Securities Lawyers Blog
The securities lawyers of Gana Weinstein LLP are investigating recommendations by brokerage firms for their clients to invest in Strategic Student & Senior Housing Trust (SSSHT) – a non-traded real estate investment trust (non-traded REIT). Strategic Student & Senior Housing Trust has stopped distributing a dividend leaving investors with no returns for the time being. As is too common in the brokerage industry, firms fail to understand the flawed non-traded REIT business model and only recommend these products for their 7% commissions – not because they benefit investors.
Strategic Student & Senior Housing Trust has been particularly hard hit in the recent recession due to the nature of its investments properties. Strategic Student and Senior Housing Trust is a public, non-traded REIT focused exclusively on assets in the student housing and senior housing areas. The fund is premised on investing in two areas “with strong demographic drivers from college students and baby boomers” according to its website.
The fund states that SSSHT intends to take advantage of the growing demand for recession-resistant asset classes and desirable demographic trends. The REIT states that it believes that SSSHT can provide stability, diversification, income, and potential growth over the long-term.
However, in an April 2020 prospectus update, Strategic Student & Senior Housing Trust stated that it incurred a net loss of approximately $19.6 million for the fiscal year ended December 31, 2019. Further, the REITs accumulated losses are approximately $41.8 million as of December 31, 2019. Moreover, due to the current recession the REIT suspended its primary offering while still early in its acquisition stage. Strategic Student & Senior Housing Trust warned that its operations may not be profitable in 2020.
Further Strategic Student & Senior Housing Trust investors are now trapped in the REIT when in March 2020, when the REIT’s board of directors determined to suspend the share redemption program with respect to common stockholders effective as of May 3, 2020. The REIT stated that until it can establish a net asset value per share it was not currently possible to determine accurately redeem or sell shares.
Our firm often handles cases involving direct participation products (DPPs), private placements, Non-Traded REITs, and other alternative investments. These products are almost always unsuitable for middle class investors. In addition, the brokers who sell them are paid additional commission in order to hype inferior quality investments providing perverse incentives for brokers to sell high risk and low reward investments.
According to studies, non-traded REITs have historically have underperformed even safe benchmarks, like U.S. treasury bonds – meaning that non-traded REITs provide paltry investment returns considering the risk an investor takes. Alternative investment products like oil and gas partnerships, REITs, and equipment leasing programs are only appropriate for a narrow band of investors under certain conditions due to the high costs, illiquidity, and huge redemption charges of the products, if they can be redeemed at all.
However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them. These products have become so popular among brokers without providing any benefit to investors that many states now limit investors from investing more than 10% of their liquid assets in Non-Traded REITs. Many states impose these limitations because its understood that that they provide virtually no benefit to investors in relationship to their risks.
Investors often fail to understand that they have lost money until many years after agreeing to the investment. In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.
The investment lawyers at Gana Weinstein LLP represent investors who have suffered investment losses due to allegations of wrongdoing. The majority of these claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.