Written by The White Law Group• October 28, 2024• 7:16 am• Blog, Investment Loss Recovery

InPoint Commercial Real Estate Income: Investment Losses

InPoint Commercial Real Estate Income Inc., featured by Top Securiites Fraud Attorneys, The White Law Group

InPoint Commercial Real Estate Income: Liquidation

The White Law Group, securities fraud attorneys, continue to investigate potential securities claims involving broker dealers who may have improperly recommended InPoint Commercial Real Estate Income to investors.

Table of Contents

Mini Tender Offer may Indicate Losses for Investors

The board of directors of InPoint Commercial Real Estate Income Inc., reportedly advised stockholders against accepting a mini-tender offer from West 4 Capital LP, an unaffiliated party offering to buy up to 375,000 shares of Class P common stock at $7.65 per share. This offer is roughly 53.6% below InPoint’s September 30, 2024 estimated NAV of $16.49 per share, with shares recently trading at $10.50 on LODAS Markets. Shares were originally sold for $25 per share.

InPoint reportedly labeled the offer as an opportunity for West 4 to profit by acquiring shares at a deep discount. Additionally, InPoint reminded stockholders that accepting the offer would make them ineligible for future distributions, currently reportedly set at an annual rate of $1.25 per share (though distributions are not guaranteed).

Non-Traded REITs Overvalued?

In a report last May, Investment News raised concerns about potential overvaluation in non-traded REITs, especially those specializing in commercial real estate, suggesting an overvaluation of up to 30%. The ongoing trend of remote work in many American businesses post-pandemic, alongside rising interest rates, has adversely affected commercial real estate.

A recent report from real estate data firm CoStar Group Inc. highlighted a record-high U.S. office vacancy rate, reaching 12.9% in the first quarter, surpassing levels observed during the 2008 financial crisis. These developments raise concerns for investors in non-traded REITs due to their considerably limited share redemption programs, which exacerbate the inherent “liquidity issue” associated with such products.

InPoint Suspends Share Redemptions

Unfortunately for investors, the commercial mortgage non-traded REIT, announced the company has suspended its continuous public offering and share repurchase plan as of Feb. 10, 2023, according to an 8-K filing with the SEC.

The company said the suspension was due to the pace of fundraising in their current public offering and the amount of monthly redemption requests, which are currently more than its fundraising.

The primary offering, share repurchase plan, and distribution reinvestment plan will reportedly remain suspended until further notice. InPoint noted it plans to evaluate strategic alternatives available to the company.

In 2020, the board suspended the company’s public offering, share repurchase plan, distributions, and distribution reinvestment plan during the COVID-19 pandemic, as we previously reported.

InPoint Commercial REIT is just one of several non-traded REITs that have halted redemptions in the past few months, possibly due to the rising interest rates. See Starwood Real Estate Income Trust Limits Redemptions and Blackstone REIT (BREIT) Limits Redemptions

Risks of Non-Traded REITs

The trouble with non-traded REITs is that they are complex and inherently risky products. Lack of liquidity is often problematic for many investors. Investors looking to sell often have difficulty finding a buyer, and when they do, can suffer significant losses on the sale.

Further, the investment itself is unsuitably risky because it is dependent on the overall health of specific sectors of the economy. Non-traded REITs are often less regulated than other types of investments (i.e., mutual funds, stocks, etc.) and generally pay higher sales commissions and fees than these other products.

Recovery of Investment Losses

The White Law Group is investigating FINRA arbitration claims involving broker dealers who may have improperly recommended mortgage REITs to investors.

Brokerage firms are required to perform due diligence on any investment they recommend, including mortgage REITs. They must ensure that the investment is suitable for a particular investor in light of that investor’s age, investment objectives, income, net worth, and investment experience. Given the current risk of devaluation of these REITs, such investments are likely only suitable for wealthy and/or sophisticated investors.

Class Action vs. Individual FINRA Arbitration Lawsuit

People often wonder whether a large class action lawsuit is a better litigation option for them than an individual FINRA arbitration case. The answer depends on many factors, but typically if the loss sustained is large (say larger than $100,000), an individual arbitration claim is likely a better option. Class actions as a recovery option are more appropriate for grouping large numbers of individuals who have small claims – too small to generally pursue individually.

Free Consultation

If you have suffered losses in Inland Commercial Real Estate Income Inc., please call the securities attorneys of The White Law Group at (888)637-5510 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Seattle, Washington.