Securities Lawyer Blog | Victim of Fraud?

TAG | REIT recovery lawyer

Jan/13

24

Alison Janke, Port Richey, FL, Fined and Suspended by FINRA

Comments off · Posted by Securities Lawyer in FINRA

The following information is from FINRA’s website under “Disciplinary and Other FINRA Actions, January, 2013.”

Alison Marie Janke (CRD #4409155, Registered Representative, Port Richey, Florida)

was fined $11,600, which includes the disgorgement of financial benefit received of $6,600, and suspended from association with any FINRA member in any capacity for three months.

Without admitting or denying the findings, Alison Janke consented to the described sanctions and to the entry of findings that she had participated in a private securities transaction without providing prior written notice to her member firm.

Ms.Janke referred a customer who was seeking alternative investments to a registered representative at a different firm, where the customer invested $200,000 in a real estate investment trust (REIT) through the other registered representative. Alison Janke not only referred the customer to another representative, but also attended the meeting with the customer and the other representative, and assisted with the completion of the purchase transaction.

The findings stated that a limited liability company Janke owned received a $6,600 payment in connection with the sale of the REIT.

The suspension is in effect from December 3, 2012, through March 2, 2013.
(FINRA Case #2011030660801)
This ends the information from FINRA’s website.

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you find yourself in this situation, or a similar situation with your broker or financial advisor, call for a free consultation with an attorney, 888-760-6552, or visit our website at: http://www.securitieslawyer.com.

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Jan/13

8

Did You Invest in Private Placement Funds with Gramercy Securities?

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Securities Lawyer, Lars Soreide, of Soreide Law Group, is currently investigating Gramercy Securities, Inc. This brokerage has been alleged to have placed unsophisticated investors’ money into unsuitable investments. There have been claims, for example, of a recent widow losing her entire net worth by investing in risky private placements. Some of these risky private placements were in the Inland American Real Estate Investment Trust, LaeRoc Edge Funds, and Arciterra Whitefish Opportunity Fund.

LaeRoc funds are real estate private placements. LaeRoc Partners is a real estate investment firm managing over $650 million in assets. The LaeRoc private placement was promoted by brokers as a safe or conservative investment. These representations allegedly were misleading.

Soreide Law Group, PLLC, represents clients nationwide. Call for a free consultation on how to potentially recover your private placement financial losses. To speak with an attorney call 888-760-6552, or visit our website at: http://www.securitieslawyer.com.

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Jan/13

3

Were You a Former Client of Tracey Crownover?

Comments off · Posted by Securities Lawyer in FINRA

Soreide Law Group is currently investigating potential claims regarding the sale of variable life insurance policies and certain Real Estate Investment Trusts (REITs) sold by former Ameriprise financial advisor, Tracey Crownover. Ms. Crownover was terminated by Ameriprise for failing to follow firm policies. Tracey Crownover has over 25 reported customer disputes through the Financial Industry Regulatory Authority (FINRA).

If you feel you may have a claim against former Ameriprise broker Tracey Helaine Crownover, call 888-760-6552.

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, represents clients nationwide before FINRA. If you or a loved one have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. Visit our website at: http://www.securitieslawyer.com.

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Aug/12

23

Largest Non-Traded REITs Dropping in Value

Comments off · Posted by Securities Lawyer in FINRA

Recently, InvestmentNews.com did an analysis of eight of the largest nontraded real estate investment trusts (REITs). They found that these REITs have lost $11.3 billion, or 37% of their equity value, over the past seven years.

On August 14th., CNL Lifestyle Properties Inc., which initially raised $2.7 billion at $10 a share, became the latest large nontraded REIT to report a sharp decline in value; its share price dropped to $7.31.

In July, the Dividend Capital Total Realty Trust Inc., which raised $1.8 billion in equity at $10 per share, revised its value to $6.69 per share. In March, the REIT said its value was $8.45 per share.

Some industry observers commented that the revaluation of CNL Lifestyle Properties is likely to be the last nontraded REIT to see a substantial decline in value. The eight REITs analyzed for InvestmentNews.com were notable because they had raised more than $1 billion in equity, and their declines in equity value were greater than 20%.

The decline in estimated equity value does not take into consideration the “distributions,” or dividend yields, that the REITs have been paying clients. Such yields can range from 5% to 7% annually. Accounting for those distributions is important in the discussion of nontraded REITs returns, industry executives noted.

These eight REITs which were examined, are a large part of the nontraded-REIT and “direct participation program” investment industry, which will raise between $9 billion and $10 billion from investors this year through independent broker-dealers.

The one exception: The family of REITs known as the Apple REITs was not included in the analysis, because their share prices are currently listed as “not priced.” The Financial Industry Regulatory Authority Inc. (FINRA) last year filed a complaint against David Lerner and Associates Inc., alleging that since at least 2004, “the closed Apple REITs have unreasonably valued their shares at a constant price of $11, notwithstanding market fluctuations, performance declines and increased leverage.” over sales of the REITs.

The InvestmentNews.com article said that during the surge in the commercial real estate market, which peaked near the end of 2007, some registered reps sold nontraded REITs to clients and characterized them as bond alternatives. Some reps sold these investments appropriately, and some reps fell short.

If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations regarding these or other non-traded REITs, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website and complete our online form at: http://www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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Apr/12

24

Nontraded REITs on the Slide

Comments off · Posted by Securities Lawyer in FINRA

Have you invested in these  non-traded real estate investment trusts and funds that have recently seen steep devaluations?Name         Offering price      Per share Current estimated value       % decline per share  Behringer Harvard Opportunity REIT I          $10.00      $4.12           -58.80%       Behringer Harvard REIT I                                     $10.00     $4.64           -53.60%       Behringer Harvard Short-Term Opportunity Fund $10.00     $0.40          -96%       Cornerstone Core Properties REIT                     $8.00        $2.25           -71.88%       Inland Western Retail Real Estate Trust Inc.   $10.00     $6.95           -30.50%       KBS Real Estate Investment Trust Inc.               $10.00      $5.16           -48.40%   Source: SEC filings Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: www.securitieslawyer.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.      

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Apr/12

20

Cornerstone Core Properties Plunges 72%–Another Nontraded REIT

Comments off · Posted by Securities Lawyer in FINRA

Bruce Kelly writes in an InvestmentNews.com article, that another nontraded real estate investment trust has taken a sudden and precipitous decline in value — this time plunging nearly 72%.

The investors in the Cornerstone Core Properties REIT Inc. were told this month by the company that the shares, once valued at $8, are now worth $2.25. “The estimated per-share value has been adversely affected by the recent global economic downturn, negatively impacting our small business tenant base, which has resulted in approximately $43 million of previously announced impairment charges recorded in the second and third quarters of 2011,” according to the letter, which was signed by Terry Roussel, the REIT’s chairman and chief executive.

Kelly writes that a sharp decline in tenant occupancy has hammered the REIT: Tenant occupancy of the REIT’s retail properties was 69% at the end of last year, compared with 92% at the end of 2008. “A couple of years ago, the sponsor had some regulatory issues and had to shut down capital raising,” said Anthony Chereso, CEO of FactRight LLC, a due-diligence firm that covers managers of alternative investments. “It had some properties with tenant issues, and the portfolio had issues with covering debt and distributions. It was not constructed well.” FactRight last year recommended that broker-dealers pull the Cornerstone Core Properties REIT from their platforms, Mr. Chereso said.

These REIT’s regulatory issues had to do with marketing at the sponsor level, Mr. Chereso said. The sponsor broker-dealer is Pacific Cornerstone Capital Inc. “Their only option is to liquidate,” he said. “There’s not a whole lot that can be done to revive it.”

Kelly writes the Cornerstone REIT raised only $172.7 million between 2006 and 2009, making it a relatively small player in a marketplace in which the largest players have raised and deployed billions of dollars. Still, other nontraded REITs or real estate funds sold by REIT sponsors recently have seen dramatic declines in value, eating away at investors’ portfolios and making life difficult for the brokers who sold the products.

By the end of December, investors in the Behringer Harvard Short-Term Opportunity Fund I LP, which had about $130 million in total assets, saw its valuation drop to 40 cents a share, down drastically from $6.48 a share Dec. 31, 2010, and the Behringer Harvard Opportunity REIT I Inc. saw its estimated value decline to $4.12 a share at the end of last year, from $7.66 a year earlier.

The Cornerstone Core Properties REIT changed its chief financial officer at the end of last year, replacing Sharon Kaiser with Stephen Robie, according to filings with the Securities and Exchange Commission.

In conclusion of the InvestmentNews.com article, Kelly writes that the REIT has been focused on paying down debt, selling three properties in the fourth quarter of 2011 with $24.8 million in sales value. The proceeds were used to pay down $13.5 million of debt and to build cash reserves, according to an SEC filing.

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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Apr/12

19

Green Street Advisors Say Clients are Better Off with Publicly Traded REITs

Comments off · Posted by Securities Lawyer in FINRA

In an InvestmentNews.com article, Dan Jamieson writes that Green Street Advisors Inc., says to forget the new breed of nontraded REITs. Investors are far more likely to be better off with publicly traded REITs, the research firm said in a report released Wednesday.

The current regulatory scrutiny has forced sponsors of nontraded REITs to address issues surrounding valuations, illiquidity, high fees, dividend payouts and conflicts, the report said. One crucial change: the introduction of daily net-asset-value estimates by several sponsors, as better pricing transparency might end the illusion of share-price stability, Green Street said.

“Since the shares don’t trade, the share price investors see on their statements every quarter doesn’t fluctuate,” the company said. That stability has been “one of most bizarre ‘advantages’ touted by nontraded-REIT sponsors.”

Jamieson writes that questionable dividend yields of 5% to 10% are likely to fall closer to the 3.3% yield for publicly traded REITs. Green Street said nontraded REITs have gotten something right, however: low leverage. In addition, “egregious” upfront costs of 7% to 10% on nontraded REITs should come down to 1% to 3%, the report said, and management fees of around 1% will drop, as well.

“Very few of them were forced into [taking on] expensive debt [or] selling properties on the cheap [or] issuing equity on an NAV-dilutive basis” during the financial crisis, the research firm said.

Nevertheless, “for most investors under most circumstances, publicly traded REITs will represent a superior investment vehicle, compared to even the ‘new breed’ nontraded REITs,” the report said.

The InvestmentNews.com article concludes that Green Street counts approximately 70 public nontraded REITs that own $85 billion in assets.

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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Apr/12

2

KBS REIT I Share Price Down; Dividends to Investors Cut to ZERO

Comments off · Posted by Securities Lawyer in FINRA

In a March 30, 2012, article from InvestmentNews.com, Bruce Kelly writes that another major nontraded real estate investment trust has seen a sharp drop in its value — but is also stopping paying distributions to investors.

The KBS Real Estate Investment Trust Inc., or KBS REIT I, told investors Monday it was cutting the value of the REIT to $5.16 per share, from $7.32, a drop of 29%. The REIT’s offering price was $10 per share. A number of REITs have seen valuations decline this year as the commercial real estate market continues to struggle and debt weighs on REITs’ balance sheets.

“The new pricing of KBS REIT I reflects the current status of the portfolio, and the discontinuation of distributions was made with the goal of managing the REIT’s debt obligations and cash flows, and attempting to maximize the total return to investors over time,” said Keith Hall, executive vice president of KBS REIT I.

Kelly writes that the REIT is substantial, having raised $1.7 billion in equity in its initial offering, according to an investor presentation the company filed with the Securities and Exchange Commission on Monday. It has $3.4 billion in property assets, and holds loans and other debt of $2.3 billion.

KBS announced that distributions to investors will be cut to zero. The REIT “will discontinue paying monthly distributions to shareholders in an effort to maximize the total amount of capital returned to shareholders over time,” according to the filing. Since July 2009, annual distributions had been 53 cents per share, according to the filing.

KBS said cash flow will be used to meet four objectives: paying down debt, strategically reinvesting capital, attempting to improve the overall return of the company and managing the REIT’s reduced cash flow.

The InvestmentNews.com article said that when asked to clarify what the last objective meant, Mr. Hall noted that it was simply one of the stated company objectives. The KBS REIT has been hit by the broad decline in the commercial real estate market since 2008. Occupancy of the REIT’s real estate holdings declined last year to 85%, from 92% in 2010, according to the filing. Added to that, rents are in decline. “REIT I’s existing rents are rolling downward into this moderately improving rental market that still remains well below peak levels,” according to the filing.

Kelly adds that eighty-one percent of the REIT’s portfolio is in office space, with 10% in bank branches and 9% in industrial real estate. KBS REIT I “has not been immune” to the broad real estate market’s difficulties,” Mr. Hall said. “While some markets have recently made slight recoveries, many markets are still challenged with decreasing occupancy and/or new lease rates at substantially lower levels from the 2007-08 peaks.”

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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Feb/12

7

FINRA Cracking Down on Risky REITs, VAs, Private Placements and on B-Ds’ Fees

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In an article for InvestmentNews.com, on February 1st, 2012, Mark Schoeff Jr. writes that in a market defined by low interest rates, investors are searching for higher returns. But brokers better be careful how they try to deliver those results, according to their primary regulator.

In a 16 page letter posted on its website, the Financial Industry Regulatory Authority Inc., (FINRA)  outlined its regulatory and examination priorities for 2012. At the top of the list: conduct and products meant to beat the market that instead are unsuitable for investors.

“FINRA is informing its examination priorities against the economic environment that investors have faced since 2008, as these circumstances have steadily contributed to conditions that foster an increased risk of aggressive yield chasing, inappropriate sales practices, unsuitable product offerings, and misappropriation and fraud,” the letter states.

“Given the low yields on Treasuries, we are concerned that investors may be inadvertently taking risks that they do not understand or that are inadequately disclosed as they chase yields,” the letter continues. Lack of liquidity and inadequate cash flow in investments also are red flags Finra is monitoring.

Shoeff writes that among the products that are on FINRA’s watch list for suitability problems: residential- and commercial-mortgage-backed securities, nontraded real estate investment trusts, municipal securities, exchange-traded funds using synthetic derivatives and significant leverage, variable annuities, structured products, private placements and life settlements.

FINRA said that it is undertaking a “broader data collection effort” and targeting its enforcement efforts on high-risk firms.  FINRA warned brokers not to enhance their balance sheets by taking on excessive debt or manipulating their assets and liabilities.

“FINRA is concerned about the additional risks that are being taken as a result of increased leverage, including market, credit and liquidity risk,” the letter states. “We will continue to monitor firms that employ a high degree of leverage, both on-balance-sheet and off-balance-sheet during the upcoming year.”

The InvestmentNews.com article goes on to say that FINRA also is zeroing in on fees.

“We remain concerned about firms’ charging retail investors hidden, mislabeled or excessive fees,” the letter states. “In 2011, FINRA brought cases against several broker-dealers that charged such excessive fees in the form of postage and handling charges that were unrelated to actual costs, and we will continue to investigate firms that appear to be taking advantage of investors through fee schemes.”

FINRA’s guidance on social media is less explicit. It said that it “is a topic on which we continue to receive many questions from firms.” FINRA reiterated that “core regulatory requirements apply to all communications with the public, irrespective of the medium or device used to communicate. Firms must be able to appropriately supervise business communications made using personal devices.”

Schoeff writes that high-frequency trading, and oversight of the creation and redemption of exchange-traded funds, also are listed among the agency’s many priorities. FINRA oversees about 4,460 broker-dealers and enforces the suitability standard, which requires brokers to sell products that fit their clients’ investment needs, timelines and risk appetites.

Other regulators are paying attention to FINRA’s priorities as   well.

“States look at these very highly,” said Steve Thomas, director of Lexington Compliance, a division of RIA in a Box LLC, and former South Dakota chief compliance examiner. “They make individual decisions on whether these items should be added to their state’s examinations.”

Securities Attorney, Lars Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: www.securitieslawyer.com.
 
Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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Oct/11

25

FINRA Warns Investors on the Risks of Nontraded REITs

Comments off · Posted by Securities Lawyer in FINRA

On October 4, 2011, the Financial Industry Regulatory Authority Inc. or FINRA,  issued an alert to investors that outlines the nontraded real estate investment trusts (REITs) features and potential drawbacks, such as high fees and a lack of liquidity. As the name suggests, nontraded REITs aren’t listed on a national exchange writes Bruce Kelly for InvestmentNews.com.

“Turbulence in the stock market and an extended period of low interest rates have contributed to investors’ seeking products offering attractive yields,” Finra’s alert said. “One such product is the publicly registered non-exchange-traded real estate investment trust, or ‘nontraded REIT,’ for short.”

This was the first Finra investor alert regarding REITs and is yet another indication of the regulator’s intense interest in the product according to FINRA’s website.

Kelly goes on to say that such REITs are sold exclusively through independent broker-dealers, though executives with nontraded REIT sponsors said in private discussions that they intend to negotiate with the wirehouses also to sell the products.

Last month, Finra issued a rule proposal that would drastically change how the value of nontraded REITs appeared on client account statements, a troubling issue for independent broker-dealers that sell the products and the sponsors that create them. Finra’s new proposal takes aim at brokers’ commissions and other upfront costs.

In May, the regulator filed a complaint against David Lerner Associates Inc., claiming that the longtime share value of $11 for its Apple REITs was unreasonable in the face of market fluctuations and other events. Finra’s investor alert comes as the nontraded-REIT industry registers strong sales.

The InvesterNews.com article says that investors bought close to $4.6 billion in nontraded REITs through June 30, according to two consultants who follow the industry. That put sales on a pace to top 2010′s full-year total of about $8.4 billion, the third-highest ever, according to Direct Investments Spectrum, a newsletter that follows the nontraded-REIT marketplace.

“Nontraded REITs are generally illiquid, often for periods of eight years or more,” Finra said. “Early redemption of shares is often very limited, and fees associated with the sale of these products can be high and erode total returns.” Front-end fees can be as much as 15% of the per-unit price, Finra said. Front-end underwriting fees for publicly traded REITs may be 7% or more of the offering proceeds, plus a brokerage commission for investors who buy shares in the open market, according to Finra.

The regulator in its alert highlighted a number of “complexities and risks” associated with the product.

Kelly writes that one such “risk” is nontraded REITs’ dividends, which are an essential component to attracting investors to the product. Known as “distributions” in the industry, they “are not guaranteed and may exceed operating cash flow,” according to Finra. “Distributions can be suspended for a period of time or halted altogether,” according to the Finra alert.

Kelly concludes that some leading REIT sponsors that struggled during the credit crisis cut investor distributions. Michael Stubben, president of MTS Research Advisors, which analyzes nontraded REITs, pointed out that Finra’s attention to nontraded REITs is “probably driven by the struggles of some older programs” that cut dividends and saw valuations fall. It’s also aimed, he added, at “getting advisers to understand the risks” of the products..

Securities Attorney, Lars Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you feel you have become a victim of the sale of unsuitable REITs by your broker/dealer, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses. To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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