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Articles Posted in REIT

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Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses in the non-traded Dividend Capital Total Realty Trust Inc. Potential claims related to the Dividend Capital REIT include unsuitable recommendations, misrepresentation and overconcentration of investment funds. Dividend Capital REIT invests in diverse real estate-related securities and debt as well as real properties.

Dividend Capital REIT Investors Could Recover Losses
The 8-K form filed by Dividend Capital Diversified Property Fund on February 1, 2013 stated that its current NAV, or net asset value, is $6.72 per share. However, this “book value” may not reflect what investors can actually get for their shares. Because the Dividend Capital REIT is non-traded, investors are forced to sell through a relatively illiquid secondary market, in which there may be no buyers of Dividend Capital shares at prices at or near the REIT’s book value.

Securities fraud attorneys say new investor concerns are being raised about Dividend Capital REIT’s redemption plan. According to the company’s 10-Q form, during the quarter ending September 30, 2012, the REIT has not redeemed any Class I, Class W or Class A shares. Furthermore, at any time, Dividend Capital can terminate, suspend or modify the share redemption program.

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Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses in the non-traded Hines REIT. Potential claims related to the Hines REIT include unsuitable recommendations, misrepresentation and overconcentration of investment funds. The Hines REIT was launched in 2004; as of September 20, 2012, it comprised 55 properties in 24 geographic markets. As of December 2009, Hines suspended its share redemption plan except when in connection to the disability or death of a stockholder.

Hines REIT Investors Could Recover Losses

Unfortunately, Hines REIT investors have found themselves in a tight spot when they want to sell their investment. Because the Hines REIT is non-traded, investors are forced to sell through a secondary market, through an auction or privately.   Investors who sell through a secondary marketmay be forced to accept a price far below their purchase price.  Investors also may choose to hold onto their shares in the hopes that the real estate investment trust will decide to make a public offering and register with the Securities and Exchange Commission or pursue another liquidity event such as a merger with a publicly traded company.

Investment fraud lawyers are investigating the possibility that full-service brokerage firms may be held liable for the recommendation of the Hines REIT.   Financial Industry Regulatory Authority rules have established that brokers and firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance.  Non-traded REITs like this one are illiquid and inherently risky and, therefore, not suitable for many investors.

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Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses in CommonWealth REIT. CommonWealth REIT recently announced that it would commence a public offering intended to pay down as much as $450 million in senior notes. The public offering would be for 27 million shares of stock, which would dilute its outstanding share count by almost 30 percent.

CommonWealth REIT Announcement More Bad News for Investors

The CommonWealth real estate investment trust primarily owns and operates real estate, such as industrial buildings, office buildings and leased industrial land. Following the announcement for CommonWealth REIT’s fourth-quarter earnings results and the 27 million share offering, the REIT’s price dropped by as much as 11 percent. According to the fourth-quarter report, a loss of $1.96 million was reported by the company as a result of a $168.6 million asset impairment.

Furthermore, between January 10, 2012 and August 8, 2012, CommonWealth allegedly issued false and misleading statements regarding its financial standing and prospects which, if proved to be true, would be a violation of the Securities Exchange Act of 1934. Furthermore, in an announcement on August 8, 2012, CommonWealth stated that it would likely be reducing its dividend payment. Investment fraud lawyers also note that from 2008 to 2011, the company’s net income fell from $244.65 million to $109.98 million, a decline of $134.67 million. For more information on this issue, see the previous blog post, “CommonWealth REIT Investors Could Recover Losses.”

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Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of their investment in Grubb & Ellis REITs. For the period ending March 21, 2011, Grubb & Ellis Company reported an $18.3 million net loss. The company included charges of $2.3 million for bad debt, $3.5 million for depreciation and amortization, $1.7 million for amortization of signing bonuses, $1.7 million in share-based compensation and $0.5 million for intangible asset impairment.

Recovery of Grubb & Ellis REIT Losses

Grubb & Ellis is an investment and commercial real estate services firm. Grubb & Ellis Healthcare REIT acquired Oklahoma City Medical Portfolio in 2008, which consisted of two medical office buildings. Grubb & Ellis Healthcare REIT II acquired four properties comprising five medical office buildings in 2011. Grubb & Ellis Apartment REIT made arrangements to acquire Bella Ruscello Luxury Apartment Homes in 2010.

Securities arbitration lawyers say non-traded REIT investments like the Grubb and Ellis REITs typically offer commissions between 7-10 percent, which is significantly higher than traditional investments like mutual funds and stocks. In some cases, the commission generated by these investments can be as high as 15 percent. This higher commission can explain why brokerage firms are motivated to recommend these investments despite their possible unsuitability.

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Securities arbitration lawyers are encouraging investors who suffered significant losses in KBS REIT I to act quickly if they believe they have a securities arbitration claim. According to the Financial Industry Regulatory Authority, “If too much time has elapsed between a broker’s conduct and your complaint to FINRA, the investigation may be hindered.” The initial public offering for KBS REIT I closed on May 31, 2008, so this May will mark five years since many investors were unsuitably recommended the KBS REIT I.

Clock Ticking on KBS REIT I Claims

With a new estimated value of $5.16 per share, the per share price has dropped drastically since its original offering price of $10 per share. However, investment fraud lawyers say that if investors need to liquidate for cash, they may receive even less for their shares. Because investors must resort to selling on a private secondary market, some investors may receive only 80 percent or less of the investment’s already-reduced estimated value.

According to securities arbitration lawyers, in many cases investors received unsuitable recommendations of KBS REIT I. Many were led to believe that the investment was a safe investment that would produce regular, dependable distributions while the investment’s value remained constant or increased. In addition, many were not made aware of the illiquidity of the investment that resulted from the fact that it was a non-exchange-traded investment.

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On February 6, 2013, securities fraud attorneys announced that LPL Financial has settled claims brought by the State of Massachusetts by agreeing to pay up to $2.5 million. The claims against LPL alleged that it failed to supervise registered representatives related to the sales of non-traded REITs, or real estate investment trusts.

LPL to Pay Up to $2.5 Million to Settle Claims, LPL Customers Continue to Explore Options

The following non-traded REITs were the focus of this complaint: Dividend Capital Total Realty, Inland American, Wells REIT II, Cole Credit Property Trust II, Cole Credit Property Trust III, Cole Credit Property 1031 Exchange and W.P. Carey Corporate Property Associates 17. Investment fraud lawyers encourage investors who suffered significant losses as a result of their investment in these non-traded REITs to explore all of their legal rights and options.

LPL was charged in December 2012 with unethical and dishonest business practices related to the sale of REITs. These charges are in connection with the sales of $28 million in non-traded REITs between 2006 and 2009, which were sold to nearly 600 clients. According to the Securities Division, 569 of those transactions had regulatory violations. According to Massachusetts’ findings, LPL’s REIT sales included violations of the State’s 10 percent concentration limits, prospectus requirements and LPL compliance practices. Furthermore, Massachusetts alleged that representatives of LPL received limited REIT training.

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Securities fraud attorneys are currently investigating claims on behalf of investors who suffered losses in the TNP Strategic Retail Trust Inc., a non-traded REIT, and the TNP 12% Notes Program. Both of these products come from Tony Thompson’s company, Thompson National Properties LLC. Reportedly, Thompson National Properties’ January Securities and Exchange Commission filings stated that TNP Strategic Retail Trust Inc. has two loans on which it is in danger of defaulting.

In addition to the difficulty with the non-traded REIT, stock fraud lawyers say that a new lawsuit has been filed in the U.S. District Court for the District of Colorado relating to the TNP 12% Notes Program LLC. According to the allegations, TNP “has failed to make required interest payments on the note.” In 2008, the plaintiffs purchased a $100,000 note, the principal of which TNP was obligated to repay by 2011. A guarantee signed by Thompson is an attachment to the lawsuit and states that TNP “hereby unconditionally guarantees the performance of all the company’s obligations under the notes, including, without limitation, the payment of principal and interest.” However, TNP allegedly missed the 2011 deadline to repay the principal and then ceased making interest payments the following year. A similar suit was filed in September, 2012.

According to an InvestmentNews article, Thompson downplayed the financial difficulties at his companies in e-mail messages to InvestmentNews. When asked specifically about TNP’s growing financial problems, Thompson reportedly wrote, “You are wrong.” For more information on securities fraud attorneys’ investigations into TNP investments, see the previous blog posts, “TNP Strategic Retail Trust Investors Could Recover Losses” and “Thompson National Properties 12 Percent Note Investors Could Recover Losses.

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Attorney Christopher J. Gray of Law Office of Christopher J. Gray, P.C.  was recently interviewed by a reporter from legal news website Lawyersandsettlements.com concerning investor claims arising out of unsuitable recommendations of non-traded REITs by stockbrokers.  The interview is accessible via the link below.

 www.lawyersandsettlements.com/articles/securities/interview-securities-fraud-lawsuit-stock-2-18372.html?opt=b&utm_expid=3607522-0&ref=newsletter_pcf#.UPhW5WceeM8

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Raymond J. Lucia Sr., an investment advisor who hosts a nationally syndicated radio talk show, has been accused of misleading investors with claims that his “Buckets of Money” strategy helps retirees “generate inflation-adjusted income for life.” The Securities and Exchange Commission (“SEC”) accused the San Diego radio personality of misleading investors by misleadingly exaggerating the historic returns and claiming that his “Buckets of Money” strategy helps retirees “generate inflation-adjusted income for life.”

Lucia, whose radio program is broadcast daily in most of the nation’s top markets, promotes his investment program at seminars held at upscale resorts throughout the country. Some of those seminars are reportedly co-hosted by financial columnist and actor Ben Stein, who has called Lucia “the best wealth manager I know.”

The SEC proceeding (Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Sections 203(e), 203(f) and 203(k) of the Investment Advisers Act of 1940, and Section 9(b) of the Investment Company act of 1940 (Exchange Act Release No. 67781, Administrative Proceeding File No. 3-15006 (“Order”)) alleges that Raymond J. Lucia Companies, Inc. (“RJL”) and Lucia presented materially misleading information at a series of investment seminars RJL and Lucia hosted for potential clients.

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Many investors are exploring the possibility of recovering their Dividend Capital REIT losses through securities arbitration. Dividend Capital Total Realty Trust Inc. is, according to its Securities and Exchange Commission filing, a Maryland corporation, formed on April 11, 2005, and located in Denver, Colorado. Its goal is to invest in a portfolio of real estate-related and real property investments. It has targeted investments that include direct investments that consist of high-quality industrial, office, mutli-family, and retail real properties, located primarily in North America. The corporation also invests in securities like mortgage loans, and securities issued by separate real estate companies.

Recovery of Dividend Capital REIT Losses

Many firms have offered to buy shares of Dividend Capital from investors at a price that has been significantly reduced from what they initially paid include. Some of these firms include MPF Income Fund 26 LLC, MPF Northstar Fund LP, MPF Flaship Fund 14 LLC, MPF Platinum Fund LP, MPF Flagship Fund 15 LLC, and Coastal Realty Business Trust.

Recently, a Financial Industry Regulatory Authority arbitration statement of claim related to Dividend Capital REIT was filed against Wells Fargo Investments LLC. If the claim is successful, investors hope to recover around $200,000 in REIT losses. The Claimant is a retired Iowa farmer. Allegations include breach of fiduciary duty, negligence, common law fraud and negligent supervision. Furthermore, the allegations state that Wells Fargo’s investment of the client’s funds was unsuitable because of an over-concentration of assets in the illiquid, high-risk, non-traded REIT.

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