Posts tagged ‘Desert Capital fraud’

Non-traded REITs destined to lose?

According to a report in the Investment News, a new study confirms that non-traded REITS consistently underperform the broad market of real estate investing in large part because of the high fees and commissions associated with these investments (the fees for non-traded REITs are often as high as 12-15%).

The study found that 70% of the non-traded REITs included in the study underperformed basic benchmarks. The study is particularly timely as the initial public offering market for nontraded REITs, known in the industry as a “liquidity event” or “going full cycle,” has heated up this year. Since March, three nontraded REITs have listed on exchanges, with more likely to come, each with limited to no success.

Notwithstanding the poor track record of these investments, brokerage firms have only increased the sale of such products. According to an executive summary of the study performed the nontraded REIT industry had $84 billion in assets under management at the end of 2011 (representing huge growth in the industry). Certainly, an inference can be made that the industry is actively looking to grow this investment area because of the very commissions that makes it so difficult for these investments to succeed.

The study was performed by BlueVault Partners LLC and the University of Texas at Austin’s McCombs School of Business. For more information on the study, visit http://www.investmentnews.com.

The White Law Group continues to file arbitration claims involving non-traded REITs. Generally these claims argue that the broker-dealers that sold these investments failed to perform the necessary due diligence on the non-traded REITs prior to offering them for sale to their clients and that the brokerage firms failed to properly assess whether the investments were suitable for their clients in light of their client’s age, net worth, investment experience, and investment objectives.

The White Law Group has filed claims involving the following non-traded REITs (among others): Desert Capital REIT, Cornerstone Core Properties, CIP Levaraged Fund Advisors, Cornerstone Health Care REIT, Behringer Harvard REIT, Inland Western REIT, Inland American REIT, KBS REIT, and AmREIT.

If you invested in a non-traded REIT 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 firm visit http://www.whitesecuritieslaw.com.

Lack of Transparency in Non-Traded REIT Valuations

The White Law Group continues to file FINRA arbitration claims to recover investment losses in non-traded REITs.  We have filed cases involving Behringer Harvard REIT, Behringer Harvard Short-term Opportunity REIT, Inland Western, Inland American, Desert Capital REIT, Cornerstone Healthcare REIT, CIP Leveraged Advisors, and KBS REIT, among many others.

The problems with these investments generally relates to the financial advisor’s failure to adequately disclose the risks and illiquidity of these investments (as well as the high commission he/she earned which was no doubt the real driving force in recommending the investments).

One of the other main complaints we continually hear relates to the problems in the valuation of these investments.  Finra rules currently mandate that sponsors of nontraded REITs establish an estimated per-share valuation within 18 months after the REIT stops raising money from investors. The problem with this language is that fund raising often lasts for years which results in the per-share valuation potentially remaining unchanged for years.

Also, the conflict of interest in having the sponsor of the nontraded REIT establish the valuation of the REIT is obvious.  Notwithstanding this obvious conflict, certain non-traded REITs are still fighting the manner in which valuations will be done in the future.

The Investment News recently reported that the nontraded-REIT industry is deeply divided about valuations as regulators prepare to codify rules on creating an estimated share value for these products.

A key sticking point is whether REITs and other private investments should use an independent third party to conduct appraisals.

Apparently certain non-traded REIT sponsors argued that the wide variety of private-investment products makes mandatory third-party appraisals inappropriate.  This position is ludicrous and touches on the main problems with these investments – transparency.

Is it not problematic enough for investors that the investment is illiquid, but the industry would like for these investors to also have no reasonable way of knowing what an independent valuation of the shares actually is?

It also appears that the proposed changes may be moving in the wrong direction.  Under the new proposal, broker-dealers no longer would be required to provide a per-share estimated value, unless the issuer provided an estimate based upon an appraisal of assets and liabilities in a periodic or current report under the Securities and Exchange Act of 1934.

Instead, during the initial offering period, broker-dealers would have the option of using a modified net offering price or designating the securities as “not priced.”

We have already seen at least one brokerage firms use the “not priced” method on its account statements and this allows for the possibility that the firm’s advisors could misrepresent the price to assuage fears and concerns about the pricing of the non-traded REIT.

What the non-traded REIT industry needs is complete transparency – transparency regarding pricing, transparency regarding the commissions generated, and transparency regarding the secondary market prices available to those investors looking to sell.

The reason that the industry fights so hard to oppose these things is that if they existed, people would quickly discover that non-traded REITs are created to be sold and not bought.

If you are a non-traded REIT investor interested in 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.  The firm exclusively represents investors in FINRA arbitration claims against their brokerage firm or financial professional.

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

Recovery of Desert Capital Real Estate Investment Trust Investment Losses

Have you suffered investment losses in the Desert Capital REIT? If so, The White Law Group may be able to help.

The White Law Group continues to file FINRA arbitrations on behalf of investors in Desert Capital REIT.  These claims are against the financial professionals and brokerage firms that recommended Desert Capital REIT to their clients.

Brokerage firms and financial advisors have a fiduciary duty to perform due diligence on an investment prior to recommending it for sale to their clients.  Based on what is now known about Desert Capital REIT, it appears clear that the broker-dealers that sold Desert Capital failed to perform the necessary due diligence.

At this point, this much is known:

(1)   Desert Capital REIT suspended its dividend and redemption programs in or about 2008;

(2)  Desert Capital REIT filed for Chapter 11 bankruptcy in the summer of 2011; and

(3)  It has been reported that Desert Capital REIT has been subpoenaed by the Securities and Exchange Commission pertaining to fraudulent payments and transactions between Desert Capital and CM Capital (a related entity).

Desert Capital REIT also paid an extremely high commission to the brokerage firms that sold the investment (somewhere between 7-10% depending on whether the brokerage firm was entitled to an additional “due diligence” fee).  This likely explains the financial advisors and broker-dealers’ motivation in recommending and selling this investment.

To determine whether you may be able to recover investment losses incurred as a result of your purchase of Desert Capital 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.com.

 

Desert Capital REIT Bankruptcy

Many investors are receiving notification this week that Desert Capital REIT has been forced into an involuntary Chapter 11 bankruptcy (or re-organization).  Realizing (some for the first time) that their investments in Desert Capital REIT may be a total loss, investors are beginning to review their legal options.

If you have questions about your legal options, The White Law Group may be able to help.

The White Law Group has been investigating potential securities fraud claims on behalf of investors in Desert Capital REIT dating back to November 2010.  Specifically, the firm has been looking at the broker-dealers that recommended the REIT to investors.  Brokerage firms have a fiduciary duty to research investments prior to recommending them for sale.  Given what is now known about Desert Capital, it appears that brokerage firms will be unable to demonstrate that they performed the necessary due diligence on Desert Capital REIT prior to recommending it for sale to the investing public.

FINRA recently announced that it is paying close attention to the sale of REITs and, in particular, the ways in which broker/dealers marketed and sold the products to investors. In many cases, broker-dealers marketed these investments as safe and secure.

To determine whether you may be able to recover investment losses incurred as a result of your purchase of Desert Capital 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.com.

 

Desert Capital REIT Insider Trading?

One of the allegations that we often hear from investors in Desert Capital REIT is that the principals of the firm were selling shares of Desert Capital shortly before investors were told that the firm would no longer be offering redemptions.  Any time a principal of a company buys or sells stock in that company, the individual is required to disclose that information to the SEC.

If you would like to see each time the principles of Desert Capital REIT bought or sold shares in Desert Capital, you can access this information here:

http://www.secform4.com/insider-trading/1274055.htm

If you have questions about investments you made in Desert Capital REIT, the securities attorney of The White Law Group may be able to help.  The firm is currently representing many Desert Capital REIT investors in claims against the brokerage firm that recommended the investment.

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.