Income distributions suspended? Another Big Loss for Non-traded REITs and for Investors in NorthStar Healthcare Income, Inc.

NORTHSTAR HEALTHCARE INCOME, INC IS THE LATEST IN A LONG LINE OF PROBLEM REITs ACCORDING TO VERNON LITIGATION GROUP

NorthStar Healthcare Income Inc., (NorthStar Healthcare) is the latest in a long line of troubled Non-Traded REITs.  Vernon Litigation Group has been suing brokerage firms for decades over these types of products and has recovered millions of dollars for investors in Non-Traded REITs and even held owners of brokerage firms personally liable for securities fraud.

Despite decades of problems with non-traded REITs, financial advisors we refer to as “commission junkies” continue to hype Non-Traded REITs such as NorthStar Healthcare Income Inc., (NorthStar Healthcare) as safe products suitable for fixed income investors.  These sales pitches are driven by the lure of big commissions for the financial advisors hawking these products, often to retirees looking for stability of principal and consistent income payments.

NorthStar Healthcare, despite being sold as a stable investment by many financial advisors, is a perfect example of what is wrong with these products.  NorthStar Healthcare has lost tremendous value both internally and in terms of value for investors.  When this happens, as evidenced by NorthStar Healthcare, the loss of value is these Non-Traded REITs is often accompanied by a reduction or even cessation of dividends. 

While the underlying investment often sounds appealing, these products have inherent flaws not present in REITs that are traded on an exchange.  REITs traded on the exchange can be easily and quickly sold if price or income expectations are not met.  Non-Traded REITs stand in stark contrast in that many investors we have represented over the years have discovered that they cannot get out of their investment once it begins to lose both value and the dividend payments are reduced or halted.  In fact, we have bluntly referred to the Non-Traded REITs as the Hotel California of investments in that they are “programmed to receive.  You can check out any time you like, but you can never leave”.  In fact, we have even compared Non-Traded REITs to Ponzi-Schemes in that they often use investor funds and/or borrowed funds to pay out dividends to other investors.

This Hotel California scenario is now playing out once again with NorthStar Healthcare: Its value dropped; it stopped paying dividends; and then it halted its repurchase program (absent death or disability of the investor).

Although some efforts have been made by states and regulators to curb the abusive sales of these products, their efforts have been woefully inadequate in light of clear evidence of how much harm these products are doing to retail investors looking for safety and income.   This lack of action by regulators and lawmakers continues despite efforts by Vernon Litigation Group and financial publications such as Forbes and the Wall Street Journal outlining how bad these products can be.

For example, Forbes highlighted the problems with these products way back in 2012.   Chris Vernon was quoted in that article and identified “more than 10 non-traded REITs that have either severely restricted, or suspended all distributions indefinitely. This means that many non-traded REIT investors are currently stuck in the investment, and their only way out is to sell their shares in an inefficient secondary market at a deep discount.”  In the Forbes article, Vernon added that investors should seek a second opinion before investing in this type of alternative product being recommended by a salesperson posing as a financial advisor.  Again, in 2014, the year after the launch of NorthStar Healthcare, Vernon Litigation posted an article that referenced a Wall Street Journal piece actually describing Non-Traded REITs as dangerous for retail investors. 

VERNON LITIGATION GROUP

Vernon litigation Group’s investigations and advocacy on behalf of investors related to Non-Traded REITs have been featured in national publications and the lawyers at Vernon Litigation Group have recovered tens of millions of dollars for Non-Traded REIT investors over the years.  For additional articles and information regarding the many troubling aspects of Non-Traded REITs visit the blog section of Vernon Litigation Group.

Vernon Litigation is a team of financial litigators in Naples and Atlanta that represent clients in courtroom litigation, arbitration, and negotiations throughout the United States. Our lawyers represent investors in federal court, state court, mediation, and arbitration (including FINRA, JAMS, and AAA arbitration).

To speak with an attorney regarding your investment in NorthStar Healthcare or other troubled Non-Traded REIT investments, contact Vernon Litigation Group by phone at (239)-649-5390 or contact Brooke Sandoval-Banker at bsandovalbanker@vernonlitigation.com.

Check Your Broker