How does real estate perform during stagflation?

Chief Accounting Officer Terminated by Sila Realty Trust

Jamie Yoakum, the chief accounting officer (CAO), has been terminated by Sila Realty Trust Inc., as per information filed with the Securities and Exchange Commission (SEC). The CAO’s responsibilities will be discharged by Kay Neely, the chief financial officer, until a replacement is found.

Sila Realty Trust

Formerly known as Carter Validus Mission Critical REIT II, Sila Realty Trust Inc. is a publicly registered, non-traded real estate investor interested in healthcare real estate. Its initial offer was launched in May 2014 in which it had raised $1.2 billion. A follow-on offering that closed in November 2018 raised a further $129.3 million.

In March 2022, it had a portfolio comprising 126 properties plus two land parcels.

Terms of separation

If Yoakum executes a general release of claims against the company, he will become entitled to receive certain benefits as per his severance plan. These would include:

  • A cash severance payment that is equal to the product of his target bonus and base salary
  • A severance multiple and his target annual bonus for the current year that would be prorated for the portion of the year he was employed
  • His time-based equity incentive awards will vest fully and immediately
  • His pro-rated performance-based equity incentive awards would vest immediately
  • A cash payment based on the dividends on his vested performance-based equity incentive awards

As is normally the case, Yoakum will be subject to specified non-solicitation and non-compete clauses for a period of 12 months.

Risks of Investing in a Nontraded REIT

One of the biggest risks of investing in a nontraded REIT is that it is difficult to sell. Since these investments are not traded on a major exchange, the company must sell its shares over the counter between brokers. Because of this, the process of selling your position may take weeks. Even if you do manage to sell your position, you will have to pay a large brokerage commission. Then you will have to discount your investment significantly.

Another risk of investing in a nontraded REIT is that the broker’s compensation is not in the investor’s best interests. This can result in conflicts of interest with the sponsor of the REIT. Because the sponsor controls the REIT, it may not be in the best interests of its shareholders. Furthermore, operating partnerships may have interests that conflict with those of the shareholders. Additionally, agents working for a REIT may have other interests outside of the REIT, and they may allocate too much time to outside investments.

In addition, investors should take care to avoid focusing on a single segment of the market when choosing a nontraded REIT. Diversification helps to reduce the risk of losing money in volatile markets. A nontraded REIT’s portfolio will include both specified and unspecified properties, which may not be capable of generating reliable income. Additionally, a nontraded REIT’s risk profile is less dependent on the public equity market than a similar portfolio with unspecified properties.

Another risk of investing in a nontraded REIT is the high fees involved in the transaction process. Nontraded REITs generally charge an upfront fee, which represents up to 15 percent of the investment amount. These fees may lower the value of your investment and leave less money for the REIT to invest in the real estate market. However, some nontraded REITs do have lower upfront fees than their exchange-traded counterparts.

Because non-traded REITs often have higher fees than publicly-traded REITs, investors should be cautious about investing in them. While non-traded REITs are considered relatively safe investments, many investors have experienced hefty losses from them. Many were sold as low-risk investments with a guarantee of high dividends, but the crash in the housing market has resulted in substantial losses for these investors. Those investors who were duped by stockbrokers may have even sued their brokerage firms and brokers. The downside of nontraded REITs is that their prices are volatile, and recouping losses can be difficult if not impossible.

Another risk associated with nontraded REITs is the lack of liquidity. Because nontraded REITs are not sold on a stock exchange, there is no easy market for their shares. This means that the value of the shares depends on periodic appraisals of the underlying properties. These appraisals may not be timely, which means that investors may have a long wait before they know the value of their investment. If the property values change significantly, the REIT will lose value and you will not know what to do until it happens.

Free AlphaBetaStock's Cheat Sheet (No CC)!+ Bonus Dividend Stock Picks
Scroll to Top