Recent Comrit Tender Offer Suggests Benefit Street Partners Realty Trust Investors May Have Losses
Investors in Benefit Street Partners Realty Trust, Inc. (Benefit Street) who invested on the advice of a broker or wealth manager may be able to recover their investment losses through FINRA arbitration, in the event that the investment was unsuitable or the recommendation to invest was misleading. Headquartered in New York, NY, Benefit Street was formed in 2012 as a Maryland corporation and operates as a real estate investment trust (REIT).
Benefit Street operates as a “real estate finance company that primarily originates, acquires and manages a diversified portfolio of commercial real estate debt investments secured by properties located within and outside the United States.” As of September 30, 2020, Benefit Street’s portfolio included some 9 commercial mortgage-backed securities (CMBS) positions with “an amortized cost basis of $179.4 million and an unrealized loss of $9.6 million, of which 4 positions had an unrealized loss for a period greater than twelve months.” While Benefit Street management has not yet indicated an intention to sell any of its real estate securities, including its CMBS positions, it has acknowledged a “deterioration in fair value of real estate securities” which “can be attributed mainly to the market down-turn and volatility as a result of high unemployment and credit uncertainties related to the outbreak of COVID-19.”
As a publicly registered non-traded REIT, Benefit Street was sold through a public offering at $25 per share. In some instances, retail investors may have been solicited to invest by their financial advisor without being fully informed of Benefit Street’s risky and complex nature. As a non-traded REIT, Benefit Street is a very 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 very limited. This is the case with Benefit Street. As it currently stands, Benefit Street only redeems shares through its Share Repurchase Program on a semi-annual basis, and even then, repurchases for any fiscal period are limited to a maximum of 2.5% of the weighted average number of shares outstanding during the previous fiscal year, with a maximum for any fiscal year of 5% of the weighted average number of shares outstanding during the previous fiscal year.
Furthermore, Tel Aviv-based investment management firm Comrit Investments 1, LP (Comrit) recently made an unsolicited tender offer to Benefit Street shareholders. Through this tender offer, Comrit offered to acquire up to 2.5 million shares of Benefit Street common stock for $10.02 per share. Therefore, Benefit Street investors who required immediate liquidity and participated in the Comrit tender offer may have suffered considerable losses approaching 60% (excluding any distributions received to date).
The attorneys at Giarrusso Law Group LLC have considerable experience in handling claims on behalf of investors in non-traded REITs such as Benefit Street, 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 complimentary and confidential consultation.