Columbia Property Trust Inc. (formerly Wells REIT II) recently announced major changes as the REIT prepares for a potential listing on a national securities exchange.
A letter to shareholders announced that as of July 2013, the REIT’s share redemption program is terminated and distribution reinvestment plan is suspended. In preparation to take the REIT public, the letter cited “current market conditions” and “legal requirements” as the reason for the suspension of the programs.
The termination of the share redemption program may be particularly problematic for some investors. According to the letter, the termination applies to both ordinary and special redemption’s, meaning that even if the shareholders dies, becomes disabled, or needs to redeem their shares to qualify for federal assistance in a long-term care facility, the REIT will not buy back their shares.
According to a Frequently Asked Questions document available on the Columbia Property Trust website, the REIT has until October 2015 to list stock on a public securities exchange. In the event the REIT fails to go public, the REIT will seek shareholders’ approval to extend the listing deadline or begin liquidating investments and distributing the proceeds to investors.
In addition, Columbia Property Trust recent Form 8-K filed with the SEC announced the approval of a 4-for-1 reverse stock split. Shareholders will receive one share of stock valued at $29.32 for every share of stock they currently own. While the REIT’s intent is to increase the estimated net asset per share value so that it is more in-line with the value of publicly traded REITs, this indicates that prior to the split the estimated value of the REIT is $7.33 per share. Certainly, this may come as troubling news to many investors who initially purchased the REIT at $10.00 per share.
Furthermore, fractional shares will not be issued. Rather the REIT has elected to pay cash for any fractional shares. To put it another way, if you own 125 shares, after the 4-for-1 reverse stock split, you will be issued 31 shares of stock (125/4=31.25) and cash payment of $7.33 for your fractional share of 0.25.
Unfortunately for many investors, they should never have been sold the REIT in the first place. REITs are incredible complex and high risk investments that are inherently illiquid and inappropriate for most investors, especially retired investors. Brokers that sell REITs have a fiduciary duty to make sure the investment is suitable for every individual client and must take into account the clients age, risk tolerance, financial needs, and investment objections to name a few of the suitability requirements enforced by the Financial Industry Regulatory Authority (FINRA).
Brokers that overlooked suitability requirements or portrayed the REIT as “safe,” be liable for investment losses through FINRA dispute resolution claim. On behalf of investors, The White Law Group is investigating claims that some brokers violated securities law and FINRA regulations when selling Columbia Property Trust.
If you invested in Columbia Property Trust (Wells REIT II) and would like to discuss your litigation options, please call the securities attorneys of The White Law Group at (312)238-9650 for a free consultation
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida. For more information on the firm, visit http://www.whitesecuritieslaw.com.