Many investors have suffered substantial losses after investing in NorthStar Real Estate Income Trust (REIT) at the unsuitable recommendation of broker-dealers.
The securities lawyers at Levin, Papantonio, Thomas, Mitchell, Rafferty & Proctor, P.A. are investigating claims from investors whose broker-dealers did not inform them of the risks of such an investment and/or neglected the factors of their clients’ risk tolerance, age, liquidity needs, investment experience, or age.
If you sustained financial loss from your investment in NorthStar REIT, our firm may be able to file a Financial Industry Regulatory Authority (FINRA) Dispute Resolution claim on your behalf and work to hold your advisor or brokerage firm accountable for your losses due to inappropriate recommendations.
About NorthStar REIT
On January 18, 2018. a three-way merger transpired between the following three entities:
- NorthStar Real Estate Income Trust, Inc., a public, non-traded REIT also known as NorthStar I
- NorthStar Real Estate Income II, Inc., a public, non-traded REIT, also referred to as NorthStar II
- Colony NorthStar Credit Real Estate, Inc., also called Colony NorthStar Credit
Colony NorthStar Credit survived the merger—publicly listed as CLNC—which emerged as a commercial real estate credit REIT with around $5.1 billion in assets and $3.3 billion in equity value.
NorthStar shareholders, however, did not fully enjoy the financial benefit of the merger. Instead, the original value of investors’ investments reportedly dropped by 30 percent of their original value.
Too Little, Too Late
Quite likely, NorthStar investors were not aware of the critical time factor at play prior to the merger. Things happened quickly, and investors should have been given a clear understanding of the importance of removing themselves from this investment prior to the merger’s execution.
According to the Securities Exchange Commission (SEC), N1 Liquidating Trust was formed on January 5, 2019 to hold and liquidate a first mortgage loan previously held by NorthStar Real Estate Income Trust, Inc.
On October 13, 2020, the Trust closed on the discounted payoff of a loan, selling its sole asset, the SEC reported. The Trust conveyed its plans to distribute to shareholders the proceeds received from the discounted payoff around October 31, 2020. This would result in $0.07 net per unit of beneficial interest—the final disbursement of the unitholders’ interest in the Trust, which was to be terminated shortly thereafter.
Broker Dealer Accountability
Non-traded REITs are generally known to be risky investments. FINRA cautions investors to carefully consider the fact that these products are generally illiquid, frequently for time spans of at least eight years. It can be extremely difficult to valuate or sell a non-traded REIT, especially as these shares are not listed on a national securities exchange. Even when a sale does transpire, the high fees from the sale diminish the investor’s total return.
Distributions are Not Dividends
Often, investors cannot resist the allure of periodic distributions offered by a non-traded REIT, but these distributions sometimes depend on heavy subsidies form borrowed funds. It’s difficult for an investor to know for certain whether the distributions they receive stem from a return on investment or if they consist of borrowed funds, so distributions do not necessarily reflect the value of the investment.
When an investor liquidates their shares, their return might actually be less than the original investment value. It all depends on the value of the REIT’s assets.
The Broker Dealer’s Role
A broker dealer’s role in these losses is quite simple. These professionals are ethically bound to tell their clients about the risks associated with recommended investments. A broker has an ethical obligation, too, to consider an investor’s risk tolerance, age, investment experience, and net worth when determining whether a certain investment is suitable for the client. When a broker fails to fulfill these obligations, the firm that employs them may be held accountable for losses suffered by an investor to whom an unsuitable investment recommendation was made.
Class Action Lawsuit Against Colony Credit
Investors should be aware that a class action lawsuit has been filed against Colony Credit Real Estate, Inc. (NYSE: CLNC) on behalf of investors who bought common stock of CLNC in connection with the merger of Colony NorthStar, Inc., NorthStar REAL Estate Income Trust, Inc., and NorthStar Real Estate Income II, Inc. The complaint cites multiple violations of the federal securities laws under the Securities Exchange Act of 1933.
What Our Clients Say
Below are some of the emails and letters that our clients have sent us.
At a time in our life when we were most vulnerable we lost control of our finances. We fell victim to a broker that took huge commissions and did not disclose that we were not able to access our money. Peter Mougey and his wonderful staff worked with us to make us whole again and got our money released. I cannot say enough about their work ethic, professionalism, and kindness during this stressful time for us. We had a 100% positive conclusion to our case and we strongly recommend Peter and the firm. We can now sleep at night! Fred & Pat H.
My husband and I were very pleased with the work that Peter and his team provided. He was very knowledgeable of the circumstances of our case and kept us informed throughout the process. He is extremely qualified and worked diligently on our behalf. We are positive that this case would not have been resolved in our favor had it not been for Peter's expertise and his passion. He definitely cares about his clients and we sincerely appreciate his efforts. Rachel C.
FRS is a governmental body. FRS retained the services of Peter Mougey of the LP law firm in a multimillion dollar lawsuit involving extremely complex issues. Mr. Mougey quickly mastered the issues and gave advice that was vital in bringing about a successful resolution. Two of the most important features of Mr. Mougey’s representation was his understanding of government and his ability to communicate complicated legal concepts to a 10-member board of trustees in language that was easily understood by all. I did not know Mr. Mougey before FRS retained him and, fortunately, have not experienced circumstances where the system would need his services again. However, if needed, I would have no hesitation in retaining his services again. Please let me know if you need any additional information or assistance. Steven S.
Edison's famous adage can't ever be ignored of course: 1 part inspiration and 99 parts perspiration. However the two attitudes must be present indissolubly--both are essential--if results are to be obtained. Peter Mougey’s group is aware of such a requirement, they work very hard at the latter, and the former comes easily to them, a rare combination anywhere to be found indeed. Raphael B.
I would like to express my sincere gratitude to Peter Mougey and your entire team on behalf of my family for the amazing job done during your representation. From day one I received kindness, rapid responses to all of my questions, with polite and patient encounters with all of your staff assistants. You are the best- and I will be eternally grateful to you and your entire team. Michelle E.