Posts tagged ‘KBS REIT investigation’
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
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.
More Bad News for KBS REIT
Last month, a group of investors filed a prospective class action complaint against KBS Real Estate Investment Trust Inc. (or KBS REIT I) in the U.S. District Court for the Middle District of Florida in Fort Myers. The class action alleges that KBS made misrepresentations about the REIT, including its investment objectives, the dividend payment policy, and the value of the REIT’s investments.
It is being reported that this suit has caused at least one brokerage firm, Summit Brokerage Services, to suspend its selling agreements with sponsor KBS Holdings LLC. This news also raises questions regarding the ability of KBS REIT to succeed moving forward. In March, KBS REIT I announced a new valuation of $5.16 a share, down from $7.32 a share, and from the $10/share that original investors paid for the shares. KBS REIT has also cut its distribution to zero.
The White Law Group continues to file FINRA arbitration claims against the brokerage firms that recommended KBS REIT. These claims generally allege that the broker-dealers that sold KBS failed to perform the adequate due diligence on KBS REIT before offering it for sale to their clients.
Brokerage firms have a fiduciary duty to perform adequate due diligence on any investment before offering it for sale to its clients. Based on what is now known about KBS, it does not appear that the firms that sold KBS REIT performed the necessary due diligence on the offering.
Certainly, the extremely high commission offered by KBS REIT to brokerage firms for selling the product may explain the brokerage firms’ motivation in approving an investment with so many issues.
If you are a KBS REIT investor and you would like to discuss your litigation options with a REIT fraud 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 I Valuation Drops Again and Signals More Trouble for Investors
Investors in the popular non-traded REIT, KBS Real Estate Trust Inc. (KBS REIT I), were reportedly notified on Monday that the value of their shares is now estimated by the company at $5.16. The new valuation represents a 29% drop from the last change to the valuation in late 2009 and a nearly 50% drop since shares of KBS REIT I were initially offered at $10.00. Additionally, KBS investors were told that they would no longer be receiving any distributions. KBS REIT I is just the latest major non-traded REIT to see a drop in its valuation in recent months as many of these investments have struggled with a difficult real estate market over the last couple of years.
This most recent valuation will likely be troubling to many investors in the KBS non-traded REIT. If you invested in KBS REIT I and are wondering if you may have recourse to recover your investment, The White Law Group may be able to assist you in pursuing recovery of your nontraded REIT damages through FINRA arbitration process. The Financial Industry Regulatory Authority (FINRA) continues to pay close attention to issues related to non-traded REITs, including how they are sold and valuated.
The White Law Group has represented many investors who have struggled with non-traded REIT investments, including KBS Real Estate Investment Trust, Inc. (KBS REIT I), over the past few years in the FINRA dispute resolution claims.
The firm has seen several issues commonly arise around how non-traded REITS are sold and represented to investors. In many cases the risks associated with nontraded REITs were not adequately represented before purchase and investors have often been over-concentrated in this type of real estate investment. In some cases, the fact that advisors receive relatively high commissions for the sale of nontraded REITs compared to other products may have contributed to some investors being unsuitably invested in non-traded REIT investments. Finally, it seems common that the illiquid nature of non-traded REITs has not been made clear to some investors. Investors in nontraded REITs, like KBS REIT I, that have had redemption programs suspended may have difficulty selling their investments or suffer a serious loss on the secondary market.
Brokerage firms and financial advisers have a fiduciary duty to perform due diligence on any investment and to insure that an investment is appropriate in light of the investor’s age, investment experience, and investment objectives. If a broker or brokerage firm fails in this responsibility, investors may have an actionable claim to recover their investment losses in a claim through FINRA dispute resolution.
If you are concerned about your investment in KBS Real Estate Investment Trust, Inc. (KBS REIT I) or another nontraded REIT investment and would like to speak to a securities attorney about potential to recover your investment losses through FINRA dispute resolution please call our 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.
Are you concerned about your KBS REIT investment?
KBS REIT is a public, non-traded real estate investment trust. There are two KBS REITs, KBS REIT I and II, both which were sold by prospectus through FINRA registered broker-dealers.
Generally non-traded REITs are valued once a year based on the appraised value of the properties the REIT owns (making it difficult to evaluate the current value of your non-traded REIT investment).
(1) Current KBS Share Valuation
Although KBS REIT I last reset its value to $7.17 in late 2009, investors with whom we have spoken have stated that they are concerned about a further devaluation of the share price in the coming months.
This assumption does seem supported by the facts. It has been reported that KBS Real Estate Investment Trust has stopped redeeming or been unable to redeem all of the shares submitted for redemption. Based on what has occurred with other non-traded REITs, like Desert Capital and Apple REIT, the next step after a suspension of a REITs redemption program is often a devaluation of the REIT’s share prices.
(2) KBS REIT Liquidity
Complicating matters for KBS REIT owners is the difficulty in selling these investments. There are a few places out there that buy non-traded REITs, like KBS REIT, on the “secondary market.” These companies include REIT Secondary Exchange, American Partnership Board, and Second Market. Unfortunately, the “secondary market” is often trolled by buyers seeking to purchase assets at extremely low and depressed prices. It is unlikely that buyers on the secondary market would be willing to pay anywhere near the announced book value (or “appraised value”).
The alleged suspension of KBS REIT’s redemption program also highlights the valuation and liquidity risk issues faced by investors with unlisted, non-traded REITs.
A potential inability to trade and liquidate shares, coupled with a decreased dividend, places unlisted REIT investors in a dangerous situation and increases the risk of financial ruin.
(3) Potential Recovery of KBS REIT Losses
The White Law Group has many ongoing FINRA arbitration cases involving a brokerage firms’ improper recommendation of KBS REIT to a client. In the firm’s experience, brokerage firms often misrepresent the risks of KBS REIT and improperly sell the investment to investors who are either retired or seeking income.
Brokerage firms have a fiduciary duty to research investments prior to recommending them for sale and to insure that each investment recommended is appropriate in light of the client’s age, investment experience, net worth, and investment objectives. This obligation is commonly referred to as the Know Your Customer Rule.
Unfortunately, due to the relatively high interest or dividend offered by non-traded REITs like KBS REIT, retired investors are often attracted to these products. Additionally, REITs typically pay a high commission – often as much as 15% (which often explains the stockbroker’s motivation in recommending the REIT investment to an investor who simply should not be in the product).
(4) Free Consultation
If you are concerned about your KBS REIT investment and would like to speak with an experienced securities attorney for a free consultation, 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, visit http://www.whitesecuritieslaw.com.