shares are expected to list by January 2019. Shares of the non-traded REIT originally sold for $25.00 each, and the company terminated its share repurchase program at the end of June prior to listing on Nasdaq.

Against this backdrop, a private equity fund known as MacKenzie Realty Capital Inc. has offered to purchase up to 400,000 shares of each class of company common stock. MacKenzie is offering $15.00 per Class A share and $14.01 per Class B-1 share, and will purchase up to 400,000 shares of each class. The offer expires on November 16, 2018. Of note, these prices are above the current market price of AFIN shares on NASDAQ. Although most investors paid $25.00 a share for AFIN shares in the Company’s offerings, AFIN shares have consistently traded well below that price level since the Nasdaq listing. AFIN shares have traded as low as $13.15 a share, and closed on October 25, 2018 at $13.85 a share. The performance of the Company since it started trading on July 19 may have caught some investors by surprise, since AFIN published an “estimated per share” net asset value of $23.56 in June 2018.

Notwithstanding the tender offer price being at a premium to market, AFIN recommends against shareholders tending their shares: “We believe that MacKenzie would not be making the offer if it did not think AFIN’s shares will be worth more in the future than the prices they are paying for each share class,” said the company in a statement.

While structured as a non-traded REIT, American Finance Trust’s offering raised more than $1.6 billion in investor equity between April and October 2013. Because AFIN was registered with the SEC, the non-traded REIT was permitted to sell securities to the investing public at large, including numerous unsophisticated investors who bought shares through the initial public offering (“IPO”) upon the recommendation of a broker or money manager. AFIN commenced its initial public offering in April 2013, which closed approximately six months later, raising $1.6 billion in investor equity. Investors who participated in the IPO paid $25 per share. AFIN later merged with another REIT known as American Realty Capital Retail Centers of America in a controversial 2017 transaction.

While it is now publicly traded, AFIN was initially sold as a public, non-traded REIT.

Stockbrokers and financial advisors who sell non-traded REITs and other non-conventional investments have an obligation to recommend these investments only when they have a reasonable basis to recommend them to an individual customer. Advisors also may not sell non-traded REITs or other investments via a misleading sales presentation that omits to disclose material risks. A hallmark of non-traded REITs is their high up-front commissions, typically between 7-10%, which many investors may overlook at the time of purchase, and which may motivate financial advisors to recommend non-traded REITs instead of lower-commission alternatives such as publicly-traded REITs and ETFs.

Investors with questions above claims concerning non-traded REITs or other non-conventional investments may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.

As discussed in a prior blog post, on June 29, 2018, the board of directors of American Finance Trust, Inc. (“AFIN” or the “Company”), formerly known as American Realty Capital Trust V, Inc., announced the approval of a plan to list AFIN common stock on the Nasdaq Global Select Market (“NasdaqGS”), under the symbol ‘AFIN’. Pursuant to that plan, half of AFIN’s shares — AFIN Class A shares — were recently listed on NasdaqGS. Specifically, since July 16, 2018, shares of AFIN have been publicly traded and are currently priced around $17.50 per share. Therefore, investors who participated in the IPO and paid $25 per AFIN share and continue to hold their position have incurred substantial unrealized losses on their investment of approximately 30% (exclusive of commissions, as well as distributions paid, to date).

Most recently, the AFIN board of directors announced that in connection with their public listing, the former non-traded REIT now intends to convert its Class B-1 shares, which represent approximately 25% of AFIN shares outstanding, into Class A shares one week earlier than previously planned, on October 10, 2018. At this time, Class B-2 shares are still scheduled to convert to AFIN Class A shares on January 15, 2019, as previously planned.

AFIN shareholders have expressed concern that the Company’s plan to list its shares on NasdaqGS in such an incremental, phased manner will likely serve to dilute the value of the AFIN Class A shares, thus creating downward selling pressure on a stock that has already suffered considerable decline from its IPO pricing. In addition, some shareholders have expressed concern over the fact that AFIN recently cut its dividend from approximately $1.30 to $1.10, effective July 1, 2018. This amounts to a reduction in distribution of approximately 15% and is of particular concern to the many retail investors who initially purchased AFIN shares for their income component.

Due to the fact that AFIN was registered with the SEC, the formerly non-traded REIT was permitted to sell securities to the investing public at large, including numerous unsophisticated retail investors who bought shares through the IPO upon the recommendation of a stockbroker or financial advisor. AFIN commenced its initial public offering in April 2013, which closed approximately six months later, raising $1.6 billion in investor equity.

Non-traded REITs are extremely complex and risky investment vehicles, and pose many risks that may not be readily apparent to many retail investors, or adequately explained by the financial advisors who recommend such investments. For example, 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 AFIN generally charge investors for certain due diligence and administrative fees, ranging anywhere from 1-3%.

Attorneys at Law Office of Christopher J. Gray, P.C. have successfully resolved a number of disputes on behalf of investors, including losses sustained due to investments in REITs and other non-conventional investments. Investors may contact us by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

Attorneys at the firm are admitted in New York and 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).

American Finance Trust, Inc. (“AFIN” or the “Company”) listed its shares on Nasdaq Global Select Market (“Nasdaq”) on July 19, 2018, with trading opening at $13.15 a share with. AFIN sold shares to public at $25.00 a share,. While the trading price of AFIN may fluctuate, it appears that pre-listing investors in the REIT have likely suffered substantial principal losses.

On June 29, 2018, the board of directors of AFIN, formerly known as American Realty Capital Trust V, Inc., announced the approval of a plan to list AFIN common stock on the Nasdaq under the symbol ‘AFIN’. In order to effectuate the Nasdaq listing and account for possible downward selling pressure upon listing, AFIN’s board also approved a phased liquidity plan, which includes the following important components through filing amendments to the Company’s charter:

• 2-to-1 reverse stock split: pursuant to this reverse split, every two shares of AFIN (par value $0.01) are to be converted into one share of common stock (par value $0.02);
• Share reclassification: the phased liquidity plan also calls for reclassification of shares of common stock into Class A common stock, Class B-1 common stock, and Class B-2 common stock (the Class B-1 shares will convert into Class A shares 90 days after the listing, and the Class B-2 common stock will convert into Class A shares 180 days after the listing).

In addition to these amendments, the AFIN board has also approved the use of $200 million to be used for purchase of AFIN stock following its listing, as deemed prudent by the board. Finally, the AFIN board has also recently announced that its annual distribution per share will be decreased from approximately $1.30 to $1.10 starting July 1, 2018. This amounts to a reduction in distribution of approximately 15%.

Because AFIN was registered with the SEC, the non-traded REIT was permitted to sell securities to the investing public at large, including numerous unsophisticated investors who bought shares through the initial public offering (“IPO”) upon the recommendation of a broker or money manager. AFIN commenced its initial public offering in April 2013, which closed approximately six months later, raising $1.6 billion in investor equity. Investors who participated in the IPO paid $25 per share.

Non-traded REITS such as AFIN are often marketed as stable, income-producing investments by financial advisors, and many investors may not have understood AFIN shares’ lack of liquidity or the potential for substantial losses on their investments.

Investors with questions about an investment in AFIN, or another non-traded REIT, who have suffered losses in connection with their investments, may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.