Suspension of the distribution reinvestment plan, as well as the share redemption program, have been approved by the board of SmartStop Self Storage REIT Inc., a non-traded, but publicly registered real estate investment trust.
The explanation offered by the company was that the suspensions were “in connection with its process for reviewing alternatives in order to provide liquidity to its stockholders.”
15th of April has been set as the date when March distributions will be paid out in cash. It has also been decided that requests made in the first quarter of 2022 for redemptions will not be acted upon.
A partial suspension of redemptions had been put in place earlier, excepting where they related to exigencies like the death of a stockholder or qualifying disability or confinement to a long-term care facility and such.
Strategic Storage Growth Trust II Inc., is a private REIT affiliated with SmartStop Self Storage REIT. Both the companies have recently announced plans to merge together in a $280 million all-stock transaction.
When last announced on the 8th of February, 2022, SmartStop had a 163-property portfolio that it owned and managed, stretching across 19 states in the U.S, as well as Ontario in Canada. The total rental area was estimated at 12.6 million square feet.
Investment Risks with Non-Traded REITS Like SmartStop Self Storage REIT
Non-traded REITs are not traded on stock exchanges and therefore have special risks.
Non-traded REITs can be illiquid investments. They are generally not available for sale on the open market. Shares of non-traded REITs may not allow you to quickly sell assets.
Transparency in Share Value
Although the market price for a publicly-traded REIT can be easily accessed, it can be difficult or impossible to calculate the value of a share in a non-traded REIT. Non-traded REITs are not required to provide an estimate of the value per share for at least 18 months after they close their offering. It could be many years later that you made your investment. This means that you might not be able to evaluate the volatility and value of your non-traded REIT investments for some time.
Distributions may be paid from offering proceeds and borrowings
Investors might be attracted by non-traded REITs due to their high dividend yields, which are higher than those of publicly-traded REITs. Non-traded REITs often pay distributions that exceed the funds they receive from operations, which is different from publicly-traded REITs. They may borrow or offer proceeds to do this. This is a common practice that REITs do not use. It reduces the share price and cash available for the company to buy additional assets.
Conflicts of interest
Non-traded REITs often have an outside manager rather than their employees. This could lead to conflicts of interest with shareholders. The REIT might pay an external manager significant fees depending on how many properties it acquires or assets they manage. These fees incentives might not align with shareholders’ interests.
How to Recover SmartStop Self Storage REIT Losses
It can be difficult and costly to get out of a non-traded real property investment trust or REIT. The board of directors can stop redemption policies from being applied to a REIT that is no longer open for new investors. Investors have few options to sell their REIT shares if this happens. Investors may find it difficult to sell their REIT shares on the secondary markets at a discount, which can lead to a significant loss of investment.
Many investors feel helpless because they don’t know where to turn. They are wrong. You may be able to sue your investor for the money you lost. To learn more, request a free case evaluation by an investment fraud lawyer. Contact Haselkorn & Thibaut, P.A. at 1-800-856-3352 or visit InvestmentFraudLawyers.com for a free consultation on recovering your losses.