CPA:18 – Global Corporate Property Associates Investigation
The securities litigation attorneys at Colling Gilbert Wright & Carter are currently investigating potential claims related to Global Corporate Property Associates 18 REIT (CPA:18).
Our securities litigation attorneys are investigating potential securities claims involving the liability that brokerage firms may have for recommending CPA:18 – Global Corporate Property Associates, to their clients. CPA:18 is a non-traded REIT sponsored by WP Carey, Inc. The sponsor firm has raised close to $1.2 billion in gross proceeds from investors, according to multiple filings with the SEC. The REIT’s lease portfolio purportedly includes self-storage properties and student housing projects. However, in 2020, the REIT decreased distributions by approximately 60% for both the Class A and Class C shares. Also, according to a letter to shareholders on March 28, Mackenzie Capital Management has launched a tender offer to purchase shares of CPA:18 Global for 8.00 per share.
Recently, CPA:18 and W.P. Carey Inc. announced a potential merger transaction between CPA:18 and WPC; each Share of CPA:18 will receive 0.0978 shares of WPC stock and $3.00 in cash. While the proposed merger is estimated to close in the 3rd quarter 2022, there is no guarantee the transaction will materialize or, if it does, how the stock will perform.
According to a letter to shareholders, CPA: 18 Global suspended its share repurchase program on February 28, except for death, disability, or long-term care confinement of stockholder. In general, mergers are often part of a strategic effort to boost shareholder value by creating new business lines and/or gaining greater market share. However, the economic environment at the time of the merger, size of the companies and management of the merger process all play a part in future returns for shareholders. As such, shareholders may experience a significant loss of voting power. While the spike in trading volume tends to inflate share prices, if economic conditions are not favorable at the time of the merger, shareholders may instead experience significant losses.
Non-traded REITs are complex and inherently risky alternative investment products. They are non-traded creating a lack of liquidity which is often problematic for many investors. Those looking to sell often have difficulty finding a buyer, and can suffer significant losses on the sale if they are forced to sell in the secondary “bottom feeder” markets.
Under FINRA rules, registered broker dealers are required to inform clients of the risks associated with investment recommendations and to ensure that those recommendations are suitable for the investor in light of the investor’s age, risk tolerance, net worth, and investment experience. Firms that fail to do so, may be liable for any subsequent losses.