Last summer, a real estate investment firm offered to purchase shares of Griffin Capital Essential Asset REIT, Inc. for $7.20 per share.
The Sonn Law Group is investigating allegations that brokers recommended investments in Griffin Capital Essential Asset REIT. If you or a family member has suffered losses investing, we want to discuss your case. Please contact us today for a free review of your case.
Griffin Capital Essential Asset REIT (“Griffin REIT”) is a publicly registered non-traded real estate investment trust. In April 2019, Griffin REIT merged with its affiliate Griffin Capital Essential Asset REIT II.
In August 2019, Everest REIT Investors, LLC, a private real estate investment firm, offered to purchase shares of Griffin REIT at a price of $7.20 per share. As of July 2019, Griffin REIT valued its shares at $9.58 per share. The initial offering price for shares of Griffing REIT was $10.00 per share.
Griffin REIT’s website states that there is “currently no public trading market for shares of our common stock and there may never be one, so redemption of shares by us will likely be the only way to dispose of your shares.” Additionally, the website states that purchase and redemption prices for shares of common stock are based on the NAV of each class of common stock rather than the public trading market. The NAV is the net asset value. Net asset value is the value of an entity’s assets minus the value of its liabilities. The website also states:
Our NAV does not currently represent our enterprise value and may not accurately reflect the actual prices at which our assets could be liquidated on any given day, the value a third party would pay for all or substantially all of our shares, or the price that our shares would trade at on a national stock exchange. Furthermore, our board of directors may amend our NAV procedures from time to time. Our share redemption program generally imposes a quarterly cap on aggregate redemptions of our shares equal to a value of up to 5% of the aggregate NAV of the outstanding shares as of the last business day of the previous quarter.
We may also amend, suspend or terminate our share redemption program at any time. A portion of the proceeds received in our offerings may be used to redeem or repurchase our shares, which will reduce the net proceeds available to acquire additional properties. We may pay distributions from sources other than our cash flows from operations, including from the net investment proceeds from our public offerings, and as a result, we would have less cash available for investments and your overall return may be reduced.
We may incur substantial debt, which could hinder our ability to pay distributions to our shareholders or could decrease the value of your investment, and our board of directors may authorize us to exceed our charter limit on the leverage of 300% of net assets.
Investors can buy shares in REITs, which in turn borrows money to make investments in multiple properties specific to a specific sector, such as retail, industrial, office, or multi-family residential apartments. REITs have specific risks associated with them that are not prevalent in traditional investments.
The following are risks that investors should consider:
- REITs that are publicly traded on the equity markets are subject to not only real estate portfolio risks, but also a broad range of global and domestic economic events, changes in interest rates and other evolving conditions that cause market swings.
- Non-traded REITs are not required to register with the SEC and are therefore not bound by the same compliance standards, disclosure requirements and investor protections of their publicly traded counterparts.
- Portfolio diversification within a particular REIT typically is limited to a specific asset class and geographic area. Moreover, because the full portfolio of a REIT’s properties may be unspecified, investors may not have full knowledge of all of their investment risks.
- Investors do not have a say in or control over the properties in which the REITs choose to invest or the way in which those properties are managed.
- There are no guarantees that the securities offered by a REIT will have an established trading market, adequate trading volumes or sufficient liquidity.
- Because REITs borrow money to fund their operations, they are subject to leverage risks and a potential lack of sufficient cash flow and access to additional financing.
- REITs do not provide investors with opportunities to defer or eliminate capital gains tax on the sale of assets nor do they pass tax losses onto their individual investors to be used to offset taxable gains.
Contact Us Today
The Sonn Law Group is currently investigating allegations that brokers recommended investments in Griffin Capital Essential Asset REIT. We represent investors in claims against negligent brokers and brokerage firms. If you or your loved one experienced investment losses, we are here to help. For a free consultation, please call us now at 866-827-3202 or complete our contact form.