Investors in Sila Realty Trust Inc. (“Sila”), a publicly registered, non-traded real estate investment trust (formerly known as Carter Validus Mission Critical REIT II) may have FINRA arbitration claims, if their investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the stockbroker or advisor.
Sila recently sent a letter to shareholders recommending they reject an unsolicited tender offer by CMG Partners and its affiliates, CMG Income Fund II LLC, CMG Liquidity Fund LLC and Blue River Capital LLC. Under the tender offer, CMG is offering to buy up to300,000 shares of Sila stock for $3.57 each. This price is approximately 59 percent less than the REIT’s most recent net asset value per share of $8.69, announced in December 2020. CMG’s offer expires on July 15, 2021, unless extended. As well as being much lower than Sila’s estimated NAV per share, CMG’s offer price is also lower than certain reported secondary market transactions, which have reportedly taken place at prices over $6.00 a share during 2021.
Sila merged with another REIT known as with Carter Validus Mission Critical REIT Inc. in late 2019. Sila recently announced plans to sell its 29-property data center portfolio to subsidiaries of Mapletree Industrial Trust, a REIT listed on the Singapore Exchange, for more than $1.3 billion. The transaction is expected to be completed in one or more closings during the third quarter of 2021. As of March 31, 2021, Sila reportedly owned 153 real estate properties, consisting of 29 data centers and 124 healthcare properties located in 70 markets across the United States with a total purchase price of approximately $3.2 billion, including capital expenditures on development properties placed into service.
Sila was incorporated on January 11, 2013 as a Maryland corporation that elected to be taxed as a real estate investment trust (REIT). As a publicly registered non-traded REIT, Sila was permitted to sell securities to the investing public at large, including numerous unsophisticated retail investors who bought shares upon the recommendation of a broker or money manager. Sila began offering securities in May 2014, and after raising $1.2 billion in investor equity in its initial primary offering, launched a follow-on offering that terminated in November 2018 after raising an additional $86.9 million.
Non-traded REITs pose many risks that are often not readily apparent to retail investors, or adequately explained by the financial advisors and stockbrokers who recommend these complex investments. One significant risk associated with non-traded REITs has to do with their high up-front commissions, typically between 7-10%. In addition to high commissions, non-traded REITs like Sila generally charge investors for certain due diligence and administrative fees, ranging anywhere from 1-3%.
Furthermore, non-traded REITs are generally illiquid investments. Unlike traditional stocks and mutual funds, non-traded REITs do not trade on a national securities exchange. Many uninitiated investors in non-traded REITs have come to learn too late that their ability to exit their investment position is limited. Typically, investors in non-traded REITs can only exit their investment through redemption directly with the sponsor on a limited basis, and often at a disadvantageous price, or through sales in a limited secondary market.
Investors who wish to discuss a possible claim may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York, Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).