Summit Healthcare REIT has declined in value on secondary markets by over 30%. It is a non-traded real estate investment trust (REITs) that offers a broad spectrum of services for the buying, selling, leasing, and management of healthcare housing properties. Its shares have not been available for repurchase for many years now, and the company has made no announcements on when these will be available for trading.
Summit Healthcare REIT Decline in Value
At present, Summit Healthcare (REIT) is valued at $2.80/share by its sponsor. In May 2018, Mackenzie Realty Capital, Inc. had released a tender offering $1.56/share, which was lower than the REIT’s current value. Interestingly, an independent secondary market source pegs the share value at around $1.75/share. This value is nearer to the tender offer made by Mackenzie Realty Capital, Inc. Sellers who purchased the shares at the original price are looking at a loss now; ditto those who may want to avail of the tender offer.
This performance of the Summit Healthcare REIT is in stark contrast to how REITs have performed, in general, over the past few years. For example, investors in the Vanguard Real Estate ETF, when it was released in December 2009, have seen an 11.65% return on their investment. $10,000 invested then would be worth more than $30,000 now.
How Healthcare REITs make their Money
Some healthcare REITs don’t use the traditional landlord-tenant model with all of their properties. Senior housing assisted living, and skilled nursing facilities are often operated as partnerships. Some healthcare real estate investors invest in a combination of properties and specialize in a specific property type. The most common type of healthcare real property is a senior housing and assisted living. The REIT and the operator each get a share of the facility’s operating profits from the partnership of the REIT.
Real Estate Investment: Issues with Non-Traded REITs
Non-Traded REITs, such as the Summit Healthcare REIT, are offered by many broker-dealer firms. These investments are an example of a Direct Participation Program. Because they are difficult to trade on exchanges like the NYSE, their illiquidity presents a challenge to investors who may want to benefit from an upswing in the share value or may want to sell stocks quickly when prices fall. These shares can only be transacted on secondary exchanges. These investment types are categorized under Regulation D by the United States Securities and Exchange Commission (SEC). In other words, these are private placements that do not need to be registered under Section 5 of the Securities Act of 1933.
It is not uncommon to have investors distressed about investments not being supervised by the financial advisors at the broker-dealer firms or of downright poor representation at the point of sale. These issues gall all the more to an investor who’s making a loss. The inability of investors to sell quickly on the exchanges results in less than transparent trading, and many investors end up selling the REIT shares for a lower price than the purchase value. This problem is absent with ETF REITs, and many financial consultants advise their clients to have ETF REITs in their portfolios.
How to Recover Losses from Summit REIT
Investors wishing to recover losses from Summit REIT can do so in the following ways –
- Investors can approach the investment company to buy back the non-traded REIT.
- The non-traded REITs can be sold on the secondary market, but this will be at a far lower value than the purchase price.
- Investors can file a FINRA claim against the broker-dealer firm.
A FINRA claim, filed privately, can help investors make good some of their losses. These customer disputes do not require any depositions and focus only on a paper trail. FINRA claims are a faster and yet less hectic alternative to court claims. These claims are heard on a private forum, ensuring quick dispute resolution.
Haselkorn & Thibaut have helped investors recover investment losses. Haselkorn and Thibaut, P.A. is a nationwide law firm specializing in handling investment fraud and securities arbitration cases. The law firm has offices in Palm Beach, Florida, on Park Avenue in New York, as well as Phoenix, Arizona, and Cary, North Carolina. The two founding partners have nearly 45 years of legal experience.
Experienced attorneys at Haselkorn & Thibaut, P.A., are available for a free consultation as a public service. Call today for more information at 1-800-856-3352.