CIM Real Estate Finance Trust Inc. Shareholders may have Claims

CIM announces Merger Plans for Four Cole REITs

The White Law Group continues to investigate potential FINRA arbitration claims involving broker dealers who may have unsuitably recommended non-traded REITs such as CIM Real Estate Finance Trust Inc. to investors.

Unfortunately for investors it appears that many financial advisors/brokerage firms that sold non-traded REITs such as CIM Real Estate Finance Trust Inc., may have understated or misrepresented the risks and liquidity problems.

According to an article this week in the DI Wire, the CIM Group has announced plans to merge four publicly registered,  non-traded REITs into CIM Real Estate Finance Trust Inc. in separate stock for stock transactions.

Citing SEC filings, The DI wires writes that CIM Real Estate Finance Trust Inc. (CMFT), Cole Office & Industrial REIT Inc. (CCIT II), Cole Office & Industrial REIT Inc. (CCIT III), and Cole Credit Property Trust V Inc. (CCPT V) have agreed to merge in the fourth quarter of 2020, pending stockholders’ approval.

According to the article, for each share of common stock, CCIT II, CCIT III and CCPT V stockholders would receive, 1.501,1.093 and 2.691 shares of CIM Real Estate Finance Trust common stock, respectively, which is valued at approximately $10.97 per CCIT II share, $7.99 per CCIT III share and $19.67 per CCPT V share, based on CIM Real Estate Finance Trust’s most recently estimated net asset value per share of $7.31.

Former stockholders of CIM Real Estate Finance Trust, CCIT II, CCIT III and CCPT V are expected to own approximately 67 percent, 22 percent, 1 percent and 10 percent of the combined company, respectively, following the closings of the merger transactions.

The distribution reinvestment plans of all four REITs will be suspended pending the closing of the proposed transactions.

How Does a Merger Affect Shareholders?

Companies often merge as part of a strategic effort to boost shareholder value, often by creating new business lines and/or gaining  greater market share. However, the economic environment at the time of the merger,  size of the companies and management of the merger process all play a part in future returns for shareholders.

Shareholders may experience a significant loss of voting power, and while the spike in trading volume tends to inflate share prices, if economic conditions are not favorable at the time of the merger, shareholders may see significant losses.

Risks of Non-Traded REITs

Real estate investment trusts (REITs) are complex and inherently risky products. Unfortunately for investors, many REITs have taken a hit due to the Covid-19 global pandemic, and some have suspended distributions during this  uncertain time.

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%.  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.

Filing a Complaint Against your Brokerage Firm

Prior to making recommendations to an individual investor, brokerage firms are required by the Financial Industry Regulatory Authority (FINRA) to disclose all the risks of an investment. Recommendations should only be made if the investment is suitable for an individual investor given their age, investment objections, investment experience and risk tolerance.

Brokerage firms that do not perform adequate due diligence on an investment and/or make unsuitable recommendations can be held accountable for investment losses through FINRA arbitration.

High commissions could be a motivating factor for unscrupulous financial advisors to sell non-traded REITs regardless of whether the investment is in line with the client’s investment objectives and profile.  Moreover, the total commissions and expenses make it difficult for the REIT to perform in line with the market.

If you are concerned about your investment in CIM Real Estate Finance Trust or another Cole REIT , you may be able to file a complaint against your brokerage firm. Please call the securities attorneys of The White Law Group at 888-637-5510 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Franklin, Tennessee.

For more information on The White Law Group, visit https://www.whitesecuritieslaw.com.