SmartStop Self Storage REIT Liquidation

SmartStop Self Storage REIT: Suspending Shares, Exploring Liquidation Options  

The White Law Group continues to investigate potential securities claims involving broker dealers who may have improperly recommended SmartStop Self Storage REIT Inc. to investors.   

SmartStop Self Storage REIT Inc., a self-managed and non-traded REIT focused on self-storage properties, reportedly announced the suspension of its share redemption program and distribution reinvestment plan (DRP), according to an article in the DI Wire. The company’s board is exploring “alternatives for stockholder liquidity,” which may include listing its stock on a national securities exchange.

According to the company, redemption requests in the queue and future requests will not be processed unless the board resumes the program. November distribution payments will be made in cash, along with future distributions, barring a DRP resumption.The company had previously filed for a proposed public offering in April 2022 under the ticker “SMST” on the NYSE, though the registration statement reportedly remains inactive.

Secondary Sales Price

According to Lodas Markets, a secondary market for non-traded investments, shares of SmartStop are currently trading for just $9.50 per share. Its estimated net asset value (NAV) per share was $15.25 as of September 30, 2023.

Third Party Tender Offers -SmartStop Self Storage 

According to a letter to shareholders on March 25th, 2024, SmartStop’s Board of Directors is recommending shareholders to ignore CMG Partners, LLC recent tender offer.  CMG is offering to acquire up to 225,000 shares of Class A common stock of the Company at a price of $7.50 per share. According to SmartStop, it estimated its most recent Net Asset Value at $15.25 per share.

The company reportedly instructed shareholders to reject the mini-tender offer, claiming that it is “an attempt to capitalize on the suspension of our share redemption program.”    

The company claims in the letter that while the Company’s share redemption program (the “SRP”) is currently partially suspended, stockholders currently do have the ability to redeem their shares with the Company in certain cases “such as death, disability, confinement to a long-term care facility”.  

The Risks of Complex Investments: Non-traded REITs 

Compared to traditional investments, such as stocks, bonds and mutual funds, non-traded REITS, like SmartStop Self Storage REIT, are considerably more complex and involve a high degree of risk. Unfortunately, many investors were not made adequately aware of the risks and liquidity problems associated with REITs.    

First, liquidity risk is a significant concern. Unlike publicly traded REITs, non-traded REITs are not listed on stock exchanges, making it challenging to sell or redeem shares easily. Investors may find themselves locked into their investments for several years, potentially limiting access to their capital when needed. 

Secondly, valuation risk is prevalent in non-traded REITs. These investments often lack transparent pricing mechanisms, making it difficult to ascertain the true value of shares. Investors may face uncertainty about the accuracy of reported net asset values (NAVs), which can impact their understanding of the investment’s performance and potential returns.  

Moreover, non-traded REITs frequently charge substantial fees and commissions, which can erode returns over time. 

Filing a Complaint against your Brokerage Firm    

Brokerage firms that do not perform adequate due diligence on an investment or demonstrate a breach of fiduciary duty can be held accountable for losses incurred through FINRA arbitration.    

FINRA, the regulator who oversees brokers and brokerage firms, provides FINRA Dispute Resolution as an arbitration venue for investors with claims against their brokerage firm or financial professional.  It provides investors with an opportunity to attempt to recoup their investment losses and is an alternative to filing such claims in court.

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 investing in SmartStop Self Storage REIT Inc. the securities attorneys of The White Law Group may be able to help you. Please call the offices 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 Seattle, Washington.