Securities Lawyers Blog
Advisor Stephen Holt (Holt), currently employed by Lighthouse Capital Group, LLC (Lighthouse Capital Group, LLC), has been subject to at least two customer complaints during the course of his career. According to a BrokerCheck those customer complaints concern private placement sales of Tenant-in-Common (TIC) real estate products. The attorneys at Gana Weinstein LLP have represented hundreds of investors who suffered losses caused by these types of high-risk products.
In February 2020 a customer complained that Holt violated the securities laws by alleging that Holt engaged in sales practice violations by conducting limited due diligence regarding a DST investment in 2015. The claim alleges $227,847 and is currently pending.
In December 2019 a customer complained that Holt violated the securities laws by alleging that Holt engaged in sales practice violations by conducting limited due diligence regarding a DST investment in 2015. The claim alleges $168,370 and is currently pending.
TIC investments have led to devastating investor losses and are in almost all cases unsuitable products. The near certainty of failure of investing in TICs as a whole has led to the product virtually disappearing as an offered investment from most reputable brokerage firms. According to InvestmentNews “At the height of the TIC market in 2006, 71 sponsors raised $3.65 billion in equity from TICs and DSTs…TICs now are all but extinct because of the fallout from the credit crisis.” In fact, TICs recommendations have been a major contributor to bankrupting brokerage firms. For example, 43 of the 92 broker-dealers that sold TICs sponsored by DBSI Inc., a company whose executives were later charged with running a Ponzi scheme, a staggering 47% of firms that sold DBSI are no longer in business.
Sales of TICs multiplied during the early 2000s from approximately $150 million in 2001 to approximately $2 billion by 2004. TICs are private placements that have no secondary trading market and are therefore illiquid investments. These products were promoted to investors as appropriate section 1031 exchanges allowing the investor to deferral taxes on appreciated real property. In a typical TIC, the investor receives a fractional interest in the property along with other stakeholders and the profits are generated mostly through the efforts of the sponsor and the management company that manages and leases the property. The sponsor typically structures the TIC investment with up-front fees and expenses charged to the TIC and negotiates the sale price and loan for the acquired property.
TIC investments entail significant risks. A TIC investor runs the risk of holding the property for a significant amount of time and that subsequent sales of the property may occur at a discount to the value of the real property interest. FINRA has also warned that the fees and expenses associated with TICs, including sponsor costs, almost always outweigh any potential tax benefits associated with a Section 1031 Exchange. That is, the TIC product itself is defective because its costs outweigh any potential investment value or tax benefit offered to the customer. Further, TICs only defer taxes – not eliminate them.
Recently, as the financial crisis fades into the rearview mirror some brokerage firms have begun reviving these failed products. However, it appears that these “new” TICs are suffering the same fate as those that failed during the financial crisis and for the same reasons – the high costs make it impossible for these products to profit investors.
Holt entered the securities industry in 2011. From September 2011 until June 2014 Holt was associated with Sandlapper Securities, LLC. Since June 2014 Holt has been registered with Lightouse Capital out of the firm’s Pasadena, California office location.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts with respect to TIC investments. Our firm brings claims on behalf of investors before FINRA securities arbitration. Our consultations are free of charge and the firm is only compensated if you recover.