June 26, 2017 Comments (0) Current Investigations

ARC New York City REIT: Decline in Valuation?

ARC New York City REIT
(Last Updated On: July 6, 2017)

Investigating Potential Claims in ARC New York City REIT

Are you concerned about investment losses in ARC New York City REIT? If so, The White Law Group may be able to help you recover your losses by filing FINRA Arbitration claim against the brokerage firm that sold you the investment.

ARC New York City REIT is a non-traded real estate investment trust that owns six real estate properties, including office and retail properties, located in New York City. The company closed its initial public offering in May 2015.

Bad News for Investors

According to recent article in the DI Wire, Summit Investment Research, an investment research and due diligence firm, published a report stating that investors in ARC New York City REIT should brace for a valuation decline of 50-70 percent when it completes its updated valuation, which will likely occur this Fall.

In October, the board of ARC New York City REIT approved its first estimated net asset value of $21.25 per share. According to Summit this valuation was “based on aggressive assumptions for their terminal cap rate and discount rate.” The research firm said that the board did not disclose the projected rent growth, which is the other key assumption for their discounted cash flow valuation. Shares were originally sold for $25.00 each.

Unfortunately for investors, Mackenzie Capital, a secondary market for private placements, was offering just $12.88 per share of ARC New York City REIT in April.

According to Mackenzie Capital’s offer letter, the share repurchase program for the REIT is oversubscribed. Repurchases are only processed biannually and only 23% of requests were accepted in December, leaving 903,028 shares not repurchased.

Earlier this week we told you about another non-traded REIT, Hospitality Investors Trust, formerly known as American Realty Capital Hospitality Trust, decreasing their NAV from $21.48 to of $13.20 per share, close to a 40% decline.

In its report, Summit noted that “the aggressive and unsupportable initial valuations for both non-listed REITs raise significant concerns about board independence and oversight.”

Summit Investment Research has been active since April 2016 and covers non-traded REITs, business development companies, interval funds, and listed REITs (that acquired non-traded REITs or were once non-traded). The company’s research can be utilized by a variety of industry clients including financial advisors, registered investment advisors, broker-dealers, sponsors, service providers like law firms, due diligence firms, industry organizations, and news organizations, and institutions.

Risks of REITs

Compared to traditional investments, such as stocks, bonds and mutual funds, non-traded REITS, are considerably more complex and involve a high degree of risk. Unfortunately many investors were not made adequately aware of the risks and liquidity problems associated with REITs.

The White Law Group has represented numerous investors in claims against the brokerage firm that recommended non-traded REITs, such as ARC New York City REIT to its investors.

Broker dealers are required to perform adequate due diligence on any investment they recommend and to ensure that all recommendations are suitable for the investor. Recommendations should be in line with the investor’s age, risk tolerance, net worth, and investment experience.

Broker dealers that fail to adequately disclose risks or make unsuitable investment recommendations can be held liable for investment losses.

If you have invested in ARC New York City REIT or another non-traded REIT and would like to speak to a securities attorney about the potential to recover your investment losses, please call The White Law Group at 1-888-637-5510 for a free consultation.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Vero Beach, Florida.