Hartman vREIT and Silver Star Properties REIT Investors May Have FINRA Claims to Recover Losses
Investors in Hartman vREIT XXI, Inc. (Hartman) and affiliate Silver Star Properties REIT (formerly Hartman Short Term Income Properties XX Inc.) (Silver Star) may have claims to recover investment losses through securities arbitration before the Financial Industry Regulatory Authority (FINRA) if the investment was recommended by a financial advisor and the recommendation to invest lacked a reasonable basis or was sold via a misleading sales presentation. Hartman, a publicly registered non-traded real estate investment trust (REIT) recently advised securities regulators that its ability to continue as a going concern is in doubt. Silver Star, also a non-traded REIT, is seeking to separate itself from Hartman, although Silver Star has encountered its own challenges, leading to the suspension of its share redemption plan.
Hartman invests in value-oriented commercial real estate such as office, retail, industrial, and warehouse properties located primarily in Texas. In its most recent quarterly report filed with the U.S. Securities and Exchange Commission, Hartman noted that it has two revolving credit loans totaling $55 million which are due to mature in March 2023, as well as a $2.41 million term loan also due to mature in March 2023. Citing uncertainty as to its ability to renew or extend those loans, Hartman warns that “there is substantial doubt about the Company’s ability to continue as a going concern within one year of the issuance date of these consolidated financial statements.” Hartman has also reported, as of the third quarter of 2022, a year-to-date net loss of approximately $1.4 million and bank overdrafts of $407,000.
In light of these headwinds, Silver Star is in discussions with Hartman’s management to negotiate a separation of the companies. Silver Star, as part of a recent rebranding campaign, intends to expand its investment classes to include self-storage facilities – as part of a broader move away from primarily functioning as an office REIT. Silver Star recently announced, however, that this expansion plan is on hold. This delay follows a previous announcement on July 8, 2022 that Silver Star was suspending its share redemption plan.
As a non-traded REIT, investors cannot easily exit their investment position in Silver Star (or, likewise, in Hartman), as they might with a publicly traded stock or ETF by simply selling shares on a liquid national securities exchange. Rather, investors in non-traded REITs such as Silver Star and Hartman typically must hold their investment for a lengthy period of time, in some instances as long as 7 to 10 years, until such time as a liquidity event transpires.
The attorneys at Giarrusso Law Group LLC have extensive experience in handling claims on behalf of investors in non-traded REITs, as well as similar 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 at (201) 771-1115 or info@gialawgroup.com for a no-cost, confidential consultation.