Resource Real Estate Opportunity REIT and REIT II Shares Reportedly Trading Under NAV Price
With shares in Resource Real Estate Opportunity REIT and Resource Real Estate Opportunity REIT II reportedly trading privately at lower prices than their net asset value (NAV), some investors may be wondering why they were never fully apprised of all the risks.
The news of the lower than NAV trading prices comes several months after both non-traded real estate investment trusts announced they were partially suspending share redemptions amidst their plans to merge with Resource Apartment REIT III, Inc.
Non-traded REITs are illiquid, risky investments that are typically not suitable for most retail investors. At Shepherd Smith Edwards and Kantas (Investorlawyers.com), our broker fraud attorneys can help you determine whether you have grounds for a Financial Industry Regulatory Authority (FINRA) claim against the broker-dealer and its registered representative that sold you the Resource Real Estate Opportunity REIT and REIT II shares.
COVID-19 and Looming Merger Appear To be Upping Non-Traded REITs’ Risks
According to some reports, Resource Real Estate Opportunity REIT has been trading at around $6.50/share even though it has a listed NAV price of about $11.10/share. Resource Real Estate Opportunity REIT II’s NAV price has been at around $9.08/share and yet has reportedly been trading between $4.50 and $5.00/share.
Both non-traded REITs raised some $645M in investor capital, with their respective portfolios containing numerous multifamily properties. The merger with Resource Apartment REIT III would combine three portfolios of suburban apartment communities in areas with market and income growth.
There are risks to investors involving this merger, including the dilution of ownership shares. Meanwhile, failure to complete it, scheduled for this last quarter, could also prove problematic.
In addition to the merger and how COVID-19 may be impacting the assets in the Resource Real Estate Opportunity REITs, these investments came with their own inherent risks. This is why brokers should only recommend them to customers that can handle the kind of exposure that non-traded REITs bring.
Not only that, but it is a brokerage firm’s fiduciary duty to ensure that they are always acting in an investor’s best interests. Determining whether an investment is suitable for a customer includes looking at their age, risk tolerance level, investing experience, and financial objectives to see whether there is proper alignment.
Non-Traded REITs are Complex and Illiquid
Non-traded REITS are highly illiquid and don’t trade on a national securities exchange. This makes them hard to sell, which many inexperienced investors wouldn’t inherently be aware of unless their broker explained this to them.
With non-traded REITs, there are limited exit options and when sales do happen there could be losses.
Another factor typically involving most non-traded real estate investment trusts is that they tend to charge high commissions of around 7-10%, as well as other fees. These commissions are one reason that this type of investment is especially attractive to brokers and their firms. But that doesn’t mean that they should recommend non-traded REITs to investors for whom they are unsuitable.
Resource Real Estate REIT Fraud Attorneys
Please contact SSEK Law Firm and request your free case consultation. Our REIT ETF fraud lawyers have been fighting for investors in the United States for over 30 years. We have the knowledge, experience, and resources to pursue claims against even the biggest financial firms in the US on behalf of our investors. Call (800) 259-9010.