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SSEK Law Firm Investigates Brokerage Firms That Sold New York City REIT to Customers

Investors That Bought NYC Stock When it Was a Non-Traded REIT Hit Especially Hard After NYSE Listing

Our real estate investment fraud attorneys (REIT) at Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) are investigating the broker-dealers and investment advisors that sold New York City REIT (NYC)  to customers. 

Now available on the New York Stock Exchange (NYSE) and open to any investor with a brokerage account, this real estate investment trust used to be a non-traded REIT and it is the investors that purchased this non-traded real estate trust that have sustained the most significant losses after it went public in August 2020. 

It is important to note that now that New York City REIT has gone public this doesn’t mean that retail investors should jump on board either, especially with COVID-19 potentially impacting the need for office space. 

Contact SSEK Law Firm and ask to speak with one of our experienced New York City REIT fraud lawyers today.

What is New York City REIT? 

Formerly known as American Capital Realty New York City Real Estate Investment Trust (ARC NYC REIT),  this then non-traded REIT appears to have been unsuitably marketed by brokerage firms to retail investors, conservative investors, retirees, and unsophisticated investors beginning in 2013 even though it was illiquid, speculative, and high risk. 

Because of ARC NYC REIT’s limited operating history, it would have been hard to predict future performance, and the properties are not as well diversified as touted, with only several mixed-office and retail condominium buildings in the New York City area. 

Yet, investors were under the impression that they could expect over 10% annual returns and many bought in at $25/share. By 2018, that price had gone down to under $12/share and in March of that year, the company announced that distributions were suspended.

In March 2019, ARC NYC REIT was renamed New York City REIT and it became listed on the NYSE in August 2020. 

Before the IPO, a reverse stock split of 2.43-1 was announced. While the purpose was to reduce stock shares and enhance the stock price, what ended up happening was at least a 50% loss from principal investments that happened before July 2020. Some investors even suffered losses as high as 80%.

Was Broker Misconduct Or Negligence Involved? 

Part of the issue is why were brokerage firms and their brokers selling New York City REIT and before that, ARC NYC REIT, to so many retail investors? High commissions may have been an incentive. And yet, as a non-traded REIT, it should have only been sold to accredited investors who fulfilled certain high-income thresholds and not to unsophisticated, inexperienced investors who could have never withstood significant risk or losses. 

This investment definitely should never have been marketed to retirees wanting to supplement their existing incomes. There are also brokers who may have rushed to sell this New York City REIT to customers before it went public seeing this as an opportunity to make money.  

Seasoned NYC REIT Fraud Lawyers 

Contact our experienced New York City REIT fraud attorneys at SSEK Law Firm today so that we can help you explore your legal options. You may have grounds for an NYC REIT claim in Financial Industry Regulatory Authority (FINRA) arbitration to recover your investment losses.

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