Posts tagged ‘Cornerstone Core Properties class action’

Update on Securities Fraud Investigation involving Cornerstone Real Estate Funds

The White Law Group continues to investigate Cornerstone Real Estate Funds’ various REITs and other investments.

According to its website, Cornerstone Real Estate Funds is a real estate company based in Irvine, California that primarily deals with the acquisition and management of healthcare real estate.

Over the past few years, Cornerstone has had several private placement offerings that have been problematic for investors.  Those offerings include the following:  Cornerstone Core Properties REIT, Sentio Healthcare Properties, Inc (formally Cornerstone Healthcare REIT) and Cornerstone Realty Fund, LLC.

Cornerstone Ventures Inc appears to manage both the and Cornerstone Reality Funds and another problematic investment, CIP Leveraged Fund.

Some of the general problems with these investments include the lack of liquidity. Non-traded REITs are not sold on the public market, therefore they are typically illiquid and shares are sometimes inaccurately valued. The lack of a secondary market prevents shares from being sold quickly and the redemption programs are often very limited and priced significantly below the purchase price.

The lack of liquidity also limits distributions to investors, which are not guaranteed, and can be suspended indefinitely at the company’s discretion.

Another problem with non-traded REITs is the extremely high commission fee broker-dealers receive. Sales commission and up-front fees can be as high 15% making these types of investments one of the highest selling commission products.

When recommending non-traded REITs, brokers, motivated by the high commission, often market these investments as safe and secure, putting their own interests ahead of their clients.

The following is a breakdown of the status of the most problematic Cornerstone offerings:

(1) Cornerstone Core Properties

Cornerstone Core Properties REIT, Inc., incorporated in 2004, is a non-trade REIT that primarily invests in commercial real estate through the United States. The majority of the REITs properties are multi-tenant industrial properties and healthcare facilities. Cornerstone REIT is sponsored by Cornerstone Realty Advisors, LLC.

According to the REITs’ most recent quarterly report (form 10-K), as of Sept. 30, 2012, the common stock value is $0.001 on approximately 290 million authorized common stock shares.

The current suspension on the stock repurchase program has denied 14, 528 requests during the nine months ending in Sept. 30, 2012. When repurchases will resume and on what terms has not yet been determined.

The White Law Group also recently received information from investors that they are being offered $1.10 per share by the affiliates of MacKenzie Capital Management, LP.  This is less than half the value of the shares 11 months ago, and approximately 85% lower than the original offering price of $8.00 per share.  According to their website “MacKenzie Capital Management and its affiliates have decades [of] experience in providing liquidity to investors in illiquid real estate securities.”

(2) CIP Leveraged Fund

According to an Investment News article, CIP Leveraged Fund was sold from January 2004 to May 2009.

Upon information and belief, CIP Leveraged Fund was established by Cornerstone to raise funds for other Cornerstone offerings.

Unfortunately for investors, it appears that the CIP Leveraged Fund was close to a total loss.

(3) Cornerstone Healthcare REIT

According to online reports, Cornerstone Healthcare Plus began raising capital in August 2007 and has raised an estimated$130 million in investor equity.

Now known as Sentio Healthcare Properties, Cornerstone Healthcare REIT is a real estate investment trust (REIT), which invests exclusively in healthcare related real estate, and is committed to delivering strong and reliable returns to investors.  According to Sentio’s website, the current Sentio Healthcare portfolio features 15 properties, managed by 11 different operators, located in 10 different states.

This REIT has many of the same risks and issues as other high commission non-traded REITs.  Unfortunately for investors, it appears that this REIT has also declined substantially in value.

Not only are these investments the subject of numerous FINRA arbitration claims, but they are also the subject of regulatory scrutiny.

In May of 2009, FINRA fined Pacific Cornerstone Capital, Inc (the broker-dealer for Cornerstone Real Estate Funds) $750,000. According to FINRA news release from Monday, Dec. 21, 2009 the company was fined “for failing to include full and complete information in private placement offering documents and marketing material.”  Cornerstone Capital was also charged with advertising violations.  It was alleged by FINRA that the misleading marketing material was used to sell private placements in two affiliate companies, Cornerstone Industrial Properties, LLC and CIP Leveraged Fund Advisors LLC (CLFA) between January of 2004 and May of 2008.

If you invested in a Cornerstone real estate investment and would like to discuss your litigation options, please call the securities attorneys of The White Law Group at 312/238-9650 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.

Recovery of Cornerstone Core Properties REIT Losses

Are you concerned about your investment in Cornerstone Core Properties REIT?  If so, The White Law Group may be able to help you recover your losses through FINRA arbitration.

It is being reported that 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. According to a letter sent out by Cornerstone Core Properties to its investors, “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.”

Apparently, Cornerstone Core Properties REIT suffered a sharp decline in tenant occupancy (tenant occupancy of the REIT’s retail properties was 69% at the end of last year, compared with 92% at the end of 2008). Additionally, the sponsor of the REIT had some regulatory issues that precluded the sponsor from raising the necessary capital to properly fund the REIT.

This is just more bad news for investors in non-traded REITs.

FINRA recently announced that it is paying close attention to the sale of non-traded REITs and, in particular, the ways in which broker/dealers marketed and sold the products to investors.  Even though REITs can be risky and are often illiquid, in many cases, broker-dealers marketed these investments as safe and secure.

REITs typically pay a high commission – often as much as 10-15% (which often explains the stockbroker’s motivation in recommending the REIT investment to the investor).

Due to the relatively high interest or dividend offered by non-traded REITs like Cornerstone Core Properties REIT, retired investors are often attracted to these products.  Unfortunately, in addition to being risky investments, non-traded REITs are also illiquid (limiting investors’ ability to access their own money for unforeseen expenses).

Another problem with non-traded REITs is that broker-dealers are not required to frequently update the current price of the investment.  This often leads investors to believe that their REIT investment is doing well even though the widespread real estate market collapse would indicate otherwise.

The White Law Group is currently representing numerous Cornerstone REIT investors in claims against the brokerage firm that recommended the REIT to these investors.

Brokerage firms have a fiduciary duty to its clients to perform adequate due diligence on an investment prior to recommending it for sale to its clients, as well as to ensure that any investment recommended is appropriate in light of the investor’s age, investment experience, net worth, and investment objectives.  Given what is now known about Cornerstone Core Properties REIT (and the many problems with this offering), it is clear that the brokerage firms that sold this investment failed in its fiduciary duty to its clients.

To determine whether you may be able to recover investment losses incurred as a result of your purchase of Cornerstone Core Properties through a FINRA arbitration claim against the brokerage firm that recommended the investment, please contact the REIT fraud attorneys of The White Law Group at 312-238-9650.

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.

For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.