If you are an investor in NorthStar Healthcare Income, you very likely received a letter last month notifying you that monthly distributions from this investment have been suspended. According to NorthStar’s board, the publicly registered nontraded real estate investment trust’s (nontraded REIT) portfolio has been undergoing “operational and performance challenges” that as of the end of June 2017 has resulted in a “lower estimated value/share” of the NorthStar Healthcare’s common stock. The nontraded REIT has since determined that in order to protect both capital and its financial state, suspension of these distribution payments is necessary.
The NorthStar Healthcare Inc. nontraded REIT was set up to originate, acquire, and oversee healthcare industry-related investments, including debt, equity, and securities investments involving healthcare real estate. Sources note that between 2013 and 2018, it raised about $2B and set up a portfolio involving more than 650 properties.
However, NorthStar Healthcare Income began reducing distribution rates in December 2017. By October of last year, it had notified investors that it would only buy back shares from an investor if qualifying disability or death were factors. In December 2018, the nontraded REIT reduced its net asset value from $8.50/share to $7.10/share. Now, with the distribution suspension, some investors are standing to lose not just their monthly distributions, but also they could see a substantial decline in value on their principal that they originally invested.