NorthStar Healthcare Income Fund losses represent one of the most significant non-traded REIT failures in recent years. If you invested in NorthStar Healthcare Income, Inc. and watched your investment lose approximately 70% of its value, you are not alone. Thousands of investors across the country trusted their financial advisors when they recommended this non-traded REIT, only to suffer devastating losses when the fund’s share price collapsed from $10.00 to just $3.03 per share.
At Varnavides Law, we represent investors who have suffered significant losses in failed investment products like NorthStar Healthcare. Our founding attorney spent 10 years at a prominent law firm defending broker-dealers and financial institutions. Now, we use that insider knowledge to fight for investors and hold negligent financial advisors accountable through FINRA arbitration.
Key Takeaways
- NorthStar Healthcare Income REIT share values declined from $10.00 to $3.03 (approximately 70% loss)
- The fund raised approximately $1.8 billion from investors between 2015-2016
- Distributions were suspended in February 2019, eliminating income for investors
- High upfront commissions (7-10%) may have motivated unsuitable recommendations
- Investors may recover losses through FINRA arbitration against brokerage firms
- Time limits apply to filing claims, so prompt action is essential
What Was NorthStar Healthcare Income Fund?
NorthStar Healthcare Income, Inc. was a publicly registered, non-traded real estate investment trust (REIT) that focused on healthcare real estate investments. According to SEC filings, the company was formed in Maryland in October 2010 and commenced operations in February 2013.
The REIT’s investment strategy centered on acquiring and managing a diversified portfolio of investments in the mid-acuity senior housing sector, including:
- Assisted living facilities
- Memory care communities
- Skilled nursing facilities
- Independent living communities
- Continuing care retirement communities
Between 2015 and 2016, NorthStar Healthcare raised approximately $1.8 billion from retail investors through its initial public offering and a follow-on offering. The shares were sold at $10.00 per share, with promises of stable income through regular distributions.
Understanding Non-Traded REITs: According to the SEC Investor Bulletin on REITs, non-traded REITs like NorthStar Healthcare are illiquid investments that do not trade on stock exchanges. This means investors cannot easily sell their shares on an open market, making it extremely difficult to exit a position if the investment performs poorly.
Timeline: How NorthStar Healthcare Investors Lost 70% of Their Investment
The decline of NorthStar Healthcare Income REIT occurred over several years, leaving investors with few options as their investment lost value.
| Date | Event | Share Value |
|---|---|---|
| 2015-2016 | Initial offering to investors | $10.00/share |
| October 2018 | NAV decline announced; repurchases limited to death/disability | $7.10/share |
| February 2019 | All distributions to shareholders suspended | $6.25/share |
| June 2020 | NAV further reduced; all share repurchases suspended | $3.89/share |
| 2021 | Secondary market trading at steep discounts | $1.50/share or less |
| 2024 | Comrit Investments tender offer | $1.01/share |
| June 9, 2025 | Welltower acquisition completed | $3.03/share |
On June 9, 2025, an affiliate of Welltower Inc. completed its acquisition of NorthStar Healthcare Income for $3.03 per share in an all-cash transaction valued at approximately $900 million. This means investors who purchased shares at the original $10.00 offering price received only 30 cents on the dollar for their investment, representing a 70% loss of principal.
Why Did Financial Advisors Recommend NorthStar Healthcare?
The unfortunate reality is that many financial advisors recommended NorthStar Healthcare Income to their clients not because it was suitable for the investor’s needs, but because of the substantial commissions the product paid to broker-dealers.
The Commission Structure
According to the prospectus, NorthStar Healthcare paid:
Upfront Fees
- Selling Commission: Up to 7% of gross proceeds
- Dealer-Manager Fee: Up to 3%
- Total Upfront: Up to 10% of investment
Ongoing Fees
- Acquisition Fee: 2.25% per property
- Asset Management Fee: 1% annually
- Disposition Fee: 3% per property sale
This means that for every $10,000 invested, only approximately $8,650 or less actually went toward purchasing investment assets. The remaining amount went to commissions, fees, and other costs. These high upfront costs created a significant hurdle that the investment needed to overcome just for investors to break even.
Warning Sign: When a financial product pays 7-10% in upfront commissions, it creates a conflict of interest. Financial advisors may be incentivized to recommend the product regardless of whether it is suitable for the client’s investment profile, risk tolerance, or liquidity needs.
How Were Investors Harmed?
Investors who purchased NorthStar Healthcare Income shares suffered harm in multiple ways:
- Principal Losses: Investors lost approximately 70% of their original investment when the Welltower acquisition closed at $3.03 per share.
- Lost Income: When distributions were suspended in February 2019, investors lost the income stream they were counting on, often for retirement.
- Illiquidity: Investors could not sell their shares when problems emerged because non-traded REITs lack a public trading market.
Many of the investors who purchased NorthStar Healthcare were elderly or retired individuals seeking stable income. They relied on their financial advisors to recommend investments that were appropriate for their conservative risk tolerance and income needs. Instead, they received recommendations for a high-risk, illiquid investment that ultimately failed to deliver.
Grounds for FINRA Arbitration Claims
If you lost money in NorthStar Healthcare Income REIT, you may have grounds to pursue a FINRA arbitration claim against the brokerage firm and financial advisor who recommended the investment. Common legal theories in NorthStar Healthcare cases include:
Unsuitable Investment Recommendations
Under FINRA Rule 2111, broker-dealers and their representatives must have a reasonable basis to believe that a recommended investment is suitable for the customer based on their investment profile. This includes considering factors such as:
- Age and life stage
- Financial situation and needs
- Investment objectives
- Risk tolerance
- Liquidity needs
- Investment time horizon
- Other investments and overall portfolio
Non-traded REITs like NorthStar Healthcare are generally considered high-risk, illiquid investments that are unsuitable for conservative investors, elderly clients, or those who may need access to their funds.
Failure to Conduct Due Diligence
According to FINRA Regulatory Notice 10-22, broker-dealers must conduct reasonable due diligence on the investment products they recommend. This includes understanding the risks, fee structure, and potential performance issues. In many cases, brokerage firms failed to adequately investigate NorthStar Healthcare before approving it for sale to their clients.
Misrepresentation and Omission of Material Facts
Some investors have alleged that their financial advisors misrepresented NorthStar Healthcare as a safe, bond-like investment when it was actually a high-risk speculative product. Material facts that may have been omitted include:
- The true risks associated with non-traded REITs
- The illiquid nature of the investment
- The high commission structure and its impact on returns
- The fact that distributions might come from investor capital rather than profits
- The lack of an established secondary market for selling shares
Over-Concentration
Some investors had their portfolios heavily concentrated in NorthStar Healthcare or similar non-traded REIT products. Prudent investment practices require diversification to protect investors from the failure of any single investment.
Elder Financial Abuse
In cases involving elderly investors, claims may also include elder financial abuse, particularly where the investment was clearly unsuitable for someone in or approaching retirement who needed conservative, income-producing investments.
Brokerage Firms That Sold NorthStar Healthcare
NorthStar Healthcare Income was primarily sold through independent broker-dealers. Investors have filed FINRA arbitration claims against numerous firms, including:
- First Allied Securities
- LPL Financial
- Woodbury Financial Services
- Cetera Investment Services
- Independent Financial Group
In a notable 2021 case, a three-person FINRA arbitration panel ordered Independent Financial Group and a former broker to pay $1 million in compensatory damages for losses related to NorthStar Healthcare and other private placements. This decision demonstrates that investors can successfully recover losses when brokerage firms fail to meet their obligations.
If you invested in NorthStar Healthcare through any brokerage firm and suffered losses, you may be eligible to file a FINRA arbitration claim to recover your investment.
How FINRA Arbitration Works for NorthStar Healthcare Claims
FINRA arbitration is the primary method for investors to recover losses from brokerage firms. FINRA operates the largest securities dispute resolution forum in the United States. Here is what the process typically involves:
Step 1: Case Evaluation – An experienced investment fraud attorney reviews your account statements, investment history, and communications to assess the strength of your claim.
Step 2: Filing the Claim – A Statement of Claim is filed with FINRA, outlining the alleged misconduct and damages sought.
Step 3: Discovery – Both sides exchange relevant documents and information. Your attorney will obtain internal records from the brokerage firm.
Step 4: Arbitration Hearing – A panel of arbitrators hears evidence and testimony from both sides before issuing a decision.
Unlike court litigation, FINRA arbitration is generally faster and less formal. Most cases are resolved within 12-18 months, although timelines can vary based on case complexity and scheduling.
Time Limits for Filing Claims
If you are considering a FINRA arbitration claim for NorthStar Healthcare losses, it is important to understand that time limits apply. Under FINRA Rule 12206, claims must be filed within six years of the event giving rise to the claim.
Time-Sensitive: If you purchased NorthStar Healthcare shares in 2015 or 2016, the six-year eligibility window may be approaching or may have already passed for some claims. However, arguments can sometimes be made that the clock began running at a later date, such as when distributions were suspended or when the Welltower acquisition was announced. Contact an attorney promptly to evaluate your specific situation.
What Damages Can You Recover?
In a successful FINRA arbitration claim, investors may be able to recover:
- Principal losses: The difference between what you paid for shares and what you received (or would have received) in the acquisition
- Lost income: Distributions that would have been paid had you invested in a suitable alternative
- Lost opportunity cost: Returns you would have earned had your funds been invested appropriately
- Interest: Prejudgment interest from the date of investment or loss
- Attorney fees and costs: In some cases, the arbitration panel may award fees
Why Choose Varnavides Law for Your NorthStar Healthcare Claim
When you are pursuing a claim against a brokerage firm, you need an attorney who understands how these firms operate from the inside. Gary Varnavides spent 10 years at Sichenzia Ross Ference LLP defending broker-dealers and financial institutions in investor disputes. He knows the strategies they use, the defenses they raise, and the evidence that matters most in these cases.
Now, at Varnavides Law, we put that insider knowledge to work for investors. We fight to hold financial advisors and their firms accountable when they recommend unsuitable investments like NorthStar Healthcare Income REIT.
Experience That Matters:
- 10 years defending broker-dealers at Sichenzia Ross Ference LLP
- Named Super Lawyers Rising Star 2015-2023
- Licensed in California and New York
Client-Focused Approach:
- Free initial consultation to evaluate your case
- Contingency fee arrangements available for most cases
- Personalized attention and direct attorney communication
Frequently Asked Questions About NorthStar Healthcare Losses
Can I still file a claim if the Welltower acquisition has already closed?
Yes, the closing of the Welltower acquisition does not prevent you from filing a FINRA arbitration claim against the brokerage firm that recommended NorthStar Healthcare. Your claim is against the broker-dealer for recommending an unsuitable investment, not against NorthStar Healthcare itself. However, time limits do apply, so it is important to consult with an attorney promptly.
What if my financial advisor is no longer with the brokerage firm?
In most cases, your claim would be against the brokerage firm itself, not just the individual advisor. Brokerage firms are responsible for supervising their representatives and can be held liable for unsuitable recommendations made by advisors who are no longer employed there.
How much does it cost to pursue a FINRA arbitration claim?
At Varnavides Law, we handle most securities litigation and FINRA arbitration cases on a contingency fee basis. This means you pay no upfront attorney fees, and we only get paid if we recover money for you. Case costs and fee arrangements are discussed during your free consultation.
What evidence do I need to support my claim?
Helpful documents include account statements showing your NorthStar Healthcare purchase, new account forms, investment questionnaires, correspondence with your advisor, and any marketing materials you received. However, even if you do not have all documents, your attorney can obtain records from the brokerage firm during the discovery process.
How long does a FINRA arbitration case take?
Most FINRA arbitration cases are resolved within 12-18 months from filing, although complex cases may take longer. This is generally faster than traditional court litigation, which can take several years.
What is the difference between a non-traded REIT and a publicly traded REIT?
Publicly traded REITs trade on stock exchanges like the NYSE, allowing investors to buy and sell shares at any time at current market prices. Non-traded REITs like NorthStar Healthcare are not listed on exchanges, making them illiquid. Investors typically cannot sell their shares except through limited redemption programs (which NorthStar suspended) or on secondary markets at steep discounts.
Were the high commissions disclosed to investors?
While commission information was technically included in the prospectus, many investors allege their financial advisors failed to adequately explain how the fee structure would impact their investment returns. A key issue in many claims is whether the advisor clearly communicated the material impact of these fees.
Can I pursue a claim if I invested through my retirement account?
Yes, you can file a FINRA arbitration claim regardless of whether you invested through a taxable account, IRA, or other retirement account. Losses in retirement accounts are particularly concerning because investors have limited time to recover those funds before retirement.
Take Action to Recover Your NorthStar Healthcare Losses
If you lost money in NorthStar Healthcare Income REIT, you deserve to know your legal options. The brokerage firms that profited from selling this product should be held accountable when they failed to protect their clients’ interests.
At Varnavides Law, we are committed to fighting for investors who have been harmed by unsuitable investment recommendations. Our experience on both sides of these disputes gives us unique insight into how to build a winning case and maximize your recovery.
Schedule Your Free Consultation
Contact Varnavides Law today to discuss your NorthStar Healthcare losses and learn whether you may be eligible for FINRA arbitration. We offer free initial consultations and handle most cases on a contingency fee basis.
Prior results do not guarantee a similar outcome. This page is for informational purposes and does not constitute legal advice. No attorney-client relationship is formed by reading this content.
