Investor Lawyers Blog
Investors in Benefit Street Partners Realty Trust, Inc. (“Benefit Street” or the “Company”) may have arbitration claims to be pursued before the Financial Industry Regulatory Authority (“FINRA”), 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 financial advisor. Benefit Street was formerly known as Realty Finance Trust; however, in September 2016, Realty Finance appointed Benefit Street Partners (“BSP”) as its new advisor, replacing former sponsor AR Global Investments.
Benefit Street is a publicly registered, non-traded real estate investment trust (“REIT”) that originates, acquires and manages a diversified portfolio of commercial real estate debt secured by properties located in the United States. Benefit Street is managed by BSP, a credit-focused alternative asset manager with over $20 billion of assets under management. Benefit Street commenced its operations in November 2012, and raised $786 millions in investor equity prior to closing its offering in January 2016. As of September 2016, the Company’s portfolio consisted of 73 loans and 7 CMBS investments.
In the years following the 2008 financial crisis, many retail investors were steered into investing in non-traded REITs such as Benefit Street by their broker or money manager based on the investment’s income-producing potential, in addition to the investment’s purported negative correlation to market volatility. Unfortunately, however, many investors were not informed of the complexities and risks associated with non-traded REITs, including the investment’s high fees (as high as 15% of the initial capital investment in some instances) and illiquid nature.
Currently, investors who wish to sell their shares of Benefit Street shares have limited options available to exit their investment position. For example, investors who wish to redeem their shares with the Company may encounter a scenario where they are limited in both time and scope as to the amount of shares they may redeem for cash consideration. As referenced in Benefit Street’s Form 10-K, in relevant part, as filed with the SEC for fiscal year ended December 31, 2017: “Repurchases pursuant to the [share repurchase program] generally will be made semiannually… Repurchases for any fiscal semester will be limited to a maximum of 2.5% of the weighted average number of shares of common stock outstanding during the previous fiscal year… Due to these limitations, we cannot guarantee that [we] will be able to accommodate all repurchase requests.”
Investors who purchased Benefit Street shares through the offering acquired shares at $25 per share. As of December 31, 2017, the Company’s Board has assigned a net asset value (“NAV”) of $19.17 per share to Benefit Street shares. Thus, it would appear that investors who are actually able to redeem some or all of their shares with the Company will lock in a loss of approximately 23%, excluding commissions paid in connection with the initial purchase and any distributions received to date.
Benefit Street investors seeking liquidity may also opt to sell their shares through limited market-driven events including tender offers. For example, according to publicly available information, third-party real estate investment firm MacKenzie Capital Management, LP (“MacKenzie”) made an unsolicited tender offer on or about March 13, 2017, for Benefit Street shares at a purchase price equal to $12.05 per share.
Investors with questions concerning possible claims involving non-traded REITs or other securities matters 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.