Posts tagged ‘David Lerner Apple REIT’
Investigation into potential for recovery of David Lerner and Apple REIT investment losses (Update)
The White Law Group is continuing to investigate and analyze how investors have been sold the Apple series of REITs by David Lerner Associates, Inc. The firm has spent the last few months reviewing documents and information regarding the Apple REIT investments sold by David Lerner and determining how best to assist investors in recovering losses incurred as a result of their investing in Apple REIT.
Here is a recap of the major points that our investigation has uncovered:
(1) In May 2011, FINRA launched an investigation into David Lerner’s sales practices with respect to Apple REITs;
(2) In June 2011, multiple class actions were filed against David Lerner and Apple REIT raising similar allegations as those raised by FINRA;
(3) David Lerner recently changed the way Apple REITs are valued on their account statements – stating only that the REITs are “unpriced,” and acknowledging for the first time that the value may not be what the investor paid for the shares;
(4) Apple REIT investors have received offers of $3/share and the alleged book value of certain Apple REITs is approximately $7/share.
FINRA has paid particularly close attention to its regulations with regards to non-traded REITs since they initially launched their investigation into David Lerner’s sales practices in May. They have recently discussed and proposed changes in regulations revolving around the valuation of non-traded REITs and also how the price of the shares are to be listed on customer account statements.
Additionally, Bruce Kelly of the investmentnews.com in a recent article states, “An eye-opening analysis of the “distributions” of nontraded REITs sold exclusively by David Lerner Associates Inc. shows the REIT’s property investments largely underperformed the level required to pay promised dividends to investors. Indeed, the analysis claims that the REITs consistently borrowed from a line of credit and used distributions investors were recycling back into the real estate investment trust to meet the targeted dividend payout.”
The analysis mentioned above by the investmentnews.com is based on an amended class action complaint filed by investors recently in New Jersey federal court. The original class complaint was filed in June. The complaint alleges that “…the distribution paid to investors did not match the level of income generated from the various Apple REITs…” and that “Brokers at David Lerner allegedly told clients that the Apple REITs were safe conservative investments that would protect their savings from the volatility of the stock market.”
The complaint reportedly further alleges that David Lerner Associates and the other named defendants, “paid distributions without regard to profitability, even as they acquired properties at prices they knew could not conceivably justify the level of distributions they were paying.”
Based on the foregoing, The White Law Group is reviewing claims against David Lerner on behalf of investors in Apple REIT for fraud, negligence, negligent supervision, and breach of fiduciary duty. These claims are based on (1) David Lerner’s alleged failure to perform the necessary due diligence on the Apple REITs prior to offering them for sale to investors, (2) its alleged failure to adequately disclose the relationship between the firm and Apple REIT; (3) its alleged failure to disclose the decline in value of the previous Apple REITs sold to investors when offering Apple REIT 9 and Apple REIT 10 to investors; and (4) the alleged unsuitability of a non-traded REIT for certain investors (including retirees, investors interested in liquidity, and investors adverse to risk).
To determine whether you may be able to recover investment losses incurred as a result of your purchase of an Apple REIT, please contact 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, please visit our website at http://www.whitesecuritieslaw.
Apple REIT Redemptions
Given the sheer volume of negative news currently in the press regarding David Lerner & Associates and Apple REIT, it will not be surprising if many Apple REIT investors attempt to redeem their investments today (Apple REIT permits redemption requests quarterly). Unfortunately, due to these same forces (FINRA’s ongoing investigation, the class action filed against David Lerner and Apple REIT, the news about the declining value of the REITs), it would also not be a surprise if Apple REIT were unable to fulfill all of the redemption requests and/or suspended redemptions all together.
For retired investors (or investors on a fixed budget), this result could be devastating and is exactly why non-traded REITs like Apple REIT are often unsuitable for income needing, conservative investors.
Unfortunately, as FINRA’s investigation alleges, many of the investors in Apple REIT are unsophisticated and elderly investors that were unaware of the liquidity concerns of owning a non-traded REIT investment. The other problem, which has been discussed in prior blog entries on this same site, is that the true value of Apple REIT is not what is represented on investors’ David Lerner account statements. Notwithstanding the fact that David Lerner continues to maintain that Apple REIT shares are worth the $11/share that investors paid for the invest, Apple REIT has acknowledged that the book value of the REITs has declined to less than $8/share and the current offer in the secondary market for the REITs is $3/share.
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 Apple REIT Securities Fraud Investigation Updates
Do you have questions about your Apple REIT investment? If so, The White Law Group may be able to help.
The White Law Group is currently investigating claims that David Lerner unsuitability recommended that investors invest in Apple REIT investments. Based on the firm’s investigation, it appears that investors that invested in Apple REIT 7, Apple REIT 8, Apple REIT 9, and Apple REIT 10, may have claims for damages against David Lerner & Associates (the FINRA broker-dealer that sold these investments to the public).
REITs (or real estate investment trusts) can be an unsuitable investment for retirees or income seeking investors. First, the investment itself can be unsuitably risky because it is entirely dependent on the overall health of the real estate market.
Second, REIT investments are generally illiquid, severely limiting the investors’ ability to access their funds should the need arise. Moreover, REITs are often less regulated than other types of investments (mutual funds, equities, etc.) and generally pay a higher commission than other products to the financial advisor that recommends it.
David Lerner Associates Inc. has been accused by FINRA of 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 alleges that David Lerner Associates has sold almost $6.8 billion of Apple REIT shares to more than 122,000 customers since 1992, and that those sales have generated more than $600 million in revenue for the firm.
To speak with a securities attorney about your Apple REIT investment, contact The White Law Group’s Chicago office 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, please visit our website at http://www.whitesecuritieslaw.com. For more information on the firm’s David Lerner investigation, please visit davidlernerlosses.tumblr.com.
David Lerner Associates Investigated by FINRA over Apple REIT sales
According to the Investment News, David Lerner Associates Inc. has been accused of targeting unsophisticated and elderly customers while selling real estate investment trust shares without considering whether the illiquid security was suitable for its clients.
The Syosset, New York-based brokerage, known for its “Take a tip from Poppy” advertising slogan, misled investors who bought more than $300 million of shares in the $2 billion Apple REIT Ten offering this year, the Financial Industry Regulatory Authority said today in a disciplinary complaint on its website. The firm denies the allegations, according to a statement.
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, Finra said. The figures failed to show that distributions far exceeded income and were funded by debt that increased leverage in the REITs, which invest in extended-stay hotels, the regulator said.
David Lerner Associates has sold almost $6.8 billion of Apple REIT shares to more than 122,000 customers since 1992, according to Finra, the industry-funded regulator for U.S. brokerages. Those sales have generated more than $600 million, accounting for more than 60 percent of the firm’s business since 1996, Finra said.
The complaint is the first step in a formal proceeding, Finra said today. It isn’t filed in court, and the firm can request a hearing before a disciplinary panel, the regulator said in its statement.
In September, David Lerner Associates paid a $255,000 fine for failing to provide required information in connection with the replacement of variable life insurance policies and annuity contracts from November 1998 through February 2004, according to the New York State Insurance Department.
A year ago this month, David Lerner Associates was accused by Finra of overcharging customers on sales of municipal bonds and mortgage securities. That case is still pending, according to Finra’s brokerage records.
If you have questions about investments you made with David Lerner Associates, the securities attorneys of The White Law Group may be able to help. To speak with a securities attorney, please call the firm’s Chicago office 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, please visit our website at http://www.whitesecuritieslaw.com.