Pacific Oak Strategic Opportunity REIT II Tender Offer Price suggests Losses for Investors

The White Law Group continues to investigate FINRA arbitration claims involving non-traded REITs such as Pacific Oak Strategic Opportunity REIT II.

Unfortunately for investors it appears that many financial advisors/brokerage firms that sold non-traded REITs such as Pacific Oak, may have understated or misrepresented the risks and liquidity problems.

According to a letter to investors, MacKenzie Capital Management, LP has launched an offer to purchase shares of acific Oak Strategic Opportunity REIT II for $2.50 per Class A and T Share. 

Mackenzie notes that although Pacific Oak intends to merge into Pacific Oak Strategic Opportunity REIT, Inc. during the second half of 2020, the potential merger is not a liquidity event and there can be no guarantee that the merger will  occur in a timely manner, or at all.

According to Mackenzie, if the merger does go through, the combined company will be a perpetual-life REIT which means that “the company will not list or liquidate, but institute an ongoing offering and share redemption program.” Unfortunately for investors, both entities recently stated, “that they have had difficulty satisfying redemption requests under their share redemption programs and that the combined company may continue having difficulty satisfying demand for liquidity.”

Further, the REITs redemptions program was oversubscribed in January 2020 and in February it suspended its redemption program due to the pending merger.

No distribution was paid for the first quarter of 2020 and the REIT has given no indication if, or when, distributions will resume, according to Mackenzie.

The REIT reportedly has estimated that the net asset value is $10.25 per Class A and T Share. 

Real estate investment trusts (REITs) are complex and inherently risky products. Compared to traditional investments, such as stocks, bonds and mutual funds, REITs are significantly more complex and often better suited for sophisticated and institutional investors.
Another problem often associated with REIT recommendations is the high sales commissions brokers typically earn for selling  REITs – as high as 15%.  In addition to the high risks, non-traded REITs often lack liquidity. Investors looking to sell these investments often have difficulty finding a buyer, and if they are able to find one can suffer significant losses on the sale.

Filing a Complaint Against your Brokerage Firm

Prior to 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 given their age, investment objections, 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 non-traded REITs 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 the REIT to perform in line with the market.

Free Consultation with a Securities Attorney

If you are concerned about your investment in Pacific Oak Strategic Opportunity REIT II, you may be able to file a complaint against your brokerage firm. 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 Franklin, Tennessee.

For more information on The White Law Group, visit http://whitesecuritieslaw.com.