Investor Lawyers Blog
Investors in Strategic Realty Trust, Inc. (“SRT” or the “Company” — formerly known as TNP Strategic Retail Trust, Inc.), a REIT based in San Mateo, California, may face principal losses if they attempt to sell their shares in the illiquid and fragmented secondary market. SRT invests in and manages a portfolio of income-producing properties, including various shopping centers, primarily in Western U.S. locations. Structured as a Maryland corporation that qualifies as a REIT, SRT was formed in September 2008. By August 2009, the Company had initiated its public offering at $10 per share for up to $1 billion in investor equity.
Retail investors commonly are solicited by financial advisors or stockbrokers to invest in non-traded REITs like SRT, which typically are sold by independent broker-dealer firms. Unfortunately, customers who purchased shares through SRT’s IPO upon the recommendation of a broker may, in certain instances, have been solicited via misleading sales presentations that failed to adequately disclose the complex nature of the investment, its negative features, and its risks. Risks associated with non-traded REITs include high up-front commissions (as high as 7-10%), high due diligence and administrative expenses, risk of loss of principal, and illiquidity.
Investors in non-traded REITs including SRT may come to find out too late that their shares are illiquid, and their options to exit the investment are limited. Briefly, investors seeking liquidity may: (i) seek to redeem their shares directly with the sponsor (SRT suspended its redemption program altogether from January 15, 2013 – April 1, 2015), (ii) be presented with limited, market-driven opportunities to tender their shares to a third party investment firm (typically at a disadvantageous price), or (iii) sell their shares on a limited and fragmented secondary market specializing in creating a trading platform for illiquid securities.
Any investment program recommended by a broker which includes any significant concentration of illiquid investments, including non-traded REITs, business development companies (BDCs), or private placement offerings, may be unsuitable for the average, retail investor. Recently, shares of SRT were reportedly trading on the limited secondary market at prices of $4.61 – $4.67 per share. For investors who acquired their shares though the IPO at $10 per share, such disadvantageous pricing suggests investors seeking immediate liquidity on a secondary market may suffer losses in excess of 50% on their investment, excluding distributions.
The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in connection with complex non-conventional investments, including non-traded REITs and BDCs. Investors may contact us via the contact form on this website, by telephone at (866) 966-9598, or by e-mail 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).