MacKenzie Realty Capital purchased shares of ARC Healthcare Trust III for $12.05
Are you concerned about your investment losses in ARC Healthcare Trust III? If so, The White Law Group may be able to help you recover your losses by filing a FINRA arbitration claim against the brokerage firm that sold you the investment.
ARC Healthcare Trust III is a publicly registered non-traded real estate investment trust sponsored by AR Global (the successor business to AR Capital). The company currently owns a portfolio of 19 properties purchased for $128 million.
Shares were originally sold for $25.00 each. In May, the company suspended the company’s distribution reinvestment plan, according to a filing with the Securities and Exchange Commission. Distributions for May and June were to be paid to stockholders in cash with no DRIP shares issued.
Tender Offer
MacKenzie Realty Capital Inc., a non-traded business development company, purchased 3,365 shares of ARC Healthcare Trust III for $12.05 each. MacKenzie originally offered to purchase 200,000 of the REIT in the tender offer that commenced in May 2017.
ARC Healthcare Trust III urged its shareholders to reject the unsolicited tender offer, saying that the price is too low and that MacKenzie incorrectly stated that the REIT has not discussed its liquidity strategy. The REIT clarified that a special committee of independent directors is considering a range of strategic alternatives, but has yet to make a decision to enter into any transaction at this time.
Last month, upon shareholder approval, an affiliated non-traded REIT, Healthcare Trust Inc., agreed to purchase substantially all of ARC Healthcare Trust III’s assets for approximately $120 million.
The Problem with Non-traded REITs
One of the major downfalls of REITs is the lack of liquidity. Non-traded REITs are not sold on the public market, therefore they lack liquidity. This prevents shares from being sold quickly and forces investors to search for a secondary market that is often very limited. The secondary market price is almost always significantly below the purchase price.
Many brokerage firms target investors that were retired or near retirement, often emphasizing the potential income the REIT may provide.
Unfortunately, some brokerage firms failed to disclose that it is not uncommon for REITs to borrow money in order to make distributions. In addition, distributions are often merely a return of principle. REITs are complex high risk products that are not suitable for most investors.
Brokerage firms have a fiduciary duty to its clients to perform adequate due diligence on an investment prior to recommending it for sale. They must ensure that any investment recommended is appropriate in light of the investor’s age, investment experience, net worth, and investment objectives. Given what is now known about non-traded REITs, it is clear that certain of the brokerage firms that sold this investment failed in its fiduciary duty to its clients.
If you suffered losses as a result of your purchase of ARC Healthcare Trust III or another AR Global offering please call the securities attorneys of The White Law Group at 888-637-5510 for a free consultation.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee.
For more information on the firm, please visit https://whitesecuritieslaw.com.
Last modified: March 8, 2024
