Posts tagged ‘KBS REIT fraud’

KBS REIT I Drops More Than 50%

Have you suffered investment losses in KBS Real Estate Investment Trust?  If so, The White Law Group may be able to help you recover your losses through FINRA arbitration.

The White Law Group continues to investigate potential securities fraud claims involving broker-dealers’ improper recommendation that investors purchase risky non-traded REIT investments, such as KBS REIT I.

KBS REIT I is a non-traded REIT that closed its initial public offering on May 31, 2008 for $10 per share. Unfortunately for many investors the value of the KBS REIT has dropped significantly. According to a recent document filed with the Securities and Exchange Commission (SEC), on December 18, 2013, the Company’s board of directors approved an estimated net asset value of $4.45 per share (a drop of over 50% from the original $10/share).

Non-traded RIETs, like KBS, are high risk complex investment products intended for institutional and sophisticated investors

The problems that often arise these types of non-traded REITs generally involves the failure of broker-dealers to adequately disclose the risks and illiquidity of these investments.  Nontraded REITs like KBS are also extremely high commission products, incentivizing unscrupulous advisors to push these products regardless of whether the investments are appropriate for their clients.

Broker-dealers have a fiduciary duty to perform adequate due diligence on any investment that they recommend and to make recommendations that are suitable given the client’s age, investment experience, net worth, and investment objectives. If a broker-dealer or one of their registered representatives fails in this responsibility, they can be liable for investment losses in a claim through FINRA dispute resolution.

If you suffered losses investing in KBS REIT I and would like to discuss your litigation options,please call The White Law Group at 312-238-9650 for a free consultation.

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.

Update on KBS Non-Traded REIT Securities Fraud Investigation

KBS was quick to file an Amended Free Writing Prospectus (FWP) with the SEC after Keith D. Hall, KBS Capital Advisor co-founder and managing partner, appeared on Fox Business. The document filed on February 20th, 2013 is intended to correct and clarify approximately 15 statements Hall made in the 5 min TV segment titled “Non-Traded REITS Investing 101.”

KBS headquarters are located in Newport Beach, Calif. According to their website KBS began as a real estate investment company to provided real estate investments on behalf of large institutional clients. In 2005 KBS Capital Advisors was created to manage the assets of KBS non-traded REITs.

For prospective Real Estate investors, Hall’s interview was very persuasive in promoting non-traded REITs like those offered by KBS. However, the FWP document not only clarifies, it sheds light on some of the risks involved in non-traded REITs.

For example, Hall commented “…there is no volatility in the stock.” However, the FWP points out that even though non-traded REIT shares are not subject to broader market volatility, that the value of the REIT may be volatile.  Investors in KBS Real Estate Investment Trust, Inc., know this to be true. Shares purchased between 2006 and 2008 initially for $10.00 per share are currently valued at $5.18 as of December 18, 2012.

To learn more about the Amended Free Writing Prospectus, and to read a transcript of the interview visit http://www.sec.gov/Archives/edgar/data/1482430/000119312513073587/d490785dfwp.htm

There is an inherent risk with non-trade REITs, as with any investment, and it is the responsibility of the brokerage firm selling the non-traded REIT to adequately disclose all risks. Non-trade REITs are not suitable for investors who need liquidity in their investment. Other suitability factors that should be considered by a brokerage firm prior to recommending a non-traded REIT are age, financial needs, and risk tolerance to name a few.

However, many brokerage firms overlook suitability regulations set forth by the SEC to earn the high commission that non-trade REITs, like KBS, offer.  KBS Real Estate Investment Trust REITs offer a 6.5% sales commission, in addition to a 3.0% dealer manager fee.

Brokerage firms that do not perform adequate due diligences on an investment or demonstrate a breach of fiduciary duty can be held accountable for losses incurred through FINRA arbitration.

The White Law Group continues to investigate FINRA arbitration claims involving KBS Real Estate Investment Trust, Inc., KBS Real Estate Investment Trust II, KBS Real Estate Investment Trust III, KBS Strategic Opportunity REIT, and KBS Legacy Partners Apartment REIT.

If you invested in a KBS non-traded REIT and would like to discuss you 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://whitesecuritieslaw.com

Non-traded REITs suffer further devaluations.

Several large non-traded REITs recently announced further devaluations.  For example, Inland American REIT recently announced that its valuation was decreasing to $6.93 per share (down from its latest valuation of $7.22 per share, and even lower from its original value of $10 per share).

Behringer Harvard REIT I also announced a drop in estimated value to $4.01 per share from $4.64 per share and Hines REIT announced its share value had dropped to $7.61 from $7.78 per share.

Although one large non-traded REIT, KBS REIT, announced its shares had risen nominally from $5.16 per share to $5.18 per share, overall the news for non-traded REIT investors represented more disappointment in these underperforming investments.

Further compounding the problem with these devaluations is that the shares are illiquid and it is unlikely that the secondary market is paying anywhere near the announced estimated values.  Due to the illiquid nature of non-traded REITs, the buy side of the secondary market is usually inhabited by enterprising and sophisticated venture capital firms and hedge funds.  These entities know that the sellers of non-traded REITs are often desperate for liquidity so the offerss  are often for significantly less than the book value of the underlying assets.  With any real estate investment, though, the “true value” is whatever someone is willing to pay so it is likely that secondary market value of these non-traded REITs is currently less than the recently announced “estimated value.”

The good news is that investors may be able to recover their losses in these underperforming non-trading REITs.

The White Law Group continues to file FINRA arbitration claims involving non-traded REITs, like Inland American REIT, Behringer Harvard REIT I, Hines REIT, KBS REIT and others.  These cases are generally brought against the brokerage firms and financial professionals that recommended the investments

Financial advisors and broker-dealers have a duty to their clients to perform the necessary due diligence on an investment before offering it for sale to their clients and to ensure that any investment recommendation that is made is suitable in light of the client’s age, investment experience, net worth, and investment objectives.   Unfortunately for investors in non-traded REITs, brokerage firms often down play the risk of these products to their clients and sell the investments as safe, income producing investments.

The claims filed by The White Law Group involving these REITs generally allege that the brokerage firms that sold these products failed to perform adequate due diligence on the investments (as they are required to do by FINRA rules, that the investments were unsuitable for the investors in light of their particular financial situation, and that the firms only sold the investments because of the large commissions that non-traded REITs pay to brokerage firms and brokers to sell these products.

If you invested in non-traded REIT and are 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.

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

FINRA Steps Up Investigations Into Nontraded REIT Sales

According to an Investment News report, nontraded real estate investment trusts and potential shortcomings in how broker-dealers sell them are once again in the cross hairs of regulatory examiners from the Financial Industry Regulatory Authority Inc.

These FINRA regulatory examinations appear to focus on the retail sellers of nontraded REITs and the numerous “red flags” that these firms overlooked in selling these products.

Specifically, FINRA is looking at the firms’ failure to conduct reasonable diligence before selling a product and the broker-dealers’ failure to make an appropriate determination that the products were suitable for investors.  FINRA is also looking at the distributions (or dividends) paid by nontraded REITs.  It is not uncommon for nontraded REITs to borrow funds to make distributions if operating cash flow is insufficient.  Unfortunately for investors, excessive borrowing may increase the risk of default or devaluation. In certain instances, nontraded-REIT distributions may also only be a return of principal (a fact that is typically not adequately disclosed to the investors).

The White Law Group continues to file FINRA arbitrations against the broker-dealers that improperly sold nontraded REITs.  These claims generally allege that the firms overlooked the red flags of these products because of the high commissions paid (generally between 7-10%).

The White Law Group has filed FINRA arbitrations to recover nontraded REIT losses experienced in the following nontraded REITs (among others):  KBS REIT, CNL REIT (CNL Lifestyle Properties), Desert Capital REIT, Apple REIT, Behringer Harvard REIT, Dividend Capital REIT, Wells REIT, Healthcare Trust of America REIT, Inland American, Cornerstone Core Properties, Inland Western, and Cole REIT.

If you have invested in a nontraded REIT and would like to discuss your litigation options with an experienced securities attorney, please call 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.

KBS REIT Class Action Withdrawn

According to reports, a class action against KBS REIT has been withdrawn.

In May, investors lead by plaintiff George Stewart sued KBS REIT, alleging that KBS made misrepresentations about the REIT, including its investment objectives, the dividend payment policy and the value of the REIT’s investments.

Apparently, on Friday, the plaintiffs filed a notice of voluntary dismissal in U.S. District Court in Fort Meyers, Fla.

Investors in KBS REIT I were notified in March that the REIT’s value would be cut to $5.16 per share, from $7.32, a drop of 29%. The REIT’s offering price was $10 per share. It also said it was stopping distributions to investors.

KBS REIT I 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 in March. It has $3.4 billion in property assets, and holds loans and other debt of $2.3 billion.

While the pending class action lawsuit against KBS has been withdrawn, investors in KBS can still file FINRA arbitration claims to attempt to recover their losses.

The White Law Group continues to investigate the liability that brokerage firms have for recommending KBS REIT to their customers.  Brokerage firms have a fiduciary duty to their clients to perform adequate due diligence on investments before recommending them to their clients.  Based on what is now known about KBS REIT, it appears that the firms that sold the product will be unable to demonstrate that they performed adequate due diligence.

Rather, it appears that the firms that sold KBS REIT were more interested in the high commissions selling the investment created (and not whether the investment was appropriate for investors).

If you suffered losses in KBS REIT and would like to discuss your litigation options, please call 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.