Articles Posted in REITs

shutterstock_143685652-300x300Advisor Megurditch Patatian (Patatian), formerly employed by brokerage firm Western International Securities, Inc. (Western International) has been subject to at least 13 disclosures of which nine are customer complaints, three are employment terminations for cause, and one is a regulatory action.  According to a BrokerCheck report several 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 February 2021 FINRA filed a complaint against Patatian alleing that he made 81 recommendations to 59 customers to purchase non-traded real estate investment trusts (REITs). According to FINRA, all of the recommendations were unsuitable because he lacked a reasonable basis to recommend the product to any investor.  FINRA found that Patatian did not understand the basic features and risks associated with the non-traded REITs and failed to conduct reasonable diligence to understand the product.  As part of the misconduct, FINRA alleges that Patatian caused customers to incur taxes and surrender fees by recommended that the customers surrender existing variable annuity policies when he failed to understand the adverse financial consequences of the surrenders. In one instance, FINRA claims that Patatian impersonated a customer in a telephone call with an insurance company to obtain the contract value and surrender fee for the variable annuity.  Finally, in order to qualify investors for the REITs, FINRA claims that Patatian recorded inaccurate customer information on his member firm’s customer account and disclosure forms, including by overstating customers’ net worth and exaggerating customers’ years of investment experience.  According to FINRA, Patatian inflated the customer’s net worth on the firm’s REIT paperwork in order to evade concentration limits on REIT investments.

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shutterstock_113872627-300x300The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that Seth Stewart, currently employed by Brookstone Financial and formerly employed by Center Street Securities, Inc. (Center Street), has been subject to at least two customer complaints during his career. According to records kept by the Financial Industry Regulatory Authority (FINRA), Stewart’s customer complaints allege that Stewart recommended unsuitable investments in illiquid alternative investments – a high risk investment category.

In February 2020, a customer complained that Stewart violated the securities laws by alleging that Stewart engaged in unsuitable investment advice. The claim alleges $200,000 in damages and is currently pending.

In December 2019, a customer complained that Stewart violated the securities laws by alleging that Stewart was unaware that certain investments he made were illiquid. The claim alleges $100,000 in damages and is currently pending.

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.

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shutterstock_85873471-300x200Advisor Kevin Houser (Houser), currently employed by brokerage firm Ameriprise Financial Services, LLC (Ameriprise) has been subject to at least four customer complaints during the course of his career.  According to a BrokerCheck report several 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 November 2020 a customer complained that Houser violated the securities laws by alleging that Houser made misleading recommendations in various REITs and BDCs including Franklin Square, Cole Credit Property Trust IV, and CIM REIT.  The claim involves alternative investments and alleges $358,000 damages, and is currently pending.

In July 2020 a customer complained that Houser violated the securities laws by alleging that Houser made misleading recommendations in various REITs, BDCs, and an annuity including Franklin Square.  The claim involves alternative investments and alleges $300,000 damages, and is currently pending.

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shutterstock_20002264-300x200Advisor Gary Ginsberg (Ginsberg), currently employed by brokerage firm Ameriprise Financial Services, LLC (Ameriprise) has been subject to at least four customer complaints and one regulatory action during the course of his career.  According to a BrokerCheck report several 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 September 2020 a customer complained that Ginsberg violated the securities laws by alleging that Ginsberg made an unreasonable due diligence review of an alternative investment. The claim involves alternative investments, alleges $100,000 damages, and is currently pending.

In August 2020 a customer complained that Ginsberg violated the securities laws by alleging that Ginsberg made an unsuitable recommendation to purchase a non-traded REIT.  The claim involves alternative investments and alleges $5,000 damages and was denied by the firm.

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shutterstock_135103109-300x200Advisor Jingbo Pan (Pan), currently employed by Vestech Securities, Inc. (Vestech Securities) and formerly employed by Coastal Equities, Inc. (Coastal Equities) has been subject to at least three customer complaints and one employment termination for cause during the course of his career.  According to a BrokerCheck report the customer complaints 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 February 2020 Pan was discharged for cause by Coastal Equities on allegations that Pan failed to follow firm procedures by failing to obtain prior principal approval before submitting an order for execution.

In November 2019 a customer complained that Pan violated the securities laws by alleging that Pan engaged in sales practice violations related to DPPs and breached his fiduciary duty and was negligent.  The claim alleges $125,000 in damages and settled for $25,000.

In September 2019 a customer complained that Pan violated the securities laws by alleging that Pan engaged in sales practice violations related to DPPs and breached his fiduciary duty, negligent, and failed to supervise.  The claim alleges $90,000 in damages and settled for $20,000.

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shutterstock_85873471-300x200Advisor Kenneth Barroga (Barroga), currently employed by Crown Capital Securities, L.P. (Crown Capital) has been subject to at least five customer complaints during the course of his career.  According to a BrokerCheck report most of these customer complaints appears to concern unsuitable investments in alternative investments.  These allegations may also concern investments in GPB Capital Holdings (GPB Capital) related investments.  Crown Capital is known to have approved their brokers to sell GPB Capital to their clients.

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 officer 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 June 2020 a customer complained that Barroga violated the securities laws by alleging that Barroga engaged in sales practice violations related to lack of suitability, breach of fiduciary duty, misrepresentation and omissions of material facts and lack of due diligence in connection with transactions in alternative investment products. The claim alleges $180,000 in damages and is currently pending.

In November 2018 a customer complained that Barroga violated the securities laws by alleging that Barroga engaged in sales practice violations related to misrepresentations concerning REITs and unsuitable investments in alternative investments.  The claim alleges $250,000 in damages and resolved for $160,097.69 with another party settling for $40,000.

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shutterstock_133513469-300x200The securities lawyers of Gana Weinstein LLP represent investors who have lost millions investing in American Realty Capital New York City REIT (ARC New York REIT, New York City REIT, or NYC REIT) (Ticker Symbol: NYC) a non-traded real estate investment trust (Non-Traded REIT) that recently went public.

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.

In 2018 NYC REIT ceased making distributions.  However, the REIT continued to tell investors that the investment was worth at least $20.26 a share on their initial $25 per share price investment while secondary market sources were projected massive losses.  In early 2020 NYC REIT announced that it would go public.  REIT investors would realize shares subject to a 2.43-to-1 reverse stock split.  Thereafter, 75% of client funds would be converted into Class B shares which could not be sold and would remain illiquid.  NYC REIT told investors that by the end of the first listing year all Class B shares would be converted into Class A shares which could be sold on the market.

Once NYC REIT went public and the true value of NYC REIT was revealed investors lost a significant portion of their investment seemingly overnight.  At the initial public offering (“IPO”), NYC REIT lost almost 44% of its value in that first trading session.  By the end of October 2020 NYC REIT had lost over 63% of its initial public offering price.  Investors in NYC REIT have suffered losses of approximately 85% of their initial investment in the Non-Traded REIT and still cannot liquidate the majority of their investment.

As a law firm that represents investors, we have watched the same story as NYC REIT play out over and over again where real estate and other assets are touted as safe and reliable investments only to realize significant losses when the true value is revealed.

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shutterstock_177082523-243x300The securities lawyers of Gana Weinstein LLP are investigating recommendations by brokerage firms for their clients to invest in RW Holdings NNN REIT Inc., formerly known as Rich Uncles NNN REIT Inc.,- a non-traded real estate investment trust (non-traded REIT).  RW Holdings originally sold shares for $10.00.  The fund claims to have an estimated net asset value per share of $6.00.  However, secondary market trading would likely value this REIT substantially lower in value.

As a background, RW Holdings NNN REIT’s real estate portfolio totals 2.4 million square feet, 45 properties divided into 19 retail properties, 14 office properties, and 12 industrial properties located in 14 states. The portfolio also includes approximate 72.7 percent tenant-in-common interest in an office property in Santa Clara, California.

In May 2020 The REIT said that it was suspended its offering and its plans to declare a revised net asset value per share later that month, as well as a revised distribution rate. RW Holdings expected that both will be lower due to the impact of the COVID-19 pandemic.

In a statement the REIT claimed “Given our inability to collect 100 percent of contractual rents, we are re-evaluating our current distribution rate…,”

More recently, the REIT published the new share valuation showing substantial losses and write downs and reduced its dividend ratio from $0.7 shares per ordinary share to $0.35 shares – a substantial decline.

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shutterstock_38114566-300x199The securities lawyers of Gana Weinstein LLP continue to investigate and represent investors who lost money in The Parking REIT (formerly known as the MVP REIT II) a non-traded real estate investment trust (Non-Traded REIT).  The Parking REIT claims to own parking lots and that an investment in the REIT provides benefits including, low operating and maintenance costs, potential for long-term capital appreciation, redevelopment opportunities, a fragmented Industry, and heavy demand.

Several years ago the board of The Parking REIT announced that it would be suspending the company’s distributions.  The Board claimed that the move would preserve capital in order to maintain sufficient liquidity to continue to operate the business and maintain compliance with debt covenants.

In a letter dated April 13, 2020, The Parking REIT provided more bad news for investors.  The company stated that “The company faces significant legal expenses related to pending lawsuits, an SEC investigation, and legal and consulting fees in connection with our exploration of potential strategic alternatives to provide liquidity to stockholders.”   Further, in order for the directors and officiers to protect themselves from increasing threates of liability the REIT paid “directors & officers liability insurance premiums added approximately $2.0 million to our general and administrative expenses in 2019.”  In addition, the REIT announced that “increasing expenses and general economic conditions are expected to prohibit The Parking REIT management and board of directors from considering a reinstatement of common stock and preferred stock distributions for the foreseeable future.”

Finally, the REIT claimed that no liquidity event may occur stating “there can be no assurance that the company will cause a liquidity event to occur in the near future or at all.”

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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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