Despite the writing on the wall, David Lerner continues to maintain that there is nothing wrong with the Apple REITs that it has sold to thousands of investors over the years. This position is not surprising considering the financial impact that a decline in Apple REITs value will have on the bottom line for David Lerner (the vast majority of David Lerner’s revenues since 1992 have purportedly been derived from the sale of Apple REIT investments to David Lerner customers). Once customer begin to realize that their Apple REIT investments have likely declined by 50% or more, David Lerner is sure to be impacted. David Lerner likely assumes that the longer they can stave off this mass exodus from the Apple REIT funds (and questions about whether the REITs have declined in value), the better it will be for the firm. This continued stance by David Lerner is belied by the facts and in derogation of the firm’s fiduciary duty to its customers.
(1) Summer 2008, the economy begins to unravel, including one of the largest real estate market corrections in U.S. history. Despite this enormous market correction, David Lerner continues to value Apple REIT shares at the original $11/share that investors paid for the investment.
(2) June 1, 2011, FINRA launches an investigation of David Lerner for targeting unsophisticated and elderly customers while selling real estate investment trust shares without considering whether the illiquid security was suitable for its clients. (FINRA further alleged that, in soliciting customers for Apple REIT Ten, David Lerner Associates provided misleading information about distribution rates for a series of predecessor securities that are now closed to investors).
(2) Later in June 2011, Apple REIT acknowledges that the book value of Apple REIT 7 is $7.83. (Book value is very different than the amount an investor would pay per share, of course. The actual market value of Apple REIT shares is believed to be closer to $3-5/share).
(3) A class action has now been filed against David Lerner Associates, Inc. and its senior officers, Apple REITs Six through Ten and their principal Glade M. Knight. The class action basically alleges that David Lerner acted negligently in its sales, marketing and underwriting of more than $6.8 billion of shares in the Apple REITs to David Lerner’s brokerage customers.
Based on the foregoing, David Lerner investors are right to be worried about their Apple REIT investments. If you are concerned about your Apple REIT investment and would like to speak with a securities attorney about your options, The White Law Group may be able to help.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida. The firm handles FINRA arbitration cases throughout the country.
For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.
David Lerner & Associates is based in Syosset, New York, but the firm has offices throughout the country, including in Boca Raton, Florida.