NorthStar Healthcare Income Real Estate Investment Trust (REIT) Investigations
If your financial advisor recommended NorthStar Healthcare Income Real Estate Investment Trust (REIT), you may have a claim to recover your losses through the Financial Industry Regulatory Authority (FINRA) arbitration. Colling Gilbert Wright is investigating financial advisors and brokerage firms, located nationwide, who recommend their clients invest in NorthStar Healthcare Income Real Estate Investment Trust (REIT). This public, non-traded REIT was formed to originate, acquire and manage equity and debt investments in healthcare-related real estate and is sponsored by Colony Capital.
According to the sponsor website, NorthStar Healthcare Income REIT was launched in February 2013 and raised more than $2 billion in assets while overseeing a $3.5 billion portfolio, which included nearly 650 properties as of December 31, 2018.
In late December 2020, NorthStar Healthcare REIT, lowered its estimated net asset value to $3.89 per share, as of June 30, 2020. The REIT’s previous NAV was $6.25 per share, as of June 30, 2019. In February 2019, NorthStar Healthcare Income REIT ceased distributions to investors in order to preserve capital and protect the company’s financial position. According to the DI Wire, “In December 2017, the company reduced its distribution rate from 6.67 percent to 3.31 percent on its $10.20 final offering price. Shares originally sold for $10.00.” The company also said that there can be no assurance that distributions will be declared again in any future periods or at any particular rate. “In December 2018, the REIT lowered the net asset value of its common stock from $8.50 per share to $7.10 per share. At the time, the company cited numerous factors which contributed to the decline in net asset value, including occupancy challenges in select markets, increased labor costs, restructuring leases, replacing tenants, and capital expenditures while continuing to make consistent distributions to its shareholders.” In October 2018, the company informed shareholders that it will only repurchase shares in connection with the death or qualifying disability of a stockholder (source: DI Wire). Distributions are currently suspended and holders of the REIT risk a substantial decline in the value of their principal.
As is often typical with alternative investment (AI) sales, many brokers/firms across the country did not disclose the significant risks involved with investments in NorthStar Healthcare Income REIT.
A REIT is a company, modeled after mutual funds, that owns or finances income-producing real estate and provides investors of all types regular income streams, diversification and long-term capital appreciation. Unlike more conventional real estate investments, REITs are often illiquid and highly speculative. Non-traded REITs hold additional risks for investors because they often feature limited redemption programs, high fees and commissions, and internal conflicts of interest. Unlike stocks on the New York Stock Exchange, REITs are not publicly traded and cannot be sold through an active exchange thereby leaving only secondary market auctions as an avenue of last resort.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, brokerage firms across the country may be liable for investment or other losses suffered by its customers.
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