Shareholders in Lightstone Value Plus REIT I, Inc., Lightstone Value Plus REIT II, Inc., and/or Lightstone Value Plus REIT III, Inc. (sometimes referred to below as the “Lightstone REITs”) may have FINRA arbitration claims, if their investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the stockbroker or advisor.
The Lightstone REITs were sold to the public during various periods dating back to 2006 (Lightstone I), 2009 (Lightstone II), and 2014 (Lightstone III), respectively. Despite the passage of years- over fifteen years in the case of Lightstone I- none of the three Lightstone REITs has been listed on a public exchange or otherwise become liquid.
Recently, the Lightstone REITs solicited proxies seeking shareholder approval for key charter amendments including:
* Eliminating durational provisions that require the Lightstone REITs seek a listing on a national stock exchange by their respective 8th or 10th (in the case of Lightstone II) anniversaries of the termination of their respective public offerings, or otherwise seek liquidity;
* Eliminating fiduciary duties that the boards owe to the Lightstone REITs and shareholders and the directors’ fiduciary duties to supervise the relationships of the Lightstone REITs and their external advisors;
* Eliminating certain protections in the event of a “roll-up” transaction; and
* Eliminating quorum requirements of at least 50% of all votes entitled to be cast at a stockholder meeting.
Management claims that the proposals seek to give the Lightstone REITs more flexibility and may facilitate a liquidity event, but critics say that shareholders are being asked to give up important rights without any clear plan going forward for the REITs to become liquid.
Non-traded REITs pose many risks that are often not readily apparent to retail investors, or adequately explained by the financial advisors and stockbrokers who recommend these complex investments. One significant risk associated with non-traded REITs has to do with their high up-front commissions, typically between 7-10%. In addition to high commissions, non-traded REITs generally charge investors for certain due diligence and administrative fees, ranging anywhere from 1-3%.
Furthermore, non-traded REITs are generally illiquid investments. Unlike traditional stocks and mutual funds, non-traded REITs do not trade on a national securities exchange. Many uninitiated investors in non-traded REITs have come to learn too late that their ability to exit their investment position is limited. Typically, investors in non-traded REITs can only exit their investment through redemption directly with the sponsor on a limited basis, and often at a disadvantageous price, or through sales in a limited secondary market.
Investors who wish to discuss a possible claim may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York, Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).
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