Investors in Strategic Realty Trust (SRT) May Have Recourse to Recover Their Losses Through FINRA Arbitration
Investors in Strategic Realty Trust, Inc. (f/k/a TNP Strategic Retail Trust, Inc.) who invested on the advice of a broker or wealth manager may be able to recover their investment losses through FINRA arbitration, if the investment was unsuitable or the recommendation to invest was misleading. Headquartered in San Mateo, California, Strategic Realty Trust (SRT) was formed in 2008 as a Maryland corporation and operates as a real estate investment trust (REIT).
SRT is focused on investing in a “portfolio of income-producing retail properties located throughout the United States, with a focus on grocery anchored multi-tenant retail centers.” As of March 31, 2020, SRT’s property portfolio was comprised of seven properties in two states, including some 43,000 rentable square feet, with 81% of its portfolio leased.
As a publicly registered non-traded REIT, SRT was sold through a public offering at $10 per share. In some instances, retail investors may have been solicited to invest by their financial advisor without being fully informed of SRT’s risky and complex nature. As a non-traded REIT, SRT is an illiquid investment product, meaning that shares cannot readily be sold on a national securities exchange. Further, non-traded REITs are generally very expensive investment products and typically include high up-front fees, including selling commissions to a third-party broker-dealer, as well as organizational expenses and offering costs. In total, such fees may amount to around 12% (or more) of the initial capital invested to acquire shares.
Uninitiated investors in non-traded REITs may come to learn too late that their ability to exit their investment position is limited. This is the case with SRT. As it currently stands, SRT only redeems shares on a quarterly basis, and even then, will only do so in the event of a death or disability of a shareholder. Further compounding the problem for investors seeking an exit, SRT’s net asset value has recently declined (as of April 2020) to only $5.86 per share, or a roughly 40% decline from its $10 offering price. SRT also cut its quarterly distribution from $0.06 per share to only $0.02, amounting to a two-thirds reduction in dividend income.
Recently, real estate investment management firm MacKenzie Realty Capital (MacKenzie) made an unsolicited tender offer to SRT shareholders (which offer expired on May 15, 2020). Through this tender, MacKenzie offered to acquire up to 2 million SRT shares at $1.00 per share. Therefore, SRT investors who required immediate liquidity and participated in the MacKenzie tender offer may have suffered considerable losses, even when factoring in any distributions received to date.
The attorneys at Giarrusso Law Group LLC have extensive experience in handling claims on behalf of investors in non-traded REITs such as SRT, as well as other complex and illiquid financial products. Investors may pursue a claim to recover monies through securities arbitration before FINRA, or in some instances, through litigation. Investors who wish to discuss a possible claim are invited to contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost, confidential consultation.