Non-Traded REITs: A U-Turn for NorthStar Healthcare Income Investors
Does your hope of getting a handsome return from NorthStar Healthcare REIT look a bit bleak today? Well, you’re not alone. Thousands of investors are facing the same setback. Under the radar, one of the key players in healthcare real estate seems to be on a downward spiral.
Here’s what’s happening; it involves an unsolicited tender offer, plunging net asset value, and FINRA regulations.
An Offer Too Low to Ignore: $1.01 Per Share?
Recently, a puny unsolicited tender offer of $1.01 per share came into play. Comrit Investments 1 LP extended this offer to purchase close to 9,350,000 shares of NorthStar Healthcare Income, Inc.’s common stock. The offer is set to run its course until March 6, 2024. If you boil it down, it means selling each share way below its original purchase value, adding insult to the injury of diminishing returns.
Dropping NAV Adds to The Worry
Adding to the somber mood, NorthStar Healthcare’s Net Asset Value (NAV) seems to be in for a bumpy ride. It fumbled consistently over the years. Here’s the surprising timeline:
– April 2016 – Down to $8.63
– December 2016 – A surprising rise to $9.10
– December 2017 – Another dip to $8.50
– December 2018 – Sank to $7.10
– December 2019 – A low of $6.25
– December 2020 – An alarming decline to $3.89
– December 2022 – Dropped further to $2.93
– December 2023 – Hit rock bottom at $2.64
In somewhat of cold comfort, as of November 9, 2023, SEC filings estimate the NAV to be $2.64 per share.
Epic Disappointment: Distributions and Purchase Programs Suspended
Rubbing salt into the wounds, distributions were suspended in February 2019. This move was intended to “preserve capital and liquidity.” Fast-forwarding to September 2021, no distributions were declared during the nine-month period ending that month.
Moreover, in a blow to investor confidence, NorthStar Healthcare REIT suspended all share repurchases under its Share Repurchase Program in April 2020.
Hope Against Hope: Can You Recover The Investment?
The high risks, lack of liquidity, and intricate nature of non-traded REITs often make them a tough pill to swallow for average investors. Non-traded REITs like NorthStar Healthcare Income REIT are a no-go if you’re seeking a quick resale. But what adds fuel to the fire is the fact that the Central Trade & Transfer, a secondary market for non-traded REITs, recently sold shares of NorthStar Healthcare at a minuscule $1.01 per share. This stands in stark contrast to the initial offering price of $10.00 per share. Investors should brace for a potential financial hit.
Navigating The Risky Waters of Non-traded REITs
High sales commissions, as steep as 15%, associated with REITs often motivate brokers to recommend them, despite the unsuitability for certain investors. This leads to a potential FINRA violation as brokers are required by law to recommend investments that are in line with their client’s risk tolerance, investment objectives, and net worth.
Due diligence is a must. If a firm is found to have failed to meet these obligations, they can be held accountable for any losses through a FINRA arbitration claim.
Investors who have suffered losses by putting their money in NorthStar Healthcare REIT should stay informed. Although recovery can be a long process, being aware of their rights and possible claims can make it more manageable.