Investor Lawyers Blog
Investors in Cole Credit Property Trust IV, Inc. (“Cole Credit IV”) appear to have incurred substantial principal losses, based on the pricing of a recent tender offer. Recently, third party real estate investment firm MacKenzie Realty Capital, LP (“MacKenzie”) initiated a tender offer to purchase shares of Cole Credit IV at a price of $6.01/share. Therefore, investors who invested in Cole Credit IV through the offering at $10/share will incur substantial losses on their initial investment of approximately 40% (exclusive of commissions paid and distributions received to date).
Cole Credit IV’s real estate portfolio is geographically diverse, and is focused on investments in “income-producing, necessity single-tenant retail properties and anchored shopping centers subject to long-term net lease,” as stated on the company’s website. As a publicly registered non-traded REIT, Cole Credit IV was permitted to sell securities to the investing public at large, including numerous unsophisticated retail investors who bought shares through the IPO upon the recommendation of a broker or money manager. Cole Credit terminated its offering on April 4, 2014.
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 Cole Credit IV generally charge investors for certain due diligence and administrative fees, ranging anywhere from 1-3%.