Investors in KBS Growth & Income REIT May Have FINRA Arbitration Claims
Investors in KBS Growth & Income REIT (KBS) may have arbitration claims to be pursued before the Financial Industry Regulatory Authority (FINRA), in the event that the investment was recommended by a financial advisor without a reasonable basis, or the investor was otherwise misled into investing in KBS without being adequately informed of the investment’s many risk components. Formed as a Maryland corporation in January 2015, KBS is structured as a real estate investment trust (REIT) focused on acquiring and managing “a diverse portfolio of core real estate properties and real estate-related assets.”
As a publicly registered non-traded REIT, KBS was initially offered to investors at a price of $10.39 or $10 per share, for Class A and Class T shares, respectively. KBS Growth & Income REIT’s initial offering launched in June 2015 and raised some $76.8 million before closing in April 2016. Subsequently, in October 2017, KBS launched a second private placement offering that was suspended in December 2019 and formally terminated in 2020. As of March 31, 2020, the company had invested in three office properties and had also made an investment in an unconsolidated joint venture.
Unfortunately, investors may have suffered losses in this complex and risky investment. To begin, as a non-traded REIT, investors cannot easily exit their investment position in KBS, as they might with a publicly traded stock or ETF by simply selling their shares on a liquid national securities exchange. Rather, investors in non-traded REITs such as KBS typically must hold their investment for a lengthy period of time, in some instances for as long as 7 to 10 years, until such time as a liquidity event transpires.
In mid-2020, KBS formally announced an adjustment to its distribution policy, citing the uncertainty caused by the Covid-19 pandemic. Specifically, KBS indicated that distributions would be based on a single quarterly record date beginning with the third quarter of 2020, with any distributions to be determined by the board of directors based on the company’s financial condition.
Subsequently, in August 2020, KBS altogether terminated its distribution reinvestment plan to pursue a liquidation strategy. And in December 2020, KBS notified investors it would delay its liquidation strategy following a “significant decrease” in its net asset value (NAV) per share. In fact, as of the year prior (2019), NAV had dropped to $4.90 per share from $8.43 per share. KBS cited Covid-19, civil unrest, and a drop in oil prices as all negatively impacting its property portfolio in Houston, Portland, and Chicago.
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 by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost, confidential consultation.