Investor Lawyers Blog
Investors in Hartman vREIT XXXI Inc., a publicly registered, non-traded real estate investment trust, 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.
In its recently filed quarterly report with the Securities and Exchange Commission, Hartman vREIT XXXI Inc. announced its management’s “substantial doubt about the company’s ability to continue as a going concern.” The REIT reportedly has two revolving credit loans totaling $55 million that mature in March 2023. The REIT also has a $2.41 million term loan that is also due to mature in March- calling into question where the REIT will turn for cash when these loans come due.
In the SEC filing, Hartman vREIT XXXI’s management indicates that it has concluded that there is substantial doubt about the company’s ability to continue as a going concern within one year of the issuance date of their third quarter consolidated financial statements due to the fact of the uncertainty regarding the loan maturities. However, the company also expressed a belief it could likely extend the maturities of the loans to contain these issues.
As of the end of the third quarter of 2022, Hartman vREIT XXXI had incurred a net loss of approximately $1.4 million during 2022, and also reportedly had bank overdrafts of $407,000.
Hartman vREIT XXI reportedly invests in “value-oriented” commercial properties, including office, retail, industrial, and warehouse properties located primarily in Texas. The REIT broke escrow on Dec. 1, 2016, and reportedly had raised nearly $92 million in investor equity since inception, as of Sept. 30, 2020.
Secondary market quotes in the illiquid and limited market for non-traded REITs reportedly have shown Hartman vREIT XXI shares listed for sale at prices as low $5.30 per share- suggesting that investors in the REIT may have lost a substantial portion of their principal.
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 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).