One of the investment strategies listed on the CIM Group website includes a closed offering referred to as CCPT, which is a reference to a non-traded real estate investment trust (REIT) that was sold to numerous retail investors by independent broker-dealer firms and financial advisors. This particular investment is CCPT IV which was previously Cole Credit Property Trust IV, now referred to as CIM Real Estate Finance Trust which is focused on acquiring single-tenant properties in strategic locations leased primarily to creditworthy retail tenants on long-term net leases.
In a recent letter to investors, Mackenzie Realty Capital, Inc. was offering $4.79/share to investors up until 12/30/19. The REIT estimates share value at a stated value of $8.65/share (as of December 2018). However, according to Central Trade and Transfer, a website that helps investors liquidate non-traded REITs on a secondary market, the most recent trading range reported by a secondary market source was in the $6.35/share to $6.53/share range.
Non-traded REITs have exploded in popularity. Non-negotiated real estate investment funds raised $ 1.2 billion in November and are in the process of raising a total of $ 11 billion in 2019, according to investment banker Robert A. Stanger & Co. The total for November 2019 is almost three times the previous year’s total of $ 415 million. Year-end fundraising of $ 9.98 billion increased by 147% compared to the same period of the total of $ 4.04 billion.
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“Stanger now predicts that non-negotiated REITs will increase by more than $ 11 billion in 2019, up from our previous estimates of $ 10.5 billion, and will close the year with their highest fundraising total since 2014,” said Kevin Gannon, president and chief executive officer of Stanger.
Non-Traded REIT a Growing Problem For Investors
According to Palm Beach, Florida based investment fraud lawyers, Matthew Thibaut, Esq. “…the problem we see for many investors is that they are looking to sell these alternative investments and they often have difficulty finding a buyer and when they can overcome the illiquidity issues, they find they often suffer significant losses on these sales.”
These cases often lend themselves to the Financial Industry Regulatory Authority (FINRA) customer dispute resolution process where FINRA provides an arbitration forum for investors to resolve disputes with their broker-dealer firms and financial advisors. 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. FINRA disputes are private arbitration matters that involve predominantly paper discovery (typically no depositions) and the cases are administered more quickly and efficiently than traditional court litigation.
For some investors, a private FINRA arbitration customer dispute enables them to bring a claim and potentially recoup their investment losses. These customer disputes typically involve only paper discovery and no depositions, and they are a faster and more efficient alternative to traditional court litigation, as they provide a private forum to resolve disputes more quickly and efficiently.