Investor Lawyers Blog
Investors in Black Creek Diversified Property Fund, Inc. (“Black Creek” or the “Company”) may be able to recover losses on their investment through initiating an arbitration proceeding with FINRA Dispute Resolution, if the recommendation to purchase Black Creek was unsuitable, or if the broker or financial advisor who recommended the investment made a misleading sales presentation. Black Creek changed its name as of September 1, 2017- it was formerly known as Dividend Capital Diversified Property Fund. As of June 2017, Black Creek owned 51 properties worth an estimated $2.3 billion in 19 geographic markets in the United States.
Black Creek was formed in 2005 and is a NAV-based perpetual life REIT primarily focused on investing in and operating a diverse portfolio of real property. As a NAV-based perpetual life REIT, Black Creek states that it intends to conduct ongoing public primary offerings of its common stock on a perpetual basis. The Company states that it also intends to conduct an ongoing distribution reinvestment plan offering for Black Creek stockholders to reinvest distributions in the REIT’s shares.
Because Black Creek is registered with the SEC, the REIT was permitted to sell securities to the investing public at large, initially offering shares at $10.00 a share. However, Central Trade & Transfer, a secondary market web site, lists a trading range for Black Greek shares of between $6.95 and $7.05 a share, even though Black Creek lists its estimated net asset value (NAV) per share as $7.49 a share. Based on either figure, it appears that investors at the initial $10.00 a share offering price have incurred significant principal losses.
Black Creek shares are not publicly traded on a national securities exchange. Like some other REITs, Black Creek was sold with relatively high commissions and expenses including a 6% sales commission, approximately 2.5% dealer manager fee and up to a 1% distribution fee, as well as up to 1.5% potentially allocated to Black Creek’s advisor for incurring or paying offering expenses.
Brokers, and by extension their brokerage firms, are required to perform adequate due diligence on any investment that they recommend. Further, brokers are required to conduct a suitability analysis in order to determine if the recommended investment is in keeping with the investor’s stated objectives and risk profile, in addition to informing their client of the risks associated with investing in a particular security. Unfortunately, retail investors are often uninformed by their broker or money manager of the illiquid nature of REITs such as Black Creek, meaning that investors who wish to sell their shares can only do so through a direct redemption with the issuer or through a fragmented and illiquid secondary market. In the case of Black Creek, the REIT has redeemed shares at $7.45 a share during 2018 and redeemed all of the shares that were requested for redemption or repurchase.
Persons who invested in Black Creek (or another REIT or non-traded investment) who have suffered losses in connection with the investment (or are currently unable to exit your illiquid investment position without incurring losses), may be able to recover damages in FINRA arbitration. Investors may contact 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 and 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).