Carter Validus Mission Critical REIT II Changes Name to Sila Realty Trust Inc.
The White Law Group continues its investigation into the liability that FINRA registered brokerage firms may have for improperly selling high-risk non-traded REITs, like Carter Validus Mission Critical REIT II (CV REIT II), to clients.
CV REIT II a non-traded, publicly registered REIT, invests in data centers and healthcare facilities, according to its website.
According to new filings with the SEC, the company is planning to purchase all of the assets from its sponsor and advisor and will be changing its name to Sila Realty Trust Inc. on September 30, 2020.
The cash deal reportedly consists of approximately $40 million paid over an approximately two-year period, with $25 million to be paid at closing, $7.5 million to be paid on March 31, 2021, and $7.5 million to be paid on March 31, 2022.
The Company expects a decrease in general and administrative expenses (approximately $18 million on an annualized basis starting in 2021) since it will no longer pay any acquisition, asset management, construction management, property management or disposition fees to affiliates of the sponsor, Carter Validus REIT Management Company II LLC.
CV REIT I and II Merger, Decrease in NAV
After Carter Validus Mission Critical REIT Inc. (CVMC REIT I) and CV REIT II merged in December 2019, they reportedly approved an estimated net asset value of $8.65 per share for the REIT’s Class A, Class I, Class T, and Class T2 shares of common stock, calculated as of October 31, 2019. Shares originally sold for $10.00 each.
Although the value of its pre- and post-merger real estate portfolio increased, the NAV was negatively impacted by transaction costs incurred from Carter Validus Mission Critical REIT’s debt payoff and other merger-related costs ($0.37), distributions in excess of earnings ($0.08), and a change in the value of interest rate swaps ($0.08), according to filings with the SEC.
Share Repurchase Limit
Unfortunately for investors, the REIT has reportedly reached its 1.25 percent share repurchase limit for the first quarter of 2020 and will not be able to fully process all repurchase requests.
The board reportedly adopted a new share repurchase program (SRP) in October, where repurchases in 2020 could not exceed 5 percent (1.25 percent quarterly) of the number of shares outstanding on December 31st of the previous calendar year. The company also limits the amount of distribution reinvestment plan proceeds used to fund share repurchases in each quarter to 25 percent of the amount of DRIP proceeds received during the previous calendar year.
Non-traded REITs are complicated and often risky investments which should only be sold to high-net worth and sophisticated investors.
Aside from the risks of investing in non-traded REITs, brokerage firms continue to push this type of investment because of the high commissions associated with their sale and creation. Brokerage firms generally make between 7-10% for selling a non-traded REIT, which is far in excess of the typical commission for more traditional investment types.
Fortunately, FINRA does provide 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.
Filing a Complaint against your Brokerage Firm
Please contact The White Law Group at 1-888-637-5510 for a free consultation, to determine whether you may be able to recover investment losses incurred as a result of your purchase of CV REIT II (Sila Realty Trust Inc.) or Carter Validus Mission Critical REIT I.
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 Franklin, Tennessee. 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.