Investors in Benefit Street Partners Realty Trust, Inc., formerly known as Realty Finance Trust, may have a right to recover their investment losses if their Benefit Street investment was recommended to them by a financial adviser who misrepresented the investment or made a recommendation that did not suit the investors’ risk tolerance.
Benefit Street is a real estate investment trust (“REIT”) that holds itself out as originating and managing a diverse portfolio of commercial real estate debt investments. Benefit Street was originally offered to investors at an initial public offering for $25 per share.
The share price has fallen precipitously since, with a December 31, 2017 assignation of value by the Company’s board of $19.17 per share, falling to an estimated net asset value of $18.75 per share by September 2018. In September of this year, the Company issued $8.2 million of common stock at $16.71 per share.
A REIT is a type of investment vehicle that functions as a company that owns real estate investments, typically large scale real estate investments or diverse real estate investments. The REIT structure can offer an investor an opportunity to invest in real estate at a lower cost than they might otherwise have.
Among the downside risks, however, are volatility (including substantial short-term losses) and for numerous REITs, like Benefit Street, the lack of a publicly-traded exchange. Unlike REITs which trade on a national securities exchange, non-traded REITS (as their name implies) are not publicly traded and are, therefore, difficult to value and carry significant illiquidity risk. These types of REITs also carry tax consequences and early redemption fees, of which an inexperienced investor may be unaware.
Non-traded REITs typically come with high fees and commissions, which make them attractive products for brokers, even though a non-traded REIT would be a suitable investment for only a small percentage of a broker’s clientele.
Stockbrokers have a duty to make certain that any recommended investment strategy is suitable for a customer. This includes (among numerous factors): making certain that a customer does not get over-exposed to one particular investment or type of investment, that the customer can afford the risk presented by a given investment, and that the customer’s investment goals and time horizon are compatible with the recommended product. Brokers are also obligated to explain the features and risks of the investments they recommend.
Many investors purchasing REITs like Benefit Street were not aware that the REIT was subject to volatility and liquidity risks and have found themselves caught totally by surprise as they are essentially “stuck” with their Benefit Street REIT as its price falls.
If you or someone you know has lost money as a result of an investment in Benefit Street Partners Realty Trust REIT which you believe was misrepresented to you or was unsuitable, please call the Frankowski Firm at 888.741.7503 or fill out this contact form.