• December 12, 2023
• Uncategorized

The Story Behind Real Estate Investment Trusts and the Silver Star REIT

 

The Wolper Law Firm is currently investigating claims for those clients who have experienced investment loss in the Silver Star Properties Non-Traded Real Estate Investment Trust.  Non-Traded Real Estate Investment Trusts (“Non-traded REITs”) do not trade a public securities exchange.  For this reason, non-traded REITs can be illiquid, meaning investors may be unable to sell their investments on demand.  Typically, the commissions generated on non-traded REITs are higher than industry norm and the investments themselves may be subject to extreme volatility due to associated risk factors.  Non-traded REITs are only suitable for investors with a long-term investment horizon who are willing to accept higher levels of risk in their investments.

 

Financial Advisors often sell non-traded REITs because the commission available is higher than traditional investment products like stocks and bonds.  Many Financial Advisors do not adequately explain the risk factors of non-traded REITs and the investor’s inability to sell the investment upon demand.

 

REITs have traditionally been sold to customers for their high dividend yield. However, many factors impact the ability of the REIT to maintain dividend and share price stability, including the fluctuation in interest rates, the amount and cost of leverage used by the REIT and collectability of the rents or mortgage payments that comprise the underlying assets within the REIT.

 

Silver Star Properties REIT is a non-traded REIT that reportedly owned 44 commercial properties worth millions in Texas. According to recent articles, in September 2023, an indirect subsidiary of Silver Star Properties known as Hartman SPE LLC filed a voluntary petition under Chapter 11 of the Bankruptcy Code in an attempt to shift to a self-storage asset class amidst an ongoing struggle to pay its undisputed creditors in full, and complete refinancing of its maturing senior indebtedness.  Silver Star has also suspended distributions to stockholders and does not anticipate being able to pay any distributions for the foreseeable future. Thus, investors will no longer receive income and are likely to lose their principal because of the bankruptcy filing.

 

Hartman SPE’s struggles are the result of several issues within the company including: failure in the management of business by its former CEO Allen Hartman, delayed SEC filings, tenant dissatisfaction resulting in cash shortages, and it’s inability to allocate resources efficiently enough to maximize capital. As a result, the Securities and Exchange Commission (SEC) initiated an inquiry into SilverStar as they attempted to investigate the possibility of certain violations of fiduciary and other duties to Silver Star by Hartman.

We Help Investors Recover Investment Losses

Investors may be able to recover investment losses against the brokerage firms that sold this product because of failed due diligence prior to recommending that their retail clients invest.  Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the financial advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.

 

The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at (800) 931-8452 or by email at mwolper@wolperlawfirm.com.