Investors in Healthcare Trust, Inc. May Have FINRA Arbitration Claims to Recover Their Losses
Investors in Healthcare Trust, Inc. (HTI, or the Company) who invested on the recommendation of a stockbroker may be able to recover their losses through FINRA arbitration, provided the recommendation to invest lacked a reasonable basis, or if the investor was otherwise misled into making the investment. Formed in October 2012 as a Maryland corporation operating as a real estate investment trust (REIT), HTI—formerly known as ARC Healthcare Trust II—is a publicly registered non-traded REIT.
As we discussed in a previous blog, HTI “invests in healthcare real estate, focusing on seniors housing properties and medical office buildings (MOB) located in the United States.” The Company’s real estate portfolio, as of June 30, 2020, includes ownership of 200 properties “located in 31 states and comprised of 9.7 million rentable square feet.” As a non-traded REIT, HTI was recommended by numerous brokers nationwide. HTI’s offering closed in November 2014 after raising approximately $2.2 billion in investor equity.
Through its offering, investors acquired HTI shares at $25 per share. Unfortunately, in some instances, investors who purchased shares on the recommendation of a stockbroker may have been uninformed of the complex nature of a non-traded REIT such as HTI, and its many risks, including its high up-front commissions and fees. As set forth in its prospectus as filed with the SEC, HTI charged investors selling commissions and a dealer manager fee of up to 10% of the gross offering proceeds, in addition to other organizational and offering expenses of 1.5%, as well as certain other acquisition and advisory fees and expenses. Such high commissions and fees add up quickly and act as an immediate drag on investment performance.
Moreover, as a non-traded REIT, HTI is a very illiquid investment product, meaning shares cannot be readily resold. Typically, investors in non-traded REITs and similar illiquid investment products must wait for an extended period of time (in some cases up to a decade) for a liquidity event to transpire, such as shares listing on a national exchange. Aside from such a liquidity event, investors in non-traded REITs like HTI are left with few options, including selling shares through an inefficient and thinly traded secondary market, often at a disadvantageous price.
Such is the case with HTI. Even though the Company’s board of directors announced on April 3, 2020, that the estimated net asset value (NAV) for HTI shares was $15.75 per share (effective as of December 31, 2019), recent secondary market pricing suggests a far lower valuation. In fact, recent secondary market pricing for HTI shares has ranged from approximately $1.50 to $1.70 per share. Accordingly, investors in HTI who require immediate liquidity and must sell through a secondary market platform will likely incur substantial losses, exclusive of any dividends or distributions received to date.
The attorneys at Giarrusso Law Group LLC have considerable experience in bringing claims on behalf of investors in non-traded REITs such as Healthcare Trust, Inc., as well as 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.