Investors in Phillips Edison May Have FINRA Arbitration Claims
Investors in Phillips Edison & Company, Inc. (PECO) may have arbitration claims to be pursued before the Financial Industry Regulatory Authority (FINRA), in the event that the investment was recommended by a financial advisor without a reasonable basis, or the investor was otherwise misled into investing in PECO without being adequately informed of the investment’s many risk components. Formed as a Maryland corporation in 2009, PECO is structured as a real estate investment trust (REIT) focused on investing in “well-occupied, grocery-anchored, neighborhood and community shopping centers . . . in strong demographic markets throughout the United States.”
As a publicly registered non-traded REIT, PECO was initially offered to investors at a price of $10 per share. In November 2018, PECO finalized a merger with an affiliated REIT, Phillips Edison Grocery Center REIT II. Following this merger—which was effectuated by a 100 percent stock-for-stock transaction—the combined PECO entity maintained an ownership interest in approximately 330 grocery-anchored shopping centers across 32 states.
Despite PECO’s sizeable investment portfolio in grocery-anchored commercial real estate, investors may have suffered losses in this complex and risky investment. To begin, as a non-traded REIT, investors cannot easily exit their investment position in PECO, as they might with a publicly traded stock or ETF by simply selling their shares on a liquid national securities exchange. Rather, investors in non-traded REITs such as PECO typically must hold their investment for a lengthy period of time, in some instances for as long as 7 to 10 years, until such time as a liquidity event transpires.
And even though many non-traded REITs like PECO are offered to investors with a redemption program, the sponsor of the REIT typically has discretion over whether to cancel or otherwise restrict such a program. This is the case with PECO. Following its March 2020 distribution, PECO formally announced that it would suspend its monthly distributions going forward, and further, announced its intention to suspend any share redemptions.
Currently, investors in PECO have limited recourse if they wish to exit their investment. Although some illiquid non-traded REITs and similar complex financial products can be sold on a thinly traded secondary market, the pricing is usually very disadvantageous. Publicly available information suggests secondary market pricing for PECO has been, at times, as low as $5 per share. Exclusive of any distributions received to date, investors may have sustained unrealized losses approaching 50% on their initial PECO investment.
The attorneys at Giarrusso Law Group LLC have extensive experience in handling claims on behalf of investors in non-traded REITs, as well as similar complex and illiquid investment 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 complimentary and confidential consultation.