Recent Tender Offer for NYC REIT Class B Shares Suggests Investors May Have Suffered Losses

Investors in New York City REIT (NYC REIT, or the Company) (NYSE: NYC), who invested on the advice of a financial advisor may be able to recover their losses through FINRA arbitration, if the recommendation to invest lacked a reasonable basis, or if the investment was sold through a misleading sales presentation. Recently, third-party investment management firm Mackenzie Capital Management, LP made an unsolicited tender offer to purchase NYC REIT Class B shares at $6.50 per share.

Because Class B shares are not freely tradeable until their final conversion to Class A shares, next scheduled to occur in stages on April 15 and August 15, 2021, NYC REIT investors requiring immediate liquidity who participated in the tender offer sustained considerable losses on their investment (exclusive of any distributions received to date). As a publicly registered non-traded REIT, NYC REIT was sold through a public offering from 2013 through 2017 at an offering price of $25 per share.

Unfortunately, in some instances, investors who purchased NYC REIT shares on the recommendation of a stockbroker may have been uninformed of the complex nature of the investment and its many risks, including its high up-front commissions and fees. Such high commissions and fees for non-traded REITs add up quickly and act as an immediate drag on investment performance. In addition to their high fees, non-traded REITs, as their name implies, are illiquid financial products that cannot be readily sold on a national securities exchange, as an investor might with shares of publicly traded stock or an ETF. In many instances, investors in non-traded REITs must wait years for a liquidity event (such as going public) to transpire in order to exit their illiquid investment position.

Such is the case with NYC REIT, which recently went public and listed its Class A shares on the NYSE, beginning trading on August 18, 2020 at $30 per share. As of this writing, NYC REIT shares Class are currently changing hands for around $8.25 per share on the NYSE. Furthermore, on a pre-split basis—when accounting for a 2.43 to 1 reverse split on NYC shares effected before its IPO—NYC REIT shares on the NYSE are currently only trading for about $3.40 per share, on a split-adjusted basis. Therefore, pre-IPO investors in NYC REIT have suffered sizeable unrealized losses on their initial investment. 

The attorneys at Giarrusso Law Group LLC have significant experience in prosecuting claims on behalf of investors in non-traded REITs such as NYC REIT, in addition to other complex and illiquid financial products. Investors may pursue a claim to recover losses through securities arbitration before FINRA, or in some instances, through litigation. Investors who wish to discuss a possible claim may contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost, confidential consultation.