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NorthStar Real Estate Investment Trust (REIT) Investor Lawsuit

Many investors have suffered substantial losses after investing in NorthStar Real Estate Income Trust (REIT) at the unsuitable recommendation of broker-dealers. The securities negligence and fraud attorneys at Colling Gilbert Wright, PLLC are investigating and litigating claims for investors whose broker-dealers did not inform them of the risks of such an investment and/or failed to take into account their clients’ risk tolerance, age, liquidity needs, investment experience, or age. If you have sustained financial loss from your investment in NorthStar REIT, our firm may be able to file a Financial Industry Regulatory Authority (FINRA) claim on your behalf and potentially recover your losses.

History of NorthStar REIT

On January 18, 2018, a three-way merger occurred between the following three entities:

  • NorthStar Real Estate Income Trust, Inc., a public, non-traded REIT also known as NorthStar I
  • NorthStar Real Estate Income II, Inc., a public, non-traded REIT, also referred to as NorthStar II
  • Colony NorthStar Credit Real Estate, Inc., also called Colony NorthStar Credit Colony 

NorthStar Credit emerged as the new entity and began to be publicly traded (Ticker symbol: CLNC). Unfortunately, the shares lost about 1/3 of its value on the day the new company went public. Making matters worse, in or about October 2020, the trust announced the formation of a liquidating trust with plans to distribute to shareholders the proceeds received from the sale of the remaining trust assets and resulting in pennies on the dollar for investors.

Non-traded REITs such as NorthStar REIT are generally considered to be risky investments. FINRA cautions investors to carefully consider the fact that these products are generally illiquid and may remain so for many years if not forever. Often secondary markets are the only outlet and investors receive significantly reduced prices when they sell their non-publicly traded shares. Also, many of these products were sold based on above market distribution which often were subsequently reduced or eliminated when the funds ran into trouble.

Broker dealers and their FINRA registered representatives are ethically bound to tell their clients about the risks associated with all recommended investments. A broker has an obligation to consider an investor’s risk tolerance, age, investment experience, and net worth when determining whether a certain investment is suitable for the client. When a brokers fail to fulfill these obligations, the firm that employs them may be held accountable for losses suffered by an investor to whom an unsuitable investment recommendation was made.