Steadfast Apartment REIT, Steadfast Apartment REIT III and Steadfast Income REIT Merger
Are you concerned about your investment in a Steadfast REIT?
According to SEC filings, on December 19, 2019, Steadfast Apartment REIT III, Inc. (STAR III) and Steadfast Income REIT (SIR) filed their respective definitive proxies seeking shareholder approval of the proposed mergers with Steadfast Apartment REIT, Inc. (STAR).
The mergers, previously announced in August 2019, would result in a consolidation of STAR III and SIR into non-traded REIT, Steadfast Apartment REIT.
Under the terms of the mergers, STAR III shareholders would reportedly receive 1.43 shares of STAR common stock as consideration, and SIR shareholders would receive 0.5934 shares of STAR common stock as consideration, on a NAV-for-NAV basis.
The company says that initial STAR III investors (in 2016) have received cumulative cash distributions of $4.79 per share, which in addition to the NAV consideration offered in the merger, in the form of STAR stock ($22.65), would account for a total return on investment of $27.44.
Initial SIR investors (in 2010) have reportedly received cumulative cash distributions of $7.31 per share, which in addition to the NAV of consideration offered in the merger, in the form of STAR stock ($9.40), would account for a total return on investment of $16.71.
The mergers are anticipated to be completed in the first quarter of 2020, pending shareholder approval. The mergers would not constitute a liquidity event for shareholders in STAR III and SIR.
According to Steadfast, if both STAR III and SIR shareholders approve the mergers the combined Steadfast Apartment REIT would have 70 properties across 14 states and approximately $3.2 billion in total assets.
Investigating Potential Securities Fraud Claims
The White Law Group is investigating potential securities fraud claims involving broker-dealers’ improper recommendation that investors purchase high-risk non-traded REIT investments. 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 are concerned about the Steadfast REIT merger 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.