Resource Real Estate REITs Agree to Merge

Concerned about your investment in a Resource Real Estate REIT?

The White Law Group is investigating potential FINRA arbitration claims involving broker dealers who may have unsuitably recommended non-traded REITs such as Resource Real Estate REITs to investors.

According to an article in the DI Wire today, three non-traded real estate investment trusts sponsored by Resource Real Estate, an asset management company that specializes in real estate investments, have agreed to merge to create a $3 billion self-managed REIT.

Resource Real Estate Opportunity REIT II Inc. reportedly plans to acquire Resource Real Estate Opportunity REIT I and Resource Apartment REIT III Inc. in separate stock-for-stock transactions. According to the company, the mergers will combine three portfolios of suburban apartment communities in markets with income and employment growth. 

If stockholders approve the deal, the mergers are expected to close during the fourth quarter of 2020.

The company notes that its apartments are approximately 94 percent occupied, with rent collections averaging approximately 98 percent over the past five months during the COVID-19 pandemic, according to SEC filings.

Risks of Non-Traded REITs

Real estate investment trusts (REITs) are complex and inherently risky products. Unfortunately for investors, many REITs have taken a hit due to the Covid-19 global pandemic, and some have suspended distributions during this  uncertain time.

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 Resource Real Estate REITs, 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 www.whitesecuritieslaw.com.