Articles Posted in REITs

shutterstock_180342155-300x200Worden Capital Management LLC (Worden Capital) advisor Mark Kolta (Kolta) has been subject to at least 14 customer complaints and one employment termination for cause.  According to a BrokerCheck report many of the customer complaints concern alternative investments and direct participation products (DPPs) such as non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and equipment leasing programs.  The attorneys at Gana Weinstein LLP have extensive experience handling investor losses caused by these types of products.

In addition, in November 2011 Kolta was discharged by Chase Investment Services Corp. (Chase) for recommending that customers of another brokerage firm trade options.

The most recent complaint was filed in July 2018 alleging breach of fiduciary duty, negligence, misrepresentations and unsuitable recommendations leading to $120,000 in damages.  The claim is currently pending.  Anther complaint filed in June 2018 contained allegations by a customer that misrepresentations and unsuitable recommendations were made leading to $450,000 in damages.  The claim is currently pending.

shutterstock_93851422-300x240The attorneys of Gana Weinstein LLP have reported on the many failings of the non-traded real estate investment trust (Non-Traded REIT) industry for years.  One of the common myths is that these products (such as Behringer Harvard, Cornerstone, Inland and KBS) only failed because of the financial crisis and the decline in the real estate industry.  The truth is these expensive and inefficient products never make sense to invest in.

Proving this to be the case is American Finance Trust Inc., (AFIN) which was sold in 2013 by Schorsch affiliated entities.  When American Finance recently went public approximately $1 billion of the company’s claimed value was wiped out exposing investors to massive losses that had long been hidden by the complex and opague ways the Non-Traded REIT industry operates.

The company itself published its own “estimated per share” net asset value of $23.56, only slightly less than the $25 per share that investors spent to acquire it just the month before.  When AFIN went public it traded as low as $14.80 with a market capitalization of about $1.6 billion – a 40% loss.

As regulators continue to turn their attention to this product and the industry works to lower commissions that brokers earn on this product the truth is now starting to come out.  Brokers have been essentially bribed with 7% commissions for over a decade to sell worthless and inferior products.  Now that commissions have declined sales have plummeted as the pressure to sell Non-Traded REITs dissipates.

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shutterstock_113872627-300x300Former Sandlapper Securities, LLC (Sandlapper) and Independent Financial Group, LLC (Independent Financial) broker Kyusun “Kenny” Kim (Kim) has been subject to at least 23 customer complaints and one regulatory action.  According to a BrokerCheck report many of the customer complaints concern alternative investments and direct participation products (DPPs) such as non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and equipment leasing programs.  The attorneys at Gana Weinstein LLP have extensive experience handling investor losses caused by these types of products.

In June 2018 FINRA barred Kim from the securities industry after making findings of unsuitable recommendations to numerous senior customers to concentrate their retirement assets and liquid net worth in speculative and illiquid securities.  FINRA found that Kim recommended customers to invest in speculative and illiquid investments that were inconsistent with the customers’ moderate or conservative investment objectives and risk tolerances. FINRA found that these recommendations caused Kim’s customers to have an undue concentration of the customers’ retirement assets and liquid net worth in speculative and illiquid investments. FINRA also found that Kim falsified client information on important forms by entering inaccurate and inflated net worth, liquid net worth, and investment experience figures for certain customers so that they appeared eligible to purchase speculative investments.

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shutterstock_29356093-300x214Former Capital Financial Services, Inc. (Capital Financial) and Questar Capital Corporation (Questar) broker Steven Knuttila (Knuttila) has been subject to at least 25 customer complaints, one employment terminations for cause, and two regulatory actions.  According to a BrokerCheck report many of the customer complaints concern alternative investments and direct participation products (DPPs) such as non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and equipment leasing programs.  The attorneys at Gana Weinstein LLP have extensive experience handling investor losses caused by these types of products.

In June 2018 FINRA barred Knuttila from the securities industry after he refused to appear for FINRA on-the-record testimony relating to an investigation into allegations that Knuttila made unsuitable recommendations to customers.  FINRA’s bar comes after a bar by Knuttila’s home State of Minnesota after it alleged that Knuttila sold numerous unsuitable investments to clients.  In addition, in 2012 Knuttila was terminated by Questar for failing to report customer complaints and wrongful use of discretion in client accounts.

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shutterstock_76996033-300x200Former Cetera Advisors LLC (Cetera Advisors) advisor Nina Jessee (Jessee) has been subject to at least 21 customer complaints and one employment termination for cause.  According to a BrokerCheck report many of the customer complaints concern variable annuities or alternative investments and direct participation products (DPPs) such as non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and equipment leasing programs.  The attorneys at Gana Weinstein LLP have extensive experience handling investor losses caused by these types of products.

In November 2017, Cetera Advisors terminated Jessee for cause alleging that she violated the firm’s policies concerning disclosing outside business activities with the firm prior to engaging in such activities.

Our firm often handles cases involving direct participation products, Non-Traded REITs, oil and gas offerings, equipement leasing products, and other alternative investments.  These products are almost always unsuitable for investors.  In addition, the brokers who sell them are paid additional commission in order to hype inferior quality investments which provides a perverse incentives by brokers to create an artificial market for products that no honest advisor would sell.

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shutterstock_177792281-300x198The securities attorneys at Gana Weinstein LLP are currently investigating Woodbury Financial Services, Inc. (Woodbury Financial) broker Richard Ginsberg (Ginsberg). According to BrokerCheck Records kept by the Financial Industry Regulatory Authority (FINRA), Ginsberg has been subject to two pending customer disputes concerning unsuitable alternative investments.

Most recently, in December 2017, Ginsberg was subject to a customer complaint in which the customer alleged that Ginsberg had placed the customer in unsuitable investments. This dispute is currently still pending.

In addition, in November 2017, a customer alleged that Ginsberg had placed the customer in unsuitable Real Estate Investment Trusts (REITs). The REITs were unsuitable for the customer in terms of the customer’s investment objectives and risk tolerance. The customer has requested $1,000,000 in damages. This dispute is currently still pending.

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shutterstock_103079882-300x239Previously, the securities lawyers of Gana Weinstein LLP reported on the decline in value of Healthcare Trust, Inc. a non-traded real estate investment trust (Non-Traded REIT).  However, recent news reveals the health of Healthcare Trust may be in further decline.  A tender offer on Healthcare Trust shares was recently made at only $12.11 per share – a significant loss on the original purchase price of $25.00.  In more bad news for investors, the company lowered its annual distribution rate from $1.45 to $0.85 per share or a cut of over 40%.  Had the company continued to pay the higher dividends those payments would have exceeded the cash flows from operations.

According to the firm’s website, Healthcare Trust is an investment trust which seeks to acquire a diversified portfolio of real estate properties focusing primarily on healthcare-related assets including medical office buildings, seniors housing, and other healthcare-related facilities.

Our firm handles where brokers recommend investments in 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.

shutterstock_186471755-300x200The securities lawyers of Gana Weinstein LLP are investigating investor losses in The Parking REIT (formerly known as the MVP REIT II) a non-traded real estate investment trust (Non-Traded REIT). According to the firm’s website, the REIT owns parking lots and claims that Americans own more than 253 million passenger vehicles 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.

However, the board of The Parking REIT announced that it would be suspending the company’s distributions.  The Board claims that the move is intended to focus on preserving capital in order to maintain sufficient liquidity to continue to operate the business and maintain compliance with debt covenants, including minimum liquidity covenants, and to seek to enhance the value of the company for stockholders through potential future acquisitions.  The elimination of dividends is never a good sign for a REIT.

Because The Parking REIT in non-traded there are no market pricing for the value of the securities. Secondary market sources for non-traded REITs are currently pricing the REIT at $12.17 per share based on a tender offer.  This is a far drop from the sale price of $25 per share when the REIT issued shares to investors.

shutterstock_112866430-300x199Former IFS Securities, Inc. (IFS) and Voya Financial Advisors, Inc. (Voya) broker James Flynn (Flynn) has been subject to at least ten customer complaints, two employment terminations for cause, three tax or civil judgment liens, and one bankruptcy proceeding.  According to a BrokerCheck report many of the customer complaints concern alternative investments and direct participation products (DPPs) such as non-traded real estate investment trusts (REITs).  The attorneys at Gana Weinstein LLP have extensive experience handling investor losses caused by these types of products.

In February 2017 Voya discharged Flynn accusing the broker of providing misleading information to the firm during a complaint investigation.  Despite numerous customer complaints and financial troubles IFS hired Flynn anyway only to also discharge him a year later in February 2018.  IFS claims that Flynn was terminated because he executed unauthorized trades.

In addition, Flynn was subject to large tax liens totaling hundreds of thousands of dollars.  In April 2005 Flynn disclosed a tax lien of over $256,000.  Thereafter, Flynn declared bankruptcy in April 2013.  The fact that a broker cannot manage his own personal finances is material information for a client to consider.  In addition, the types of products clients have alleged were unsuitable are high commission products that may be recommended to generate high profits for the advisor at the expense of the client.

shutterstock_64859686-300x300The investment fraud attorneys at Gana Weinstein LLP are currently investigating Ausdal Financial Partners, Inc. (Ausdal Financial) broker Gerald Repasz (Repasz). According to BrokerCheck records, Repasz has been subject to 5 customer disputes, one of which still pending. The majority of these investments concern the unsuitable recommendation of alternative investments.

Most recently, in October 2017, a customer alleged that Repasz placed customers into UDF III, UDF IV, and Behringer Harvard REIT investments which were unsuitable to the customer’s investment objectives. The customer is requesting $62,000 in damages. This dispute is currently still pending.

In September 2016, a customer alleged that from 2005 to 2010, Repasz placed the customer in alternative investments that were unsuitable for the customer and misrepresented the material facts of the investments. The dispute was settled at $20,000.