Did your broker recommend you over-concentrate your investment portfolio in NorthStar Healthcare Income Real Estate Investment Trust (REIT), which is now called N1 Liquidating Trust?
Erez Law is currently investigating brokers across the country who recommend their clients invest in NorthStar Healthcare Income Real Estate Investment Trust (REIT), a public, non-traded REIT that was formed to originate, acquire and asset manage equity and debt investments in healthcare real estate, sponsored by Colony Capital.
In January 2018, NorthStar REIT and affiliate NorthStar REIT II merged with Colony NorthStar Inc. to become Colony Credit Real Estate (CLNC). According to public records, this merger cost shareholders one-third of their investment’s original value overnight. Additionally, seven cents net price per unit was the final distribution of the interest held in the trust. Public records indicate that a class action lawsuit has been filed by investors who purchased CLNC common stock against Colony Credit Real Estate.
In October 2018, the company informed shareholders that it will only repurchase shares in connection with the death or qualifying disability of a stockholder, according to the DI Wire. Additionally, now that distributions have been suspended, investors risk a substantial decline in value of their principal.
In January 2019, N1 Liquidating Trust was created to hold and liquidate a first mortgage loan previously held by NorthStar REIT.
In February 2019, NorthStar Healthcare Income REIT ceased distributions to investors in order to preserve capital and protect the company’s financial position. According to the DI Wire, “In December 2017, the company reduced its distribution rate from 6.67 percent to 3.31 percent on its $10.20 final offering price. Shares originally sold for $10.00.” The company also said that there can be no assurance that distributions will be declared again in any future periods or at any particular rate. “In December 2018, the REIT lowered the net asset value of its common stock from $8.50 per share to $7.10 per share. At the time, the company cited numerous factors which contributed to the decline in net asset value, including occupancy challenges in select markets, increased labor costs, restructuring leases, replacing tenants, and capital expenditures while continuing to make consistent distributions to its shareholders.
In late December 2020, NorthStar Healthcare REIT lowered its estimated net asset value to $3.89 per share, as of June 30, 2020. The REIT’s previous NAV was $6.25 per share, as of June 30, 2019, according to the DIWire.
In March 2021, a former client of Truist Investment Services, Inc. (SunTrust Investment Services, Inc.) filed a claim alleging $500,000 in damages related to unsuitable investments in NorthStar Healthcare REIT. The elderly customer is alleging breach of contract, failure to supervise, gross negligence, misrepresentations, negligence, abuse and exploitation of an elderly person, unjust enrichment, and other breaches of duty.
Many brokers at brokerage firms across the country did not disclose the significant risks involved with investments in NorthStar Healthcare Income REIT.
About NorthStar Healthcare Income REIT
According to the fund’s website, “NorthStar Healthcare is focused on making investments in the needs-driven senior housing sector, which we define as independent living facilities, assisted living, memory care and skilled nursing facilities. We believe this sector is an attractive asset class to invest in as these types of facilities generally provide the broadest level of services to residents in a more cost effective setting… NorthStar Healthcare, with its experience, relationships and vision, is ideally positioned to capitalize both as an equity investor and lender in this industry and provide investors an opportunity for both income and long-term growth.”
According to the website, NorthStar Healthcare Income REIT is intended for investors:
- Seeking income through regular cash distributions
- Wanting the potential for capital appreciation, reduced portfolio volatility and a low correlation to traditional asset classes
- Looking for commercial real estate exposure in today’s growing healthcare sector
NorthStar Healthcare Income REIT launched in February 2013. NorthStar Healthcare Income REIT raised more than $2 billion to date, and oversees a $3.5 billion portfolio, which includes more 642 properties as of December 31, 2018, according to their website.
A REIT is a company, modeled after mutual funds, that owns or finances income-producing real estate and provides investors of all types regular income streams, diversification and long-term capital appreciation. Unlike other real estate investments, REITs are often entirely illiquid. Non-traded REITs hold additional risks for investors because they often feature limited redemption programs, high fees and commissions, and internal conflicts of interest. Unlike stocks on the New York Stock Exchange, REITs are not publicly traded and cannot be sold through an exchange, only through secondary market auctions.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, brokerage firms across the country may be liable for investment or other losses suffered by its customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If you have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.