Articles Posted in REITs

shutterstock_123928846-300x268Advisor Mark Robare (Robare), currently employed by Triad Advisors LLC (Triad Advisors) has been subject to at least one customer complaint and one regulatory matter during the course of his career.  According to a BrokerCheck report one customer complaint concerns alternative investments such as direct participation products (DPPs) like business development companies (BDCs), non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and private placements.  The attorneys at Gana Weinstein LLP have represented hundreds of investors who suffered losses caused by these types of high risk, low reward products.

In March 2020 a customer complained that Robare violated the securities laws by alleging that Robare engaged in sales practice violations related to an unsuitable investment strategy beginning in 2014. The claim alleges $500,000 and is currently pending.

In September 2014 the SEC alleged that Robare used Fidelity Investments for clearing services for its advisory clients whereby Robare entered into a revenue sharing arrangement with Fidelity Investments in 2004.  In this arrangement, Fidelity paid Robare to invest in certain mutual funds offered on Fidelity’s platform and Robare received nearly $400,000 from Fidelity from 2005 to 2013 as a result of the arrangement.  The SEC claimed that Robare modified its Form ADV disclosures in December 2011 after Fidelity advised Robare that it would cease making payments if the arrangements were not disclosed. The SEC fined Robare $50,000.

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shutterstock_132704474-300x200The securities lawyers of Gana Weinstein LLP are investigating recommendations by brokerage firms for their clients to invest in Carey Watermark Investors 2 aka Watermark Lodging Trust – a non-traded real estate investment trust (non-traded REIT).  Carey Watermark Investors 2 originally sold shares for $10.00.  The fund claims to have an estimated net asset value per share of $11.41.  However, secondary market trading sources cite a far smaller value at only $5.50 a share – implying that the trading markets anticipate that Carey Watermark Investors 2 has substantially dropped in value.

As a background, Watermark Lodging Trust claims to be a premier lodging REIT with a portfolio of high-quality lodging assets led by an internal management team with a distinctive record of stockholder value creation. WLT claims to have been formed to take advantage of current and future opportunities in the lodging industry and seeks to provide investors with attractive, risk-adjusted returns and long-term growth in value.

Thereafter, on April 13, 2020, Carey Watermark Investors 2 and Carey Watermark Investors 1 merged in an all-stock transaction to create Watermark Lodging Trust.  In addition, since March 2020 the REIT has suspended distributions due to the reduced travel demand and related financial impact resulting from COVID-19.

In May 2020 the company filed a notice with the SEC stating that “approximately $277 million of indebtedness is scheduled to mature after the date of this Form 8-K through December 31, 2020. This indebtedness is nonrecourse mortgage indebtedness and the Company has extension options with respect to a portion of such indebtedness. If the Company’s lenders do not provide covenant relief or if the Company is unable to repay, refinance or extend any such indebtedness, the lenders may declare events of default and seek to foreclose on the underlying hotels. We may also seek to give properties back to the lenders. We have begun active efforts to raise capital through a variety of strategies, including, without limitation, sales of assets, potentially at discounted prices; incurrences of debt; joint venture arrangements; and/or issuances of equity securities in transactions which may be dilutive to our stockholders.”

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shutterstock_156562427-300x200The securities lawyers of Gana Weinstein LLP are investigating recommendations by brokerage firms for their clients to invest in Strategic Student & Senior Housing Trust (SSSHT) – a non-traded real estate investment trust (non-traded REIT).  Strategic Student & Senior Housing Trust has stopped distributing a dividend leaving investors with no returns for the time being.  As is too common in the brokerage industry, firms fail to understand the flawed non-traded REIT business model and only recommend these products for their 7% commissions – not because they benefit investors.

Strategic Student & Senior Housing Trust has been particularly hard hit in the recent recession due to the nature of its investments properties.  Strategic Student and Senior Housing Trust is a public, non-traded REIT focused exclusively on assets in the student housing and senior housing areas. The fund is premised on investing in two areas “with strong demographic drivers from college students and baby boomers” according to its website.

The fund states that SSSHT intends to take advantage of the growing demand for recession-resistant asset classes and desirable demographic trends.  The REIT states that it believes that SSSHT can provide stability, diversification, income, and potential growth over the long-term.

However, in an April 2020 prospectus update, Strategic Student & Senior Housing Trust stated that it incurred a net loss of approximately $19.6 million for the fiscal year ended December 31, 2019. Further, the REITs accumulated losses are approximately $41.8 million as of December 31, 2019.  Moreover, due to the current recession the REIT suspended its primary offering while still early in its acquisition stage.  Strategic Student & Senior Housing Trust warned that its operations may not be profitable in 2020.

Further Strategic Student & Senior Housing Trust investors are now trapped in the REIT when in March 2020, when the REIT’s board of directors determined to suspend the share redemption program with respect to common stockholders effective as of May 3, 2020.  The REIT stated that until it can establish a net asset value per share it was not currently possible to determine accurately redeem or sell shares.

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shutterstock_20354401-300x200The securities lawyers of Gana Weinstein LLP are investigating recommendations by brokerage firms for their clients to invest in Moody National REIT II (Moody REIT) – a non-traded real estate investment trust (non-traded REIT).  According to secondary market quotes, Moody National REIT II has suffered massive losses and may only be worth less than 50 cents for every dollar purchased.  In addition, Moody National REIT II no longer distributes a dividend.  As is too common in the brokerage industry, firms fail to understand the flawed non-traded REIT business model and only recommend these products for their 7% commissions – not because they benefit investors.

Moody REIT has been particularly hard hit in the recent recession due to the nature of its investments properties.  Moody National REIT II, Inc. was formed in July 2014 to acquire a portfolio of hospitality properties (a/k/a hotels and resorts) focusing primarily on the select-service segment of the hospitality sector with premier brands including, but not limited to, Marriott, Hilton and Hyatt.

According to the investments’ Fact Sheet, Moody REIT’s objectives are to “Preserve, protect and return stockholders’ capital contributions. Pay regular cash distributions to stockholders. Realize capital appreciation upon the ultimate sale of the real estate assets acquired by Moody National REIT II, Inc.”

However, according to filings with the SEC, on March 24, 2020, the Company’s board of directors approved the suspension of: (1) the sale of shares in Moody REIT; (2) the payment of distributions to the company’s stockholders; (3) reinvestments; and (4) the operation of the share redemption program.

Our firm often handles cases involving direct participation products (DPPs), private placements, Non-Traded REITs, and other alternative investments.  These products are almost always unsuitable for middle class investors.  In addition, the brokers who sell them are paid additional commission in order to hype inferior quality investments providing perverse incentives for brokers to sell high risk and low reward investments.

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shutterstock_64859686-300x300The securities lawyers of Gana Weinstein LLP are investigating recommendations by brokerage firms for their clients to invest in Hospitality Investors Trust  – a non-traded real estate investment trust (non-traded REIT).  Hospitality Investors Trust REIT, formerly known as American Realty Capital Hospitality Trust, originally sold shares for $25.00.  As of December 31, 2019, the fund has approved an estimated net asset value per share of $8.35 as massive loss to initial investors.  Even worse, secondary market trading sources cite a far smaller value at only $.75 a share – implying that the trading markets anticipate that Hospitality Investors Trust is virtually worthless.

Hospitality Investors Trust states that it is a publicly registered non-traded real estate investment trust (REIT) which owns a diversified portfolio of strategically-located hotel properties throughout North America within the select service and full-service markets of the hospitality sector.

Even prior to the recent recession and COVID-19 related market issues, Hospitality Investors Trust suspended the company’s share repurchase program effective February 28, 2019.  Thus, well before recent market events investors could not redeem their shares even at the prices the fund stated the investment was worth.

Recently, the REIT stated that “the Company has the responsibility to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about its ability to meet its obligations arising within one year after the date that the financial statements are issued.  Due to the existence of certain events of default under the Company’s debt obligations…the Company is unable to conclude with certainty that it is probable that it will be able to meet its obligations arising within twelve months of the date of issuance of these financial statements…”  In other words, Hospitality Investors Trust REIT is questionable as a going concern at this point.

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shutterstock_189006551-207x300Advisor Scot Fairchild (Fairchild), currently employed by Lucia Securities, LLC (Lucia Securities) has been subject to at least two customer complaints during the course of his career.  According to a BrokerCheck report one of the customer complaint concerns alternative investments such as direct participation products (DPPs) like business development companies (BDCs), non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and private placements.  The attorneys at Gana Weinstein LLP have represented hundreds of investors who suffered losses caused by these types of high risk, low reward products.

In December 2019 a customer complained that Fairchild violated the securities laws by alleging that Fairchild engaged in sales practice violations related to breach of fiduciary duty, misrepresentations and omissions, negligence and unsuitable investments in high risk, illiquid investments purchased between 2013 and 2014 and in violation of Nevada Securities Laws. The claim alleges $214,335 and is currently pending.

In January 2019 a customer complained that Fairchild violated the securities laws by alleging that Fairchild engaged in sales practice violations related to breach of fiduciary duty, negligence, breach of contract, and unsuitable investment recommendations related to Real Estate Investment Trusts purchased between on or around 2013 and 2014.  The claim alleges $500,000 and settled for $175,000.

DDPs include products such as non-traded REITs, oil and gas offerings, equipment leasing products, and other alternative investments.  These alternative investments virtually never profit investors and are almost always unsuitable for investors because of their high fee and cost structure.  Brokers selling these products are paid additional commission in order to hype these inferior quality investments providing a perverse incentives to create an artificial market for the investments.

Several studies have confirmed that Non-traded REITs underperform publicly traded REITs with some showing that Non-Traded REITs cannot even beat safe benchmarks, like U.S. treasury bonds.  Brokers selling these products must disclose to the investor that non-traded REITs provide lower investment returns than treasuries while being high risk and illiquid – but almost never do.  Because investors are not compensated with additional return in exchange for higher risk and illiquidity, these kinds of alternative investment products are rarely, if ever, appropriate for investors.  Continue Reading

shutterstock_132317306-300x200Advisor Dustin Shafer (Shafer), currently employed by Newbridge Securities Corporation (Newbridge Securities), has been subject to at least seven customer complaints and two tax liens or judgement during the course of his career.  According to a BrokerCheck report one of the customer complaints concern alternative investments such as direct participation products (DPPs) like business development companies (BDCs), non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and private placements.  The attorneys at Gana Weinstein LLP have represented hundreds of investors who suffered losses caused by these types of high risk, low reward products.

In January 2020 a customer complained that Shafer violated the securities laws by alleging that Shafer engaged in sales practice violations related to recommending an investment that was not explained and that was guaranteed a montly dividend.  The claim alleges $175,000 and is currently pending.

In January 2020 a customer complained that Shafer violated the securities laws by alleging that Shafer engaged in sales practice violations related to recommending alternatives investment beginning in 2013 that were misrepresented.  The claim alleges violations of Illinois securities laws, breach of fiduciary duty, negligence, and violation of FINRA rules.  The claim alleges $454,000 in damages and is currently pending.

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shutterstock_20354401-300x200Advisor Joseph Roop (Roop), formerly employed by Kalos Capital, Inc. (Kalos) has been subject to at least seven customer complaints and one bankruptcy during the course of his career.  According to a BrokerCheck report some of the customer complaints concern alternative investments such as direct participation products (DPPs) like non-traded real estate investment trusts (REITs), oil & gas programs, and annuities.  The attorneys at Gana Weinstein LLP have represented hundreds of investors who suffered losses caused by these types of high risk, low reward products.

In addition, brokers at Kalos have been accused of selling millions in fraudulent GPB Capital Holdings (GPB Capital) related investments.  GPB Capital is facing multiple accusations of being a Ponzi scheme, an ongoing U.S. Securities and Exchange Commission (SEC) and FBI investigations, and even GPB’s chief compliance officier being indicted for illegally obtaining information on the SEC’s investigation.  Now even Volkswagen and Toyota are threatening to pull the plug on GPB Capital auto dealerships.  While advisors have been telling investors to do absolutely nothing and just hang in there – this is nothing more than just additional poor advice.  In November 2019 GPB Capital’s admitted that no financial audit would occur anytime in the near future.  The firm has admitted that it has never been profitable and has merely returned investor capital in the past in order to fake a successful business model.  In sum, investors now know there is nothing to hang onto.  By the day, advisor recommendations to do nothing appear to be completely self-serving, out of the loop, and not in the interest of the investor.

In July 2019 a customer complained that Roop violated the securities laws by alleging that Roop engaged in sales practice violations related to unsuitable investments in alternative securities (REITS, etc.) during the time period from 2012 through 2017. The claim alleges $450,000 in damages and is currently pending.

In October 2018 a customer complained that Roop violated the securities laws by alleging that Roop engaged in sales practice violations related to unsuitable investments and sale of securities when not properly registered in the State of Alabama from January 2011 through July 2014.  The claim alleges $100,000 in damages and was settled for $90,000.

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shutterstock_176283941-300x200Advisor Steven Case (Case), currently employed by LPL Financial LLC (LPL Financial) has been subject to at least two customer complaints during the course of his career.  According to a BrokerCheck report some of the customer complaints concerns alternative investments such as direct participation products (DPPs) like non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and equipment leasing programs.  The attorneys at Gana Weinstein LLP have witnessed a spike in clients needing representations concerning these alternative investment programs that produce profits only for broker-dealers at the expense of their clients.

 

In May 2019 a customer complained that Case violated the securities laws by alleging poor investment advice concerning the purchase of three alternative investment products. The is currently pending.

 

In October 2012 a customer complained that Case violated the securities laws by alleging that Case made unsuitable investment recommendations in non-traded REITs. The claim was settled by the firm for $20,000.

 

DDPs include products such as non-traded REITs, oil and gas offerings, equipment leasing products, and other alternative investments.  These alternative investments virtually never profit investors and are almost always unsuitable for investors because of their high fee and cost structure.  Brokers selling these products are paid additional commission in order to hype these inferior quality investments providing a perverse incentives to create an artificial market for the investments. Continue Reading

shutterstock_156367568-300x200Advisor Anthony Hobson (Hobson), currently employed by Money Concepts Capital Corp (Money Concepts) has been subject to at least three customer complaints during the course of his career.  According to a BrokerCheck report some of the customer complaints concerns alternative investments such as direct participation products (DPPs) like non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and equipment leasing programs.  The attorneys at Gana Weinstein LLP have represented investors who suffered losses caused by these types of products.

In June 2019 a customer complained that Hobson violated the securities laws by alleging between April 2008 and November 2010, Hobson over-concentrated accounts in high-risk and speculative alternative investments. The claim alleges $218,500 in damages and is currently pending.

In January 2015 a customer complained that Hobson violated the securities laws by alleging that Hobson misrepresented a non-traded REIT. The claim was settled by the firm for $32,500.

DDPs include products such as non-traded REITs, oil and gas offerings, equipment leasing products, and other alternative investments.  These alternative investments virtually never profit investors and are almost always unsuitable for investors because of their high fee and cost structure.  Brokers selling these products are paid additional commission in order to hype these inferior quality investments providing a perverse incentives to create an artificial market for the investments.

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