Steadfast REIT Merger may Mean Losses for Investors.
Are you concerned about investment losses in Steadfast Apartment REIT III? If so, The White Law Group may be able to help you recover your losses by filing a FINRA arbitration against the brokerage firm that sold you the investment.
According to a press announcement yesterday, Steadfast Apartment REIT announced that it will acquire Steadfast Income REIT and Steadfast Apartment REIT III to form a single REIT focused on moderate-income apartments that together will own approximately $3.3 billion in real estate assets.
The deal, expected to close in the first quarter of 2020, will reportedly increase cash flow to the new company by nearly $21 million, due to the fee structure realignment, according to the company.
In exchange for each share of Steadfast Income REIT and Steadfast Apartment REIT III common stock, Steadfast Income REIT and Steadfast Apartment REIT III stockholders will reportedly receive 0.5934 and 1.43 shares, respectively, of Steadfast Apartment REIT common stock, which is equivalent to $9.40 per Steadfast Income REIT share and $22.65 per Steadfast Apartment REIT III share, based on Steadfast Apartment REIT’s most recent estimated value per share of $15.84.
Following the closing of the transactions, Steadfast Apartment REIT, Steadfast Income REIT and Steadfast Apartment REIT III stockholders are expected to own approximately 48.1%, 40.6% and 11.3% of the combined company, respectively.
The REIT expects to continue distributions, which are currently equivalent to 6% annualized based on a purchase price of $15.00 per share, or $0.90 per share annually, “subject to market factors and company performance.”
According to the company, the distribution reinvestment plan (“DRIP”) will remain in effect. Steadfast Income REIT and Steadfast Apartment REIT III stockholders will be able to elect to participate in the STAR DRIP upon completion of the respective transactions.
Each of the REITs have each agreed to limit its quarterly share repurchases to repurchase requests made in connection with the death or qualifying disability of the stockholder, subject to certain terms and conditions, according to the merger agreement.
The White Law Group is investigating potential securities fraud claims involving broker-dealers’ improper recommendation that investors purchase high-risk non-traded REIT investments, like Steadfast Apartment REIT III. Many investors are not fully aware of the problems and risks associated with these investments before purchasing them.
Real estate investment trusts (REITs) are complex and inherently risky products. Compared to traditional investments, such as stocks, bonds and mutual funds, REITs are significantly more complex and often better suited for sophisticated and institutional investors.
Another problem often associated with REIT recommendations is the high sales commissions brokers typically earn for selling REITs – as high as 15%. Brokers have an obligation to make investment recommendations that are consistent with their clients risk tolerance, net worth, investment objectives and experience in the market.
Unfortunately, in many cases, the high sales commission may provide some brokers with enough incentive to make unsuitable investment recommendations.
In addition to the high risks, non-traded REITs often lack liquidity. Investors looking to sell these investments often have difficulty finding a buyer, and if they are able to find one can suffer significant losses on the sale.
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. Firms that fail to do so, may be held responsible for any losses in a FINRA arbitration claim.
If you suffered losses investing in Steadfast Apartment REIT III or another Steadfast REIT and would like a free consultation with a securities attorney, please call The White Law Group at 888-647-5510.
The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois and Franklin, Tennessee.
For more information on The White Law Group, visit www.whitesecuritieslaw.com.