Articles Tagged with REIT

Stoltmann Law Offices, P.C., a Chicago-based investors rights and securities law firm offering nationwide representation on a contingency-fee basis, has represented hundreds of investors over the years who have suffered losses in non-Traded Real Estate Investment Trusts (REITs).  These investments are sold, not bought, meaning financial advisors push these products on investors because of the high commission rates they pay out. These investments are illiquid, meaning an investor cannot just sell out and get their money out, and they are on the speculative side of the risk scale.  Although they are sold by financial advisors as providing stable value and high income in a low interest rate environment, REITs are anything but stable and are certainly high risk.

Recently, the SmartStop Strategic Student & Senior Housing Trust sent a letter to shareholders, on behalf of the board of trustees, warning of the REITs financial problems.  The letter, as reported by TheDIWire, paints a dire picture about the REIT’s financials, including blaming Covid twice for its underperforming properties. The REIT only owns two student housing properties and four senior housing properties. The REIT came to market in 2017 through a private placement and then opened to the public market in May 2018, raising about $110 million from investors.  According to the letter sent to investors, the Strategic Student & Senior Housing Trust is mired in debt and does not have sufficient cash to make necessary payments on certain bridge loans, absent a restructuring of that debt. These are certainly dire times for this REIT and the investors could be left holding the empty bag if the REIT liquidates.

Non-Traded REITs are by nature illiquid and high risk. Although pitched by financial advisors as being “non-correlated” to the stock market, the only reason this is the case is because the non-traded characteristic means the price doesn’t reset every day, like publicly-traded funds, for example. These non-traded REITs are mired in conflicts of interest, are very complicated structurally, and are designed to do one thing: save the owner of the real estate on taxes.  That’s the entire purpose of the REIT structure – its a tax savings vehicle for SmartStop.

Stoltmann Law Offices is pursuing investment losses for investors in IGF Investment Grade Funds I, LP (“IGF Fund”). IGF Fund is a real estate private placement that invests in single-tenant, net leased commercial properties, with 75% of the portfolio being “investment grade rated tenants with the remainder being of quality private credit tenants or those trending to investment grade.” IGF Fund advertises that it pays 6% annual returns to investors, paid monthly, with two-thirds of the income being tax-deferred. On its website, IGF Fund solicits property owners and brokers for “single tenant triple net or double net leased assets…retail, office, restaurants, and C-stores, and leases backed by investment grade tenant credit of AAA or BBB-“. While IGF solicits properties from $1 million to $16 million, it raised less than $12 million as of August 2018. IGF Partners Realty LLC is the general partner of the IGF Fund and is headquartered in Santa Barbara, California. The IGF Fund is a Delaware limited partnership and a Regulation D private placement.

Generally, Regulation D private placements should only be sold to accredited investors, with some exceptions. Some of the criteria considered is the investor’s annual income, net worth, and sophistication and investment experience. In order to qualify as an “accredited investor”, an investor must have a $200,000 annual income, or $300,000 joint income for the past two years, or a net worth of $1 million (excluding their home). When considering the suitability of a real estate investment for a client, a broker must take into consideration the client’s current asset allocation. For most client’s, their home is already one of the largest pieces of their net worth, so investing in more real estate (and particularly illiquid real estate investments, like IGF Fund) simply does not make sense.

IGF Fund is desperate to raise cash. The initial offering of $60 million was made on March 29, 2016. As of August 21, 2018, the fund raised only $11,720,000. This means that over 80% was left to be sold two years after the initial offering. Because of this, IGF Fund notified investors in early 2019 that it was extending its offering period from December 31, 2018 to April 30, 2019. IGF Fund and brokers selling this investment have been wining and dining current and potential investors to convince them to invest more cash. The lack of capital raised limits IGF Fund’s ability to purchase properties, thus minimizing any potential return for investors. Moreover, extending the offering period also extends the time period before the Fund can be liquidated. The IGF Fund is still paying distributions to investors, however without sufficient funding to purchase assets it will run dry, leaving investors with nothing.

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.

AdobeStock_200379710-300x200Stoltmann Law Offices continues to investigate Healthcare Trust REIT, a non-traded real estate investment trust (REIT), that seeks to acquire a diversified portfolio of real estate properties focusing primarily on healthcare-related assets including medical office buildings, seniors housing, and other healthcare-related facilities. This is according to the company’s website. Recent news suggests that Healthcare Trust may be in further decline, and that investors may have lost money in the REIT. REITs are not suitable for all investors. They tend to be highly illiquid and risky investments, and a broker must take into account a customer’s age, net worth, investment objectives and investment risk tolerance, among other factors before recommending or selling any investment. If he does not, his brokerage firm may be liable for losses on a contingency fee basis, because the firm has a duty to reasonably supervise its representatives in order to make sure they do not violate securities laws or internal firm rules. You may have options if your broker recommended or sold you Healthcare Trust REIT investments. We take cases on a contingency fee basis only.

AdobeStock_41845221-300x212Stoltmann Law Offices is interested in talking to those individuals who may have investment losses in FS Energy & Power Fund, which is a business development company (BDC). According to the company’s website, it is a non-traded BDC that invests primarily in the debt, and, to a lesser extent, equity securities of private U.S. energy and power companies. This is a non-traded product so there is no market pricing for the value of its securities. BDCs, much like direct participation products (DPPs), real estate investment trusts (REITs), private placements and others, are alternative investments that may not be suitable for all investors because of their highly illiquid and risky nature. A broker must only recommend those securities that are suitable for his clients by taking into account their age, net worth, investment risk tolerance and other factors. If he does not, his brokerage firm may be liable for losses. Investments like FS Energy & Power Fund are in the oil, gas and energy sector, which, by nature, are highly risky and illiquid funds only for sophisticated investors who can withstand much risk. They are typically not suitable for the unsophisticated investor who cannot withstand risky investments.

AdobeStock_1800313-1-300x204The attorneys at Stoltmann Law Offices continue to investigate ARC New York City real estate investment trust (REIT). The ARC REIT seeks to provide investors with a combination of current income and capital appreciation through strategic investments in high-quality commercial real estate located within the five boroughs of New York City, mainly Manhattan. Its three primary objectives are to preserve capital, pay monthly stable cash distributions, and increase the value of assets in order to generate capital appreciation. According to secondary market sources for non-traded REITs, shares of ARC are currently at $11.02 per share, which is much lower than its sale price of $25 per share, when the stock issued shares to investors. Non-traded REITs such as ARC tend to be highly risky and illiquid investments that are not suitable for all clients. Your broker must take into account your age, net worth, investment objectives and investment sophistication before recommending or selling securities, and, if he does not, his brokerage firm may be liable for investment losses. If your broker sold you ARC stock, you may be able to recover your losses in the arbitration forum on a contingency fee basis.

AdobeStock_35532974-1-300x200Did your broker recommend you invest money in Validus Mission Critical REIT II? Validus is a non-traded, publicly registered REIT that intends to employ a long-term, net lease strategy in order to help mitigate risk, provide greater certainty of rental income and maximize value for fund shareholders, according to its website. Earlier this month, the REIT reclassified 75 million total shares of authorized but unissued Class A, Class I and Class T common stock. These are Regulation D private placements, and like most REITs, are not suitable for all investors. They are typically sold as unregistered securities. This means they lack the same regulatory oversight as more traditional investment products like stocks or bonds. Brokers at brokerage firms must take into account client age, net worth, investment objectives and sophistication before recommending or selling a product, most specifically a REIT. If you lost money with Validus REIT, please call our law offices based in Chicago, Illinois to speak with an attorney about how you may be able to sue your brokerage firm on a contingency fee basis for money losses. The call is free.

AdobeStock_78306447-1-300x199Stoltmann Law Offices is investigating Charles Wiggle Jr., a current registered broker with Peak Brokerage Services. Mr. Wiggle was accused of recommending unsuitable investments in speculative securities such as Behringer Harvard Strategic Opportunity Funds and US Energy Platinum Energy Partners. Real Estate Investment Trusts (REITs) such as Behringer Harvard and oil and gas and energy securities such as US Energy can come with high costs for investors and have historically underperformed. These investments are only suitable for a handful of investors and may not be suitable for most. Mr. Wiggle and his firm, Peak Brokerage Services, have an ironclad obligation to only recommend and sell those securities that are suitable for clients. If they do not, clients can sustain large losses and the brokerage firm may be liable for them. Please call our Chicago-based securities law firm today in order to have a consultation with an attorney. There is no cost and no obligation. We bring claims against firms on a contingency fee basis only.


Have you suffered losses with Hines REIT? If so, the attorneys at Stoltmann Law Offices may be able to help you recover those losses. We may be able to file a Financial Industry Regulatory Authority (FINRA) Dispute Resolution arbitration claim against the brokerage firm that sold you that investment on a contingency fee basis. Hines Real Estate Investment Trust (REIT) is a non-traded REIT, which invests in commercial real estate with a focus on multifamily properties. In November 2016, it filed its article of dissolution and had plans to liquidate. There may be potential fraud claims associated with Hines, and REITs tend to be risky and illiquid investments. A broker with a brokerage firm has an ironclad obligation to only recommend or sell investments that are suitable for clients. If he does not, his firm may be responsible for losses. Please call 312-332-4200 for a free consultation with one of our attorneys about your losses with Hines REIT.

AdobeStock_99700100-2-300x200Did you invest with New York REIT, formerly American Capital New York Recovery REIT? If so, the attorneys at Stoltmann Law Offices may be able to help you recover those losses in the arbitration forum on a contingency fee basis. New York REIT is a publicly traded real estate investment trust focused on acquiring and operation commercial real estate in New York City, according to their website. Its former founder, Nicholas Schorsch, allegedly became involved in a scandal in 2014 over accounting inaccuracies. He resigned that same year. The company owns 19 commercial real estate properties including office and retail properties. Please call our Chicago-based law firm at 312-332-4200 today if you suffered losses with New York REIT. The consultation is free with no obligation.

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