Many investors have suffered substantial losses after investing in NorthStar Healthcare Income Real Estate Income Trust (REIT) at the unsuitable recommendation of broker dealers.
The securities lawyers at Levin, Papantonio, Rafferty, Proctor, Buchanan, O’Brien, Barr & Mougey, 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, investment experience, or age.
If you sustained financial loss from your investment in NorthStar Healthcare REIT, our firm could file a Financial Industry Regulatory Authority (FINRA) Dispute Resolution claim on your behalf and work to hold accountable for your losses the brokerage firm that sold you this investment.
About NorthStar Healthcare REIT Losses
NorthStar Healthcare Income, Inc. (also known as NorthStar Healthcare) was created to build, acquire, and asset manage a diversified portfolio of health care real estate equity, securities, and debt investments.
Northstar Healthcare Income REIT’s prospectus establishes minimum suitability standards for a purchaser of the investments, meaning the investments are not suitable for many investors. Furthermore, various states also imposed additional requirements to be met before investors were permitted to purchase shares of Northstar Healthcare Income REIT.
Northstar Healthcare Income REIT, like other non-traded REITs, payed brokers and Financial Advisors significant upfront commissions. The Northstar Healthcare REIT estimates that it paid Selling Commissions of 7% upfront according to the Prospectus, and another 6% or more in other fees and costs. Thus, approximately 86.5% or less of an investors capital was actually available for investment by the manager. In other words, a significant portion of the money investors paid to purchase the Northstar Healthcare Income REIT was immediately diverted to their broker/financial advisor and the manager.
According to the NorthStar Healthcare distributions updates, the REIT’s board met on February 1, 2019 and decided to stop paying dividends. The decision followed a deep analysis of the entity’s business, financial health, liquidity sources, and capital requirements, which directed a strategy of preserving capital and suspending monthly distribution payments to stockholders. This was bad news for investors who relied on income from their investment.
Next in a Series of Disappointments
The move has prompted serious concerns among investors, and this is not the first time they have been disappointed to a point of justified anxiety. In December 2017, NorthStar Healthcare shareholders experienced a decreased distribution rate—from 6.67% to 3.31%. One year later, a December 2018 announcement from the NorthStar Healthcare board told investors that the net asset value of their shares had dropped to $7.10 per share. By December 2019, this value had dropped even further to $6.25 per share. However, options to actually sell or liquidate this investment may be extremely limited. Bids for the purchase of the Northstar Healthcare Income REIT via the Secondary Market were as low as $1.50 or less per share as of the end of March 2021. The REIT’s initial offering price was $10.20. Thus, investors may have suffered substantial losses investing in Northstar Healthcare Income REIT.
Unfortunately, many investors were not aware that the distributions they had previously received did not reflect returns on investments generated by funds from NorthStar Healthcare’s business operations. Rather, the payments were at least partially a return on each investor’s principal, which may have been funded through hefty loans. In fact, investors have not received a return on investment for years.
It is likely that some broker-dealer firms and investment advisors inaccurately or improperly represented the nature of the distributions. In many cases, these individuals were ignorant of the inner trappings of non-traded REITs and the inherent risks they pose to investors. In many other cases, brokers and financial advisors knew of the risks but recommended the products anyway, unable to resist the lucrative commissions that such products offer.
Broker Dealer Accountability
Non-traded REITs are 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
When improperly presented by advisors investors often 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 is 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.
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.