Investors in Illiquid Steadfast Apartment REIT May Have FINRA Arbitration Claims
Investors in Steadfast Apartment REIT, Inc. (Steadfast REIT, or STAR) who invested on the advice of a broker or wealth manager may be able to recover their investment losses through FINRA arbitration, if the investment was unsuitable or the recommendation to invest was misleading. Headquartered in Irvine, CA, Steadfast REIT was formed in 2013 as a Maryland corporation and operates as a non-traded real estate investment trust (REIT).
STAR is focused on owning and operating a “diverse portfolio of multifamily properties located in targeted markets throughout the United States.” As of September 30, 2020, Steadfast REIT “owned 69 multifamily properties comprising a total of 21,529 apartment homes and three parcels of land held for the development of apartment homes.”
As a publicly registered non-traded REIT, Steadfast REIT was sold through a public offering at $15 per share. In some instances, retail investors may have been solicited to invest by their financial advisor without being fully informed of STAR’s risky and complex nature. As a non-traded REIT, Steadfast REIT is a very illiquid investment product, meaning that shares cannot readily be sold on a national securities exchange. Further, non-traded REITs are generally very expensive investment products and typically include high up-front fees, including selling commissions to a third-party broker-dealer, as well as certain organizational expenses and offering costs. Such fees and expenses add up quickly and may amount to around 12% (or more) of the initial capital invested to acquire shares, acting as a significant drag on investment performance.
Uninitiated investors in non-traded REITs may come to learn too late that their ability to exit their investment position is very limited. This is the case with Steadfast REIT. As recently reported, according to a letter sent to STAR shareholders, the non-traded REIT has lowered its distribution rate, and moreover, has amended its share repurchase program to only allow for share repurchase requests in the event of a death or qualifying disability of a shareholder. As it currently stands, STAR investors will now only receive $0.5250 in annualized distributions, a significant decline from the previous $0.90 annualized distribution.
In March 2020, Steadfast REIT completed its merger with certain affiliated non-traded REITs, including Steadfast Income REIT, Inc. and Steadfast Apartment REIT III, Inc. Investors who invested in either of these affiliated REITs now hold shares in Steadfast REIT. Under the terms of the completed merger, shareholders in Steadfast Income REIT, Inc. received 0.5934 shares of STAR common stock. Shareholders in Steadfast Apartment REIT III, Inc. received 1.43 shares of STAR common stock under the terms of the merger.
The attorneys at Giarrusso Law Group LLC have extensive experience in handling claims on behalf of investors in non-traded REITs such as Steadfast REIT, as well as other complex and illiquid financial products. Investors may pursue a claim to recover monies through securities arbitration before FINRA, or in some instances, through litigation. Investors who wish to discuss a possible claim may contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a confidential, no-cost and no-obligation consultation.