NorthStar Healthcare REIT
The securities lawyers of Gana Weinstein LLP represent investors that were sold NorthStar Healthcare Income Inc., (NorthStar Healthcare) - a non-traded real estate investment trust (non-traded REIT). Our representations focuses on the failure of the investor’s brokerage firms to conduct adequate due diligence on NorthStar Healthcare. Investment advisors are obligated to conduct due diligence on securities recommended by the firm. The due diligence rule is heightened for non-traded REITs because the offering is non-public and investors have access to little publicly available information. Many investors have contacted us because they were told that NorthStar Healthcare was a safe income producing REIT when in fact this was never the case. Other investors have had their portfolios overconcentrated in NorthStar Healthcare and other non-traded REITs and alternative investments.
As a background NorthStar Healthcare was formed to originate, acquire, and asset manage equity and debt investments in healthcare real estate. NorthStar Healthcare launched in February 2013 and raised total gross proceeds of $2 billion, including $225.3 million through its distribution reinvestment plan. The company claims to have a $2.4 billion portfolio of 633 properties as of the June 2019. However, the REIT appears to have never been profitable.
NorthStar Healthcare continues to report that it is not profitable. NorthStar Healthcare has reported massive investor losses on investor capital raised and currently trades at only 25 cents for every dollar purchased on the secondary markets. On November 29, 2019 investors received a letter from Comrit Investment 1, LP (Comrit) offering investors a $2.86 per share sales price reflecting massive losses. According to the September 2019 financial data Northstar Healthcare raised over $1.7 billion from investors and has accumulated losses of $1 billion of it leaving a net equity of less than $700 million. In fact, in the last 9 months since the end of 2018 Northstar Healthcare reports that investor equity declined another 7% while it has not paid investors any distributions.
As investors are aware, NorthStar Healthcare no longer distributes a dividend. Further, since 2015 all Northstar Healthcare distributions have been merely a return of investor capital. Meaning that Northstar Healthcare has not been able to generate profits sufficient to pay investors a return since 2015. Instead of paying distributions from operations and income the company sent investors back their own capital in order to continue raising funds and misleading investors into believing that there was nothing wrong with the company.
Non-traded REITs are only purchased by retail investors who are not informed as to the true risks and poor quality of these investments. Studies have found that non-traded REITs underperform even safe benchmarks, like U.S. treasury bonds. Non-traded REITs provide inadequate investment returns considering the risk an investor takes in such programs and their illiquidity. However, due to the high commissions brokers earn on these products non-traded REITs remain one of the most popular options among brokers. Many states now attempt to protect investors from non-traded REITs by limiting investors from investing more than 10% of their liquid assets in these products. Many states impose these limitations because its understood that that they provide virtually no benefit to investors in relationship to their risks.
Investors often fail to understand that they have lost money until many years after agreeing to the investment. In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.
The investment lawyers at Gana Weinstein LLP represent investors who have suffered investment losses due to allegations of wrongdoing. The majority of these claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.