Investor Lawyers Blog
Investors in Griffin Capital Essential Asset REIT, Inc. (“Griffin Essential”), may have substantial losses based on a tender offer to purchase shares for $6.89 a share — or $3.11 a share less than the offering price of $10 a share. As recently reported, on December 1, 2017, third-party real estate investment firm MacKenzie Capital Management (“MacKenzie”) made an unsolicited tender offer for shares of Griffin Essential at $6.89 per share, in cash. The Board of Directors of Griffin Essential has recommended that its shareholders reject the offer. However, the Board also advised that, as of September 30, 2017, its share redemption program (“SRP”) for 2017 was fully subscribed, thus leaving investors seeking liquidity via redemption with little recourse.
Griffin Essential is a Maryland REIT incorporated in August 2008 for purposes of acquiring a portfolio of geographically diverse single tenant properties across a wide range of industries. From 2009 – 2014, Griffin Essential conducted a series of offerings in connection with its capital raise. In aggregate, the non-traded REIT issued 126,592,885 shares of common stock for gross proceeds of approximately $1.3 billion. As a publicly registered non-traded REIT, Griffin Essential was permitted to sell securities to the investing public at large, including numerous unsophisticated retail investors who bought shares through the IPO upon the recommendation of a broker or money manager.
Investors who purchased shares of Griffin Essential through the offering acquired their shares for approximately $10 per share. Therefore, it would appear that investors who participated in the MacKenzie tender offer incurred substantial losses on their initial investment in excess of 30% (exclusive of commissions and distributions).
In response to the low interest rate environment that has prevailed for a decade, many brokerage firms — including well-known wirehouses such as Merrill Lynch, Morgan Stanley, and UBS — have reportedly recommended various options strategies to their customers as supposedly safe and efficient mechanisms to enhance income. However, when stock markets turn volatile, these strategies can quickly spiral into unexpected investment losses for retail investors — as recently occurred during a spike in stock market volatility that peaked on February 5, 2018.
Investors in various oil drilling programs offered by Vista Resources, Inc. (“Vista”), may be able to recover losses sustained on their investment through arbitration before FINRA, in the event that the investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment — including its risk components — was misrepresented by the advisor and his or her brokerage firm. Founded in 1987, Vista is headquartered in Pittsburgh, PA. Over the course of the past several decades, Vista has managed roughly 60 drilling programs, typically structured as industry joint ventures or limited partnerships.
Investors in NorthStar Healthcare Income, Inc. (“NHI REIT”) are likely facing substantial principal losses based on recently reported transactions. Although liquidity is limited, NHI REIT investors may be able to sell shares through a limited and fragmented secondary market. Recently, NHI REIT shares were listed for sale on a secondary platform at $6.70 per share. Thus, for investors who bought in through the IPO at $10 per share, it would appear that they have sustained losses of roughly 1/3 on their initial capital outlay (these losses are exclusive of distribution income received to date).
Former financial advisor Scott William Palmer (CRD# 817586), who was most recently affiliated with Janney Montgomery Scott LLC (“Janney”) (BD# 463), has voluntarily consented to a bar from the securities industry pursuant to a Letter of Acceptance, Waiver & Consent (“AWC”) accepted by FINRA Enforcement on April 10, 2018. Without admitting or denying any wrongdoing, the Hackensack, NJ-based former broker consented to the industry bar following his June 13, 2017 termination from employment by Janney.
Investors in Benefit Street Partners Realty Trust, Inc. (“Benefit Street” or the “Company”) may have arbitration claims to be pursued before the Financial Industry Regulatory Authority (“FINRA”), 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 financial advisor. Benefit Street was formerly known as Realty Finance Trust; however, in September 2016, Realty Finance appointed Benefit Street Partners (“BSP”) as its new advisor, replacing former sponsor AR Global Investments.
On March 27, 2018, the Securities and Exchange Commission (“SEC”) announced formal charges against Wedbush Securities Inc. (“Wedbush”, CRD# 877) with respect to allegations that the broker-dealer failed to supervise its employee, Ms. Timary Delorme (f/k/a Timary Koller) (“Delorme”). Based on its investigation, the SEC alleged Wedbush ignored numerous red flags indicating that Ms. Delorme — who has been affiliated with Wedbush as a registered representative since 1981 — was purportedly involved in a manipulative penny stock trading scheme with Izak Zirk Englebrecht, a/k/a Zirk De Maison “(“Englebrecht”).
As recently reported, the Board of Directors of The Parking REIT, Inc. have unanimously authorized a suspension of the company’s cash distributions and stock dividends, effective immediately. In conjunction with filing a Form 8-K with the SEC on March 23, 2018, the company issued a press release indicating, inter alia, that “The Board is focused 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…”
The Securities and Exchange Commission (SEC) reportedly has settled charges against the operators of a real estate investment business that caused millions in loses to investors. Up to 300 investors may have lost money on interests in a fund known as Alaska Financial Company III, LLC (“AFC III”), which two individuals named Tobias Preston and Charles Preston sold to investors via their company McKinley Mortgage Co. LLC (“McKinley”).
Massachusetts reportedly has begun an investigation concerning whether Wells Fargo Advisors engaged in unsuitable recommendations, inappropriate referrals, and other actions related to its sales of certain investment products to customers. Recently, Wells Fargo disclosed that it is evaluating whether its personnel and registered representatives may have made inappropriate recommendations and referrals concerning 401(K) rollovers and alternative investments.