Investors in RW Holdings NNN REIT, Inc. May be Able to Recover Their Losses Through FINRA Arbitration
Investors in RW Holdings NNN REIT, Inc. (the Company)—formerly known as Rich Uncles NNN REIT Inc.—may have claims to recover their investment losses through securities arbitration, if the recommendation to invest by a financial advisor lacked a reasonable basis, or if the investor was otherwise misled into investing. Incorporated as a Maryland REIT in May 2015, RW Holdings NNN REIT holds a real estate portfolio of some 20 retail properties, 16 office properties, and 9 industrial properties, across 14 states (as of March 31, 2020). In addition, RW Holdings NNN REIT also holds a 72.7% undivided tenant-in-common interest in an office building in Santa Clara, California. The Company is headquartered in Newport Beach, California.
As a publicly registered non-traded REIT, RW Holdings NNN REIT was permitted to be sold nationwide to retail investors. In some instances, investors may not have been adequately informed of the many risks and complexities associated with investing in non-traded REITs. To begin, an investment in RW Holdings NNN REIT is very illiquid and cannot be easily resold. Typically, investors in non-traded REITs must wait for a long period of time, in some cases for more than 10 years, to sell their shares following a liquidity event (such as shares being listed on a national exchange). In addition, non-traded REITs usually carry fees and expenses considerably higher than fees associated with investing in stocks or ETFs on a liquid national securities exchange.
In February 2020, the Company declared a net asset value (NAV) per share (for its Class C and S common stock) of $10.27 per share, effective December 31, 2019. This valuation followed the Company’s merger with an affiliated REIT, Rich Uncles Real Estate Investment Trust I. However, in light of the recent Covid-19 pandemic, RW Holdings NNN REIT elected to suspend its follow-on offering and Class S offering in May 2020. Subsequently, the Company disclosed a revised NAV of $7 per share (unaudited), and beginning June 1, 2020, reopened its offering at a revised $7 per share offering price.
Exclusive of any distributions received to date, investors who acquired their shares in RW Holdings NNN REIT prior to the pandemic are likely carrying unrealized losses of around 30%. In addition, based upon information disclosed by the Company through recent filings with the SEC, the Company anticipates facing continued financial distress due to the ongoing Covid-19 pandemic, which has “caused significant disruptions in the economy and uncertainties in the investment markets.” On May 22, 2020, the Board of the Company announced that it was cutting the distribution rate in half, from $0.70 to $0.35 per share. Further, the Company announced that one of its tenants, 24 Hour Fitness in Las Vegas, “has not paid rent since March 2020 and has provided formal notice that it has rejected the lease through its Chapter 11 bankruptcy proceeding.”
Investors in RW Holdings NNN REIT, Inc. (f/k/a Rich Uncles NNN REIT Inc.) may be able to recover their investment losses through securities arbitration before the Financial Industry Regulatory Authority (FINRA), or in some cases, litigation. The attorneys at Giarrusso Law Group LLC have considerable experience with complex non-traded investments, including REITs and business development companies (BDCs), and work closely with investors nationwide to resolve all manner of investor disputes. 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 and no-obligation consultation.