ARC Healthcare Trust III, Inc. and Healthcare Trust, Inc. Investigation
Are you concerned about your investment losses in ARC Healthcare Trust III? If so, The White Law Group may be able to help by filing a FINRA arbitration claim against the brokerage firm that sold you the investment.
ARC Healthcare Trust III is a publicly registered non-traded real estate investment trust sponsored by AR Global (the successor business to AR Capital). The company suspended the company’s distribution reinvestment plan at the beginning of May, according to a filing with the Securities and Exchange Commission. Distributions for May and June will be paid to stockholders in cash with no DRIP shares issued.
The White Law Group continues to investigate claims on behalf of investors that purchased investments such as ARC Healthcare Trust III and other non-traded REITs. Specifically, the firm is investigating the liability that brokerage firms may have for improperly selling these high-risk, illiquid investments.
More Bad News for Investors
On June 19, 2017, American Realty Capital Healthcare Trust III, Inc. (ARC HT III) announced that a special committee of the board of directors, consisting of independent directors, approved the sale of substantially all of ARC HT III’s assets to Healthcare Trust, Inc. (HTI) for approximately $120 million in an all cash transaction.
Both companies are sponsored and advised by affiliates of AR Global Investments, LLC. The sale of assets requires the approval of ARC Healthcare Trust III shareholders. Following the sale of assets, ARC HT III intends to liquidate any remaining assets and dissolve. The sale of assets is anticipated to close in the third or fourth quarter of 2017.
Healthcare Trust Inc. invests in multi-tenant medical office buildings and owns an 8.4 million-square-foot portfolio of 163 properties with a total purchase price of $2.3 billion. The company’s primary offering went effective in February 2013 and closed in November 2014 after raising $2.2 billion in investor equity.
Shares were originally sold for $25.00 each and have a net asset value of $21.45 per share, as of December 31, 2016.
Healthcare Trust Inc. has amended their share repurchase plans, effective July 14th. The company will only repurchase shares following the death or qualifying disability of stockholders that purchased shares of common stock or received their shares through noncash transactions. The move is intended to preserve capital that can be used to purchase additional assets and increase distribution coverage.
The Problem with Non-traded REITs
One of the major downfalls of REITs is the lack of liquidity. Non-traded REITs are not sold on the public market, therefore they lack liquidity. This prevents shares from being sold quickly and forces investors to search for a secondary market that is often very limited. The secondary market price is almost always significantly below the purchase price.
Many brokerage firms target investors that were retired or near retirement, often emphasizing the potential income the REIT may provide.
Unfortunately, some brokerage firms failed to disclose that it is not uncommon for REITs to borrow money in order to make distributions. In addition, distributions are often merely a return of principle. REITs are complex high risk products that are not suitable for most investors.
Brokerage firms have a fiduciary duty to its clients to perform adequate due diligence on an investment prior to recommending it for sale. They must ensure that any investment recommended is appropriate in light of the investor’s age, investment experience, net worth, and investment objectives. Given what is now known about non-traded REITs, it is clear that certain of the brokerage firms that sold this investment failed in its fiduciary duty to its clients.
If you suffered losses as a result of your purchase of American Realty Capital Healthcare Trust III or another AR Global offering please call the securities attorneys of The White Law Group at 888-637-5510 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 Vero Beach, Florida.
For more information on the firm, please visit http://www.whitesecuritieslaw.com.