Northstar Healthcare real estate investment trust has determined that suspension of income distribution payments is necessary to protect its capital and financial state.
The Sonn Law Group is investigating allegations that brokers have recommended Northstar Healthcare REIT investments without fully disclosing the risk associated with REITs or have caused investors to over-concentrate their portfolios in Northstar REIT investments. If you or a family member has suffered losses investing in Northstar Healthcare, we want to discuss your case. Please contact us today for a free review of your case.
Northstar Healthcare REIT
Northstar Healthcare Income, Inc. (Northstar) is a publicly registered non-traded real estate investment trust (REIT). Northstar Healthcare Income is sponsored by Colony Capital, “a leading global real estate and investment management firm” with $43 billion in assets under management.
The company’s management team includes Robert Gatenio, Executive Chairman; Ronald Jeanneault, CEO and President; Douglas W. Bath, CIO; Frank V. Saracino, CFO and Treasurer; and Ann B. Harrington, General Counsel and Secretary.
As of March 31, 2018, it listed $3.5 billion under its equity portfolio’s management.
REITs are modeled after mutual funds and are designed to finance income-producing real estate to provide investors with regular income streams. Unlike traditional stocks, REITs are not publicly traded and cannot be sold through an exchange. Additionally, they hold additional risks for investors because they frequently feature limited redemption programs and high fees or commissions.
Equity and Debt Investments in Healthcare Real Estate
According to the company’s website, Northstar Healthcare was “formed to originate, acquire and asset manage equity and debt investments in healthcare real estate[,]” focusing mainly on the senior citizen housing sector which includes independent living facilities, assisted living facilities, memory care, and skilled nursing facilities.
The website describes the needs-driven senior housing sector as “an attractive asset class” and states that the REIT is intended for investors who are, “seeking income through regular cash distributions,” (though it stresses that there is no guarantee of these), who want the potential for capital appreciation, reduced volatility and a low correlation to traditional asset classes.
Sources note that between 2013 and 2018, Northstar raised about $2 billion and set up a portfolio involving more than 650 properties. Northstar originally sold assets for $10/share. However, Northstar began reducing distribution rates in December 2017. By October 2018, it had notified investors that it would only buy back shares from an investor if qualifying disability or death were factors. In December 2018, the REIT reduced its net asset value from $8.50/share to $7.10/share.
Income Distributions Suspended
In February 2019, Northstar’s board of directors reportedly performed a thorough analysis of the REIT’s business, financial condition, liquidity sources and capital needs, and believed that it was prudent to preserve capital and protect the company’s financial position, thus suspending all income distributions. With the income distributions suspended, some investors are standing to lose not only their monthly distributions, but also the principal they originally invested.
According to studies, non-traded REITs have historically underperformed even safe benchmarks, like U.S. treasury bonds – meaning that non-traded REITs provide paltry investment returns considering the risk an investor takes. The NorthStar REIT is a high-risk investment that can be very volatile, which means that it is not suitable for every investor. However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them.
These products have become so popular among brokers without providing any benefit to investors that many states now limit investors from investing more than 10% of their liquid assets in non-traded REITs. Investment professionals who recommend unsuitable REITs may be subject to disciplinary action by FINRA or the Securities and Exchange Commission.
Did you Invest in Northstar Healthcare REIT? Contact The Sonn Law Group Today
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. If a broker recommended unsuitable investments with Northstar, or failed to disclose the risks associated with investing REITs, their brokerage firm may be liable for investment or other losses suffered.
The Sonn Law Group is currently investigating allegations that brokers recommended investments with Northstar Healthcare Income, Inc. 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 844-689-5754 at complete our contact form.