Articles Tagged with NorthStar Healthcare REIT

Stoltmann Law Offices, P.C. has represented investors in arbitration claims against brokerage firms involving non-traded REITs hundreds of times. We understand these products better than the brokers who sell them, which is what makes us effective advocates for our clients. If you invested your hard-earned money in the NorthStar Healthcare REIT and would like to discuss your options to recover your investment losses, please contact Stoltmann Law Offices at 312-332-4200.

On December 23, 2020, it was reported that the NorthStar Healthcare REIT was reducing its share price from $6.25 to $3.89. The facts on the ground for this non-traded REIT do not portend well for investors. According to published reports, the REIT retained a valuation expert to determine how the REIT can get out of the debt it is buried in. Unfortunately, the value of the REITs portfolio is only $1.6 billion but cost $2.2 billion.

Non-Traded REITs are the darlings of brokers and financial advisors. They are perfect investments from their perspective. They offer huge selling commissions, are not “volatile” because they do not trade on the open market, and offer a high income rate. Brokers do not need to “manage”  a position in a non-traded REIT like they do a well-managed portfolio. Even though they get paid 7X more for selling a non-traded REIT than they do for managing an account, (1% fee versus 7% commission), brokers love non-Traded REITs because they get to sell it and forget it.  The investor is left holding the bag when the REIT stops paying distributions, freezes redemptions, and cuts the share price by 70%. Then once the investor looks a little closer, you come to realize that “dividend” you’ve been paid all of these years was actually, mostly, just a return of your money – the REIT takes your money, shells out at least 10% for commissions and fees, puts the rest of it into its real estate portfolio, then shells out distributions that are mostly your own money given back to you.

The investment fraud attorneys at Stoltmann Law Offices are evaluating recent reports that the NorthStar Healthcare Income, Inc. Real Estate Investment Trust (REIT) has announced it will completely stop making distributions to investors in order to retain cash. This most recent announcement follows up on the decision in April 2018 by the NorthStar Healthcare Income to suspend investor distributions. It should come as no surprise, that as the income component of this income investment was suspended, the purported value of the shares of this non-traded REIT has also plummeted.

According to HealthCare Income REIT, its NAV, or net-asset-value, is down to $7.10 per share, an almost 30% decline from its listing price of $10 per share. Importantly, shares of HealthCare Income REIT are not publicly traded, so investors cannot simply put in an order to sell their shares and have an exchange, like the NYSE, fill an order for the sale at a bid price. Because these non-traded REITs are illiquid, if investors want to sell their shares, this can only be facilitated through secondary market auctions.  According to  recent secondary market sales information,  shares of NorthStar Healthcare Income REIT were sold for only $4.76 per share on January 25, 2019 – a more than 50% decease from the offering price.  There have been no reported sales since, and the official announcement ending distributions is sure to drive the price of this REIT down even more.

Suspending distributions, ending distributions, freezing redemptions, and share prices that rarely reach the offering price are all too common storylines with non traded REITs. Non-Traded REITs have played a prominent role in our representation of investors since 2005. Financial Advisors commonly use non-traded REITs, like the NorthStar Healthcare REIT, as a piece of the fixed-income portion of an investor’s overall portfolio. They also use these non-traded REITs to fill the part of the diversification plot as exposure to the real estate sector. Neither of these reasons is sufficient to expose investors to a traditionally underperforming asset class. The fixed-income allure of these non-traded REITS really took hold after the dust settled from the financial crisis. Due to persistently low interest rates, investors just could not get any sort of yield from traditional fixed income securities. Financial advisors began to really push non-traded REITs offering distribution rates of more than 7%, all the while allegedly protecting the principal  investment with a portfolio of real estate. If this sales pitch sounds familiar and you have money stuck in the NorthStar Healthcare REIT, please call our Chicago-based securities attorneys at 312-332-4200 for a no-obligation free consultation.

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