National Healthcare Properties: Investor Lawsuits

National Healthcare Properties (fka Healthcare Trust Inc.) Lawsuits and Liquidation Update

Have you suffered investment losses in National Healthcare Properties (fka Healthcare Trust Inc.)? 

The White Law Group continues to investigate FINRA arbitration lawsuits involving National Healthcare Properties (formerly known as Healthcare Trust Inc.) and the liability that broker-dealers may have improperly recommended to investors. These investors should be aware that lawsuits often stem from unsuitable recommendations, a lack of proper disclosure, and ongoing risks tied to illiquidity.

National Healthcare Properties has recently faced growing scrutiny from shareholders who question whether management’s decisions, such as stock splits, truly benefit investors or mask deeper financial issues.

This firm has reportedly completed its internalization of management as the company considers a public listing on a national stock exchange. Alongside this, the company has rebranded as National Healthcare Properties Inc. to reflect its focus on healthcare real estate better.

Investment Losses? Contact us now for a free consultation!

The Problem with a Reverse Stock Split

The company executed a 4-for-1 reverse stock split after it reported a net loss of $139 million for the first half of 2024, primarily due to $98.2 million in termination fees from the internalization process.  The board also updated the company’s per-share net asset value (NAV) to $13, down from $14 in 2022. Shares of the REIT were initially sold for $25 per share. 

Reverse stock splits can create the illusion of higher share prices, but they often signal financial distress. They may lead to decreased investor confidence, potentially driving the stock’s value down over time.

In the case of National Healthcare Properties, the reverse stock split highlights underlying struggles with profitability and balance sheet strength. A higher-than-average share price looks enticing.

However, investors must know that this move doesn’t always indicate improved fundamentals. In many cases, non-traded REITS that have used reverse splits, especially after years of poor performance, have continued to lose secondary market value.

This type of split also reduces liquidity for investors. As the number of outstanding shares decreases, trading them on an already limited secondary market may become more challenging. This situation is especially concerning for a company like National Healthcare Properties, where liquidity risks were already high due to its non-traded structure.

National Healthcare Properties – Risks and Liquidity Problems

Unfortunately for investors, many financial advisors/brokerage firms that sold non-traded REITs, such as Healthcare Trust Inc., may have understated or misrepresented the risks and liquidity problems. National Healthcare Properties investors continue to face many of the same challenges, including shrinking NAV, uncertainty around dividends, and long holding periods.

HTI specializes in healthcare-related real estate, including medical office buildings and senior housing. The REIT, sponsored by American Realty Capital (now known as AR Global), was part of a commercial real estate empire built by investor Nicholas Schorsch that was involved in an accounting scandal several years ago. Unfortunately, American Realty Capital REITs have had less-than-stellar results for investors.

Liquidity remains a significant challenge for National Healthcare Properties’ shareholders. Unlike publicly traded REITS, non-traded ones limit redemption opportunities. They may also suspend share repurchase programs during times of financial stress.

A vital factor to consider is dividend sustainability. Non-traded REITs often pay dividends that appear attractive. Unfortunately, these distributions can be funded by borrowed money or even investor capital, rather than from operations that generate income. This practice masks underlying financial weakness. It may also expose investors to greater risks and liquidity challenges.

See: Hospitality Investors Trust Inc. (HIT REIT) Files Chapter 11 Bankruptcy 

Are Non-Traded REITs Suitable for You?

Non-traded REITs are high-risk, complex investments and are not suitable for every investor. Before making recommendations to an individual investor, brokerage firms are required by the Financial Industry Regulatory Authority (FINRA) to disclose all the risks of an investment. Recommendations should only be made if the investment is suitable for an individual investor, taking into account their age, investment objectives, investment experience, and risk tolerance.

Brokerage firms that do not perform adequate due diligence on an investment and/or make unsuitable recommendations can be held accountable for investment losses through FINRA arbitration.

High commissions could be a motivating factor for unscrupulous financial advisors to sell the REIT regardless of whether the investment is in line with the client’s investment objectives and profile. Moreover, the total commissions and expenses make it difficult for non-traded REITs to perform in line with the market.

The added complication of a reverse stock split only worsens the situation, since it often signals distress and makes it even harder for investors to understand the actual state of their investment fully.

This situation is stressful for National Healthcare Properties’ investors, especially those who must wait years (or longer) to recover even a fraction of their principal. When redemption programs are open, they may come with caps or be oversubscribed. In other words, investors end up stuck with their illiquid shares. The only alternative is to sell on secondary markets, where liquidity risks often drive prices down far below an investment’s original offering price.

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 substantial (say, exceeding $100,000), an individual arbitration claim is likely a better option. Class action lawsuits as a recovery option are more appropriate for grouping large numbers of individuals who have small claims, too small to generally pursue individually.

Another distinction is that class action settlements may result in smaller payouts for each individual. These smaller payouts may not fully reflect your or another person’s individual losses. On the contrary, FINRA arbitration allows for claims to be tailored to a specific investor’s facts. For investors, arbitration often offers the best opportunity to recover losses associated with unsuitable sales or failure to disclose liquidity risks.

Investment Losses? Contact us now for a free consultation!

National Healthcare Properties – Frequently Asked Questions (FAQs)

1. What is National Healthcare Properties (formerly Healthcare Trust Inc.)?
   National Healthcare Properties, formerly known as Healthcare Trust Inc., is a non-traded real estate investment trust (REIT) focused on healthcare-related real estate such as medical office buildings and senior living facilities. It was previously sponsored by American Realty Capital (now AR Global).
2. Why are investors filing lawsuits related to this REIT?
   Many investors allege that brokers misrepresented the REIT as a safe or income-producing investment. Issues such as lack of liquidity, declining net asset value (NAV), and poor performance have led to significant losses, prompting FINRA arbitration claims.
3. What is a reverse stock split, and why is it a red flag?
   A reverse stock split reduces the number of outstanding shares while proportionally increasing the share price. Although it doesn’t change the overall value of the investment, it often signals financial distress and may decrease investor confidence.
4. What is the current value of shares compared to the original offering price?
   Shares were initially offered at $25.00 per share. Recent secondary market sales have seen some shares priced as low as $2.15, representing substantial losses for investors.
5. Are non-traded REITs like this one risky?
   Yes.Non-traded REITs are illiquid, high-commission investments that are generally suitable only for long-term investors with a high risk tolerance. They may not be ideal for retirees or those requiring immediate access to funds.
6. Can I join a class action lawsuit against National Healthcare Properties (Healthcare Trust Inc.)?
   While class action lawsuits are an option, investors with significant losses (typically over $100,000) may be better served by filing an individual FINRA arbitration claim for a potentially greater recovery.
7. How do I know if I have a case against my broker or brokerage firm?
   Suppose your financial advisor failed to disclose the risks of investing in Healthcare Trust Inc. or recommended it without regard to your financial situation or objectives. In that case, you may have a valid claim. A free consultation with a securities attorney can help determine this.
8. What is FINRA arbitration?
   FINRA arbitration is a legal process that allows investors to resolve disputes with brokerage firms and financial advisors. It is typically faster and less costly than traditional litigation.
9. How much does it cost to file a FINRA arbitration claim?
   Most law firms handling these claims, including The White Law Group, work on a contingency fee basis. That means you don’t pay legal fees unless we recover money on your behalf.
10. How do I get started if I believe I’ve been wronged?

Call The White Law Group at 888-637-5510 for a free consultation to discuss your potential case involving National Healthcare Properties and explore your legal options.

About The White Law Group 

The White Law Group, LLC is a national law firm specializing in securities fraud, arbitration, investor protection, and compliance, dedicated to helping investors in claims across all 50 states against their financial professionals or brokerage firms. Since the firm launched in 2010, it has handled over 800 FINRA arbitration cases.        

Our firm represents investors in all types of securities-related claims, including those involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, unauthorized trading, and many others.

With over three decades of experience in securities law, The White Law Group has the expertise to help investors recover their losses.

Investment Losses? Contact us now for a free consultation!