Recent Posts

Apr 9, 2025

More Bad News for David Lerner Associates Means Good News for Apple REIT Investors

David Lerner Associates (DLA) is not quite out of its legal predicament even though it was recently hit with serious sanctions from securities regulators due to the firm’s sale of non-traded real estate investment trusts (REIT) and municipal bonds. This time, the Financial Industry Regulatory Authority (FINRA) has smacked DLA for allegedly conducting unfair sales practices and excessive markups. DLA is currently facing an indefinite amount of arbitration complaints from clients who purchased certain REITS such as Apple REITs 6, 7, 8, and 9 and municipal securities. FINRA’s sanctions order, which includes David “Poppy” Lerner in it, will most likely strengthen those claims.

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Apr 9, 2025

David Lerner Associates and Sloppy “Poppy” Get Nailed by FINRA for $12 million for Sales of Apple REITs to Investors in Florida and Nationwide

Over the past 20 years, David Lerner Associates (DLA) has sold $20 billion worth of non-traded Real Estate Investment Trusts (REIT) such as Apple REITs 7, 8, 9, and 10. Although FINRA has taken no formal action on behalf of investors for losses stemming from REITs 7, 8, and 9, it recently ordered DLA to pay $12 million in restitution to customers who purchased Apple REIT 10, a $2 billion non-traded REIT. As the sole distributor of the APPLE REIT, DLA targeted thousands of unsophisticated and elderly customers to sell the illiquid REIT without performing adequate due diligence to determine whether the REIT was suitable for its investors. In its sales campaign, DLA used deceptive marketing materials that did not disclose to customers that the income from the REIT was insufficient to support distributions to investors. FINRA spokeswoman Michelle Ong said that the action is the largest single restitution payment for investors involving REIT sales.

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Apr 9, 2025

Watch Out Non-Traded REIT Investors: You Are Destined To Lose!

According to a study performed by BlueVault Partners LLC and the University of Texas at Austin’s McCombs School of Business, non-traded REITS consistently underperform the broad market of real estate investing in large part because of the high fees and commissions associated with these investments (the fees for non-traded REITs are often as high as 12-15%). The study found that 70% of the non-traded REITs included in the study underperformed basic benchmarks. The study is particularly timely as the initial public offering market for non-traded REITs, known in the industry as a “liquidity event” or “going full cycle,” has heated up this year. Since March, three non-traded REITs have listed on exchanges, with more likely to come, each with limited to no success.

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Apr 9, 2025

FINRA Sues Tony Thompson for Allegedly Defrauding Thompson National Properties Notes Investors

The Financial Industry Regulatory Authority (FINRA) has filed a complaint against well-known real estate investor Tony Thompson alleging that he deceived and defrauded investors who bought $50 million in high-yield promissory notes sponsored by Thompson National Properties LLC, Mr. Thompson’s main business enterprise. The three note programs at the heart of FINRA’s complaint are the TNP 12% Notes Program LLC, the TNP 2008 Participating Notes Program LLC and the TNP Profit Participation Program LLC. Thompson National Properties had provided a purported guarantee of principal and interest for the notes when they were sold. However, neither the private placement memorandums (PPMs) for the three offerings nor their supplements disclosed the likelihood that Thompson National Properties would not be able to meet the guarantees of principal and interest. According to the complaint, one of those series of private notes is in default, while two others have stopped making payments to clients.

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Apr 9, 2025

GenSpring in the Hot-Seat for Hedge Funds Sold as Conservative Bond Alternatives

Hedge funds are similar to mutual funds in structure. Investor money is pooled together and invested in an effort to make a positive return. However, hedge funds have more flexible investment strategies than mutual funds. Hedge funds seek to profit in all kinds of markets by utilizing strategies involving leverage, short-selling, and other speculative investment practices that are not typically used by mutual funds. Another factor that distinguishes hedge funds from mutual funds is that hedge funds are not subject to the same regulations designed to protect investors. Depending on the amount of assets in the hedge funds advised by a manager, some hedge funds may not be required to file reports with the SEC. Fortunately, hedge funds are subject to the same prohibitions against fraud as are other market participants. In addition, managers owe a fiduciary duty to the funds under management.

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Apr 9, 2025

Non-Traded REIT Valuations Very Murky

The problems with these investments generally relate to the financial advisor’s failure to adequately disclose the risks and illiquidity of these investments (as well as the high commission he/she earned which was no doubt the real driving force in recommending the investments).

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Apr 9, 2025

Can I Recover My AmREIT Real Estate Investment Trust Losses?

Many investors in the non-traded AmREIT have inquired about their ability to recover their losses after learning that their fund is no longer valued as much as they were previously led to believe. As a result, many claims are being filed by AmREIT and other REIT investors for misrepresentation, unsuitable recommendations and/or overconcentrations of their investment funds in AmREIT and other REIT investments to recover their REIT losses.

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Apr 9, 2025

No More KBS REIT Class Action

On July 23rd, KBS REIT investors’ lead plaintiff George Stewart withdrew his class action suit against 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. No reason was given, but the Motion to Dismiss the Complaint pointed out the onerous pleading requirements of securities class actions. Perhaps Mr. Stewart will proceed to take his case to arbitration, the more traveled and less bumpy road to resolve investors’ disputes. 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. In any event, KBS REIT investors will not benefit from his decision and need to take matters in their own hands!

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Apr 9, 2025

IPO Flop For Retail Properties of America f/k/a Inland Western REIT

Several troubled non-traded REITs have looked to IPOs to bail themselves out and avoid litigation with investors, but Retail Properties of America (formerly called Inland Western REIT), the nation’s third-largest shopping center REIT, may have exacerbated its troubles with its recent IPO offering. It is being reported that Retail Properties’ $8 offering price not only came up well short of its expected pre-offering price of $10 to $12, but it took some reverse-stock-split engineering just to get the price to $8. For those investors who originally bought the REIT at $10 a share, the actual split-adjusted value of the stock is less than $3 per share (a decline of over 70%). This should dampen the enthusiasm for future REIT stock offerings and give pause to other non-traded REITs looking at an IPO as an option to bail out of litigation.

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Apr 9, 2025

Cornerstone Healthcare–You Can Change Your Name But You Can’t Hide From United States REIT Investors!

Cornerstone Healthcare REIT has changed its name to Sentio Healthcare Properties, Inc. The Healthcare REIT (or Sentio Healthcare Properties) is one of the Cornerstone REITs that appears most troubled. It appears that the value of the REIT may have declined substantially. Several non-traded REITs, like Cornerstone, have attempted name changes recently as they attempt to distance themselves from the negative news associated with the old name.

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