NorthStar Healthcare Investors Should Explore Legal Options to Recover Losses
Eighteen months after NorthStar Healthcare REIT suspended distributions, investors are still grappling with the losses they’ve sustained. Now, the non-traded real estate investment trust’s (non-traded REITs) share price appears to have lost most, if not all, of its value.
If you are a Northstar Healthcare investors, our non-traded REIT fraud lawyers at Shepherd Smith Edwards and Kantas (SSEK Law Firm) would like to help you explore your legal options. You very well may have grounds for a broker negligence claim to recover your losses and damages.
Unfortunately, many brokers and their broker-dealers that sold NorthStar Healthcare Income REITs to customers not only failed to do the proper due diligence to make sure it was suitable for them but also recommended and sold this non-traded REIT to many customers, including retail investors, for whom they were never appropriate, to begin with.
Many of those who were sold NorthStar Healthcare investments were told that this was a safe REIT from which they could expect to make money.
NorthStar Healthcare Gave Back Returns Instead of Paying Profits to Investors
NorthStar Healthcare Income Inc. launched its non-traded REIT to originate, obtain, and manage equity and debt investments in healthcare real estate. At one point, it had raised $2B in gross proceeds. In June 2019, NorthStar Healthcare claimed to have over 630 properties in its portfolio that were collectively valued at around $2.4B.
Yet, there is growing evidence that this non-traded REIT was never profitable.
Even when distributions were being paid, since 2015, those funds reportedly were a return of investor capital and not profits. Basically, NorthStar Healthcare was just giving investors back the money they had invested so that they wouldn’t know that they weren’t making money. (Even before the distributions stopped, the company’s financial data in September 2019 showed that while it had raised over $1.7B in investor funds, accumulated losses were $1B.)
Non-traded REITs Are Illiquid and Risky
Non-traded real estate investment trusts are generally not a safe bet for a lot of retail investors. Unlike publicly-traded REITs, non-traded REITs are not publicly traded nor are they listed on an exchange.
They are illiquid investments, which makes them harder to sell. Investors usually have to wait until a non-traded REIT decides to list its shares on an exchange or liquidate its assets to become liquid. This is a process that could take years. Non-traded REITs can be very volatile.
While this type of investment will generally offer investors a chance to redeem their shares early, there are limits to this and a REIT can suspend redemptions whenever it wants. Redemption programs can also decide to mandate that shares be redeemed at a reduced rate, which is what NorthStar Healthcare did at one point.
Not only that but in October 2019, prior to suspending redemptions completely, its investors were told that the company would only buy back the shares if disability or death had occurred. Meanwhile, brokers and their firms have earned high fees for selling NorthStar Healthcare Income REITs to customers.
NorthStar Healthcare REIT Fraud Lawyers
Over the years, SSEK Law Firm has successfully represented investors in their non-traded REIT fraud claims and helped them to recover their losses and other damages. If you are a NorthStar Healthcare Income investor, your broker and his/or firm may have failed to disclose the risks involved, unsuitably recommended this investment to you, or overconcentrated your portfolio in this risky investment.
Contact our investment fraud attorneys today and request your free, no-obligation case consultation.