Four Springs Capital Trust Withdraws Registration Statement due to “Market Conditions” 

The White Law Group continues to investigate potential securities claims involving Four Springs Capital Trust. Four Springs Capital Trust, an internally managed REIT, is reportedly focused on single-tenant, income producing industrial, medical, service/necessity retail and office properties throughout the United States.  

Four Springs reportedly filed a request with the Securities and Exchange Commission (SEC) in December 2022 to withdraw its registration statement on a previously filed Form S-11. The REIT has decided not to pursue the sale of the securities currently “due to market conditions.”  

Unfavorable Market Conditions for IPO 

This comes after the REIT made an Initial Public Offering (IPO) in January 2022 which it postponed, also “due to market conditions.”  

This is not the first time the company has attempted and failed to launch an IPO. We reported in 2017, Four Springs Capital Trust canceled a $115.9 million initial public offering due to “unfavorable market conditions,” according to a filing with the Securities and Exchange Commission.  

Risks of Non-Traded Office REITs  

If you invested in non-traded office Real Estate Investment Trusts (REITs), it’s essential to be aware of the potential risks, especially when certain economic and market factors are in play. 

Take into account the changing landscape of remote work. With more people working from home, the demand for office space has shifted. Companies are adopting flexible work arrangements, which might mean they need less office space or could opt to downsize their current office footprint. Reduced demand for office space can lead to higher vacancy rates in office properties, potentially impacting the rental income generated by office REITs. If these REITs have a significant investment in office properties, they could experience declining rental income and property values. 

Secondly, consider the impact of high-interest rates. As an investor, you should know that non-traded office REITs often rely on borrowing to finance property acquisitions and improvements. When interest rates rise, borrowing costs increase, potentially squeezing the REIT’s profitability and its ability to distribute dividends to investors. This situation might make the investment less appealing, especially in a rising interest rate environment. 

Liquidity Issues

Additionally, keep in mind the issue of liquidity. Non-traded REITs typically have less liquidity compared to publicly traded REITs. If you invest in non-traded REITs, you might find it challenging to sell your shares quickly, and you could face restrictions on when and how you can exit your investment. In uncertain market conditions or when the investment outlook is less favorable, this lack of liquidity can become a risk, as you may not be able to access your capital easily. 

Furthermore, non-traded office REITs often focus on specific geographic regions or property types, such as suburban office buildings or certain markets. This limited diversification can make these REITs more vulnerable to local economic conditions and trends. If a particular market or property type experiences a downturn, the overall performance of the REIT might suffer. 

There is also the consideration of valuation uncertainty. Non-traded REITs are known for their opaque valuation practices. Unlike publicly traded REITs with readily available market prices, non-traded REITs typically provide periodic valuations that may not accurately reflect current market conditions. As an investor, it can be challenging to assess the true value of your investment, particularly during turbulent times. 

Due Diligence  

The White Law Group is investigating the liability that brokerage firms may have for improperly selling non-traded office REITs like Four Springs Capital Trust.  

Broker dealers that sell alternative investments are required to perform adequate due diligence on all investment recommendations. They must ensure that each investment recommendation that is made is suitable for the investor considering the investor’s age, risk tolerance, net worth, financial needs, and investment experience.  

However, another problem with this type of investment is the high sales commissions and due diligence fees the brokers earn.  Brokers have an enormous incentive to push the product to unsuspecting investors who do not fully understand the risks of these types of investments. They can easily misrepresent the basic features of the products – usually focusing on the income potential and tax benefits while downplaying the risks.  

Fortunately, FINRA  provides an arbitration forum for investors to resolve such disputes. If a broker or brokerage firm makes an unsuitable investment recommendation or fails to adequately disclose the risks associated with an investment, they may be found liable for investment losses in a FINRA arbitration claim.  

Recovery Options for Investors  

To determine whether you may be able to recover investment losses incurred as a result of your purchase of Four Springs Capital Trust, please contact 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 Seattle, Washington. The firm represents investors throughout the country in claims against their brokerage firm.  

For more information on the firm and its representation of investors, visit www.WhiteSecuritiesLaw.com.