An investment in Black Creek Diversified Property Fund (DPF) is subject to significant risks. Some of the more important risks are summarized below. A more detailed description of the risks associated with the DPF offering is found in the section of the prospectus entitled “Risk Factors.” Investors should read and understand all of the risk factors before making a decision to invest in shares of DPF’s common stock.
Past performance is not a guarantee of future results.
- Investing in real estate assets entails certain risks, including changes in: the economy, supply and demand, laws, tenant turnover, interest rates (including periods of high interest rates), availability of mortgage funds, operating expenses and cost of insurance. This investment will offer limited liquidity options to investors. Real estate investment trusts (REITs) are not suitable for all investors.
- Further, investing in Black Creek Diversified Property Fund (DPF) stock involves additional and substantial risks specific to DPF, including, among others, that:
- There is no public trading market for shares of DPF’s common stock, and DPF does not expect that there will ever be a public trading market for its shares, so redemption of shares by them will likely be the only way to dispose of your shares.
- DPF’s redemption program imposes limits on redemptions. DPF may amend, suspend or terminate its share redemption program at any time. As a result, DPF’s shares have only limited liquidity and may become illiquid. Beginning in the first quarter of 2009 through the third quarter of 2016, redemption requests for Class E shareholders exceeded the redemption limits set forth in DPF’s Class E share redemption program and associated offering materials, which during that time frame was limited to a 5% per year cap and other limitations with respect to Class E shareholders and DPF conducted a number of self-tender offers to supplement this liquidity. As a result, investors who sought to redeem their Class E shares during that period only received a portion of the proceeds they requested, either through the redemption program or self-tender offers that were conducted by DPF, and were required to resubmit redemption requests periodically in order to renew their request to either have their shares tendered or purchased pursuant to a tender offer. During this time period, these Class E shareholders did continue to receive distributions on the shares they retained.
- The purchase and redemption price for shares of DPF’s common stock will be generally based on the NAV of each class of common stock and will not be based on any public trading market. DPF’s NAV will not represent DPF’s enterprise value and may not accurately reflect the actual prices at which DPF’s assets could be liquidated on any given day, the value a third party would pay for all or substantially all of DPF’s shares, or the price that DPF’s shares would trade at on a national stock exchange. The board of directors may amend DPF’s NAV procedures from time to time.
- Some of DPF’s executive officers and directors and other key personnel are also officers, directors, managers, key personnel and / or holders of an ownership interest in its advisor, its dealer manager and / or other entities related to its advisor. As a result, they face conflicts of interest, including but not limited to conflicts arising from time constraints, allocation of investment opportunities and the fact that the fees its advisor will receive for services rendered to DPF will be based on DPF’s NAV, the procedures for which its advisor will assist its board of directors in developing, overseeing, implementing and coordinating.
- If DPF fails to maintain its status as a REIT, it would adversely affect its results of operations and its ability to make distributions to its stockholders.
- The amount of distributions DPF may make is uncertain, are not guaranteed and may be modified at the program’s discretion. DPF may pay distributions from sources other than cash flow from operations including, without limitation, the sale of assets, borrowings or offering proceeds (including the return of principal amounts invested). The use of these sources for distributions would decrease the amount of cash DPF has available for new investments, repayment of debt, share redemptions and other corporate purposes, and could potentially reduce your overall return and dilute the value of your investment in shares of DPF common stock. For each year from 2012 through 2015 and for the quarters ended June 30, 2016, September 30, 2016, December 31, 2016, March 31, 2017 and June 30, 2017, distributions were funded solely from cash flow from operations. The distributions for the three months ended March 31, 2016 were funded 95.3% from cash flow from operations and 4.7% from other sources.
- DPF’s use of leverage increases the risk of loss on its investments.
- The payment of fees by DPF to its advisor and its dealer manager will reduce the cash available for distribution and will increase the likelihood that investors are unable to recover the amount of their investment in DPF.
- In connection with DPF’s offering, it incurs fees and expenses. In particular, DPF expects to incur a dealer manager and distribution fee which are expected to reduce the amount of distributions received by certain investors and as a result will lower the overall return to such investors. Also, DPF has and expects to continue to incur organizational and offering related expenses which reduce the overall cash flow of DPF and negatively impact its NAV and could negatively impact your overall return.
This material must be read in conjunction with the DPF prospectus in order to understand fully all of the implications and risks of the offering of securities to which it relates. This document must be preceded or be accompanied by a prospectus, which contains important information about DPF. This is neither an offer to sell nor a solicitation of an offer to buy the securities described in the DPF prospectus. The offering is being made only by the DPF prospectus. Neither the Securities and Exchange Commission nor any other state securities regulator has approved or disapproved of the securities or determined if the prospectus is truthful or complete. In addition, the Attorney General of the State of New York has not passed on or endorsed the merits of the offering. Any representation to the contrary is unlawful. DPF is not an investment company registered under the Investment Company Act of 1940.