Suitability

Published on: September 14, 2012

Cole Credit Property Trust II May be Following in the Footsteps of Other Non-traded REITs

Investment fraud lawyers are currently investigating claims on behalf of investors who were improperly sold various non-traded REIT investments and suffered significant losses as a result. Reportedly, Cole Credit Property Trust II is currently in the process of executing its “exit event.” In this event, a non-traded Real Estate Investment Trust either performs an initial public offering or sells its assets.

In recent events, other non-traded REITs have gone through this process and securities fraud attorneys say that, in most cases, the event does not go well for investors. As a result of the exit event, many REITs have experienced a significant decline in the offering — often amounting to 30 percent or more of the investment’s value.

As the seventh-largest non-traded REIT in the industry, Cole Credit Property Trust II has invested assets amounting to nearly $3.4 billion. Reportedly, Morgan Stanley and UBS Investment Bank have been hired by Cole Credit Property Trust II to explore their options for the exit event. Investment fraud lawyers encourage Cole Credit Property Trust II investors to closely monitor the REIT’s valuation as, despite an estimated valuation of $9.35 per share, the trend in previous non-traded REITs indicates that the market may not be so kind to the per share valuation.

Published on: September 10, 2012

Dividend Capital REIT and Seven Other Non-traded REITs Suffer Significant Losses

by InvestorLawyers

Securities arbitration lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of their investment in eight of the biggest non-traded REITs, including Dividend Capital Total Realty Trust Inc. According to a recent analysis, over the last seven years, eight of the biggest REITs have lost 37 percent of their equity value, or around $11.3 billion.

Dividend Capital REIT and Seven Other Non-Traded REITs Suffer Significant Losses

In July, Dividend Capital Total Realty Trust Inc. revised its per share value to $6.69, down from its March value of $8.45 per share. The Dividend Capital REIT raised $1.8 billion at a $10 per share price. Dividend Capital REIT president, Guy Arnold, failed to return calls seeking comment on the REIT’s performance. For more information about the Dividend Capital REIT, see the previous blog post, “Dividend Capital REIT Restructuring Could be a Sign of Trouble.”

Another non-traded REIT, CNL Lifestyle Properties Inc., experienced a share price drop to $7.31. The CNL Lifestyle Properties REIT raised $2.7 billion at a $10 per share price, according to investment fraud lawyers.

Published on: September 6, 2012

CNL Lifestyle Properties REIT Investors Could Recover Losses

by InvestorLawyers

Stock fraud lawyers are currently investigating claims on behalf of investors who have suffered significant losses as a result of their investment in CNL Lifestyle Properties Inc. Reportedly, a recent announcement from CNL Lifestyle Properties stated that its per share value estimate has dropped from its original share price of $10 to $7.31. This decline represents a drop of 27 percent, which could mean significant losses for many investors. Furthermore, the REIT is reportedly cutting investor dividends, or distribution.

CNL Lifestyle Properties REIT Investors Could Recover Losses

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.

The CNL Lifestyle Properties REIT is, according to investment fraud lawyers, another in a long line of non-traded REITs currently under investigation. REITs typically carry a high commission which motivates brokers to make the recommendation to investors despite the investment’s unsuitability. The commission on a non-traded REIT is often as high as 15 percent. Non-traded REITs, such as the CNL Lifestyle Properties REIT, carry a relatively high dividend or high interest, making them attractive to investors. However, these investments are inherently risky and illiquid, which limits access of funds to investors. This becomes a major problem for investors, especially retired individuals, who may need to access their funds when the need arises. For more information on REITs, see the previous blog post “FINRA Investor Alert: Public Non-Traded REITs.”

Published on: September 5, 2012

Behringer Harvard Strategic Opportunity Fund I Investors Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses as a result of their investment in Behringer Harvard Strategic Opportunity Fund I. Reportedly, this investment is in serious trouble, with its assets being far outweighed by its liabilities. Behringer Harvard Strategic Opportunity Fund I was initially offered in 2005 and, since then, has raised $65 million. Six properties were involved in the fund’s investing, including a hotel in Los Angeles and an office building in Amsterdam. It has been reported that, around the middle of August, Behringer Harvard informed brokers of the fund’s problems.

Behringer Harvard Strategic Opportunity Fund I Investors Could Recover Losses

Allegedly, many brokers recommended Behringer Harvard Strategic Opportunity Fund I to their clients, misrepresenting the investment as low risk and safe. Furthermore, investment fraud lawyers say some brokers unsuitably placed an overconcentration of client assets in the product.

Chief executive of the funds of which Behringer Harvard’s opportunity platform consist, Michael O’Hanlon, stated that Behringer Harvard Strategic Opportunity Fund I’s “liabilities are greater than its assets.” O’Hanlon also stated that a “swing issue” is in effect over the Los Angeles hotel and the fund is currently negotiating with banks on the issue.

Published on: September 3, 2012

Mutual Fund Investors Could Recover Losses

by InvestorLawyers

Securities arbitration lawyers currently are investigating claims on behalf of investors who suffered significant losses in various mutual fund investments. A number of mutual funds experienced a gross underperformance in the 2011 market. Investors of these mutual funds have lost a large portion of their investments.

Mutual Fund Investors Could Recover Losses

According to stock fraud lawyers, 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. If a broker or adviser makes a recommendation that is unsuitable for their client, the broker or brokerage firm can be held responsible for the investor’s losses in Financial Industry Regulatory Authority arbitration.

The following is a list of mutual funds currently being investigated by securities arbitration lawyers:

Published on: August 29, 2012

Investors Beware as Gas Prepayment Bonds Downgraded by Moody

by InvestorLawyers

As a significant number of gas prepayment bonds ratings have been downgraded by Moody’s Investors Service, stock fraud lawyers are advising investors to be cautious regarding their investments in these bonds. As a result of downgrades in Goldman Sachs Group Inc., Citigroup Inc., JPMorgan Chase & Co., Credit Agricole Corporate & Investment Bank, Merrill Lynch & Co., BNP Paribas, Morgan Stanley, Royal Bank of Canada and Societe Generale, numerous bonds became subject to review and subsequent downgrades.

Investors Beware as Gas Prepayment Bonds Downgraded by Moody

Securities arbitration lawyers say this situation is similar in some ways to what happened when, after Lehman declared bankruptcy, Series 2008A of Main Street Natural Gas Inc. Gas Project Revenue Bonds were downgraded. In the case of the Lehman bonds, the bonds were not guaranteed by Lehman Brothers, though certain payment obligations of the gas supplier were guaranteed.

The following is a list of gas prepayment bonds that have been affected by downgrades:

Published on: August 27, 2012

Retail Properties of America, Formerly Inland Western, Faces More Problems

by InvestorLawyers

For quite some time now, securities fraud attorneys have been investigating claims on behalf of investors who suffered significant losses as a result of their investments in Retail Properties of America REIT, formerly known as Inland Western. Reportedly, the chief executive of Inland Real Estate Group of Cos. Inc., Daniel Goodwin, recently expressed criticism about the Retail Properties of America Inc.’s IPO timing. A new lawsuit states that in January 2011, the REIT told investors before the offering that they could expect a value of $17.25 per share. However, at the time of the offering, the REIT’s shares, adjusted for the stock split, were actually only valued at $3.20 a share. This also was significantly lower than the $10 price which the majority of investors paid per share.

Retail Properties of America, Formerly Inland Western, Faces More Problems

According to Goodwin, Inland Real Estate Group of Cos. Inc. has no control over Retail Properties of America. Furthermore, when asked if Inland would join in the lawsuit filed in the U.S. District Court for the Northern District of Illinois — which is seeking class action status — Goodwin said, “We have discussed various potential actions but haven’t reached a conclusion. Our interests are clearly aligned with the shareholders.”

Investment fraud lawyers say Retail Properties of America is the third-largest shopping center REIT in the nation. In April 2012, Retail Properties of America was converted to a publicly traded New York Stock Exchange company from a non-traded REIT.

Published on: August 23, 2012

Following KBS Class Action Withdrawal, Investors Can Still Recover Losses Through Arbitration

by InvestorLawyers

According to securities arbitration lawyers, investors who suffered significant losses as a result of their losses in the KBS REIT still may recover those losses through securities arbitration following the withdrawal of a class action against KBS REIT. Plaintiff George Steward led investors in suing KBS REIT in May. Allegations stated that misrepresentations about the REIT were made by KBS. These alleged misrepresentations included the dividend payment policy, investment objects and the REIT’s investments value. Reportedly, a voluntary dismissal was filed by the plaintiffs in the U.S. District Court in Fort Myers, Florida last month.

Following KBS Class Action Withdrawal, Investors Can Still Recover Losses Through Arbitration

In March, KBS REIT I investors were notified that the investment’s value would drop from $7.32 to $5.16 per share, representing a 29 percent decline in value. The investment’s offering price was $10 per share. Furthermore, KBS also stated it would cease distributions to investors. An investor presentation filed with the SEC in March stated that KBS REIT I raised $1.7 billion in equity during its initial offering. The investment holds loans and other debt of $2.3 billion and property assets of $3.4 billion.

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 are illiquid and inherently risky and, therefore, not suitable for many investors. According to securities fraud attorneys, because of the high-commissions these investments generally offer, many brokers make unsuitable recommendations of REITs to investors. Based on information now known about KBS REIT, many of the firms that sold this investment will be unable to prove the adequate due diligence was performed before recommending this product to investors.

Published on: August 22, 2012

Dividend Capital REIT Restructuring Could be a Sign of Trouble

by InvestorLawyers

Since the writing of the previous blog post “Dividend Capital Total Realty Trust Non-traded REIT Investors Could Recover Losses,” investment fraud lawyers have received communication from investors related to their concerns about the value of their shares. Reportedly, the quarterly dividend rate of these shares is 5.23 percent and the new price of each share is $6.69. The investment’s prospectus for Dividend Capital shares and its recent Securities and Exchange Commission filing indicate new terms for repurchase plans and a major restructuring of the investment. In addition, Dividend Capital Total Realty Trust appears to be going by a new name, Dividend Capital Diversified Property Fund.

Dividend Capital REIT Restructuring Could be a Sign of Trouble

This new offering is purportedly a means for the company to offer liquidity, securities fraud attorneys say. Generally, non-traded REIT shares are illiquid but, when the REIT is liquidated, are sold to another REIT, or goes public, the shares are sold. The SEC filing states that the offering is intended to replenish the capital of their fund shares. As a result, they will not have to list a termination date, should one of the aforementioned events occur. This new plan is scheduled to go into effect on October 1, 2012 and purportedly allows investors to liquidate shares at any time. The price of the shares at liquidation is determined by the company’s Net Asset Value’s daily calculation. However, restrictions on this plan include the following:

While Class A, W or I shares may be redeemed at any time, a “Quarterly Cap” has been instituted by Dividend Capital, which will limit redemptions equal to 5 percent of the total Net Asset Value of all shares set upon completion of the prior calendar quarter.

Published on: August 20, 2012

Investors of Highland Floating Rate Funds Could Recover Losses

by InvestorLawyers

Stock fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of their investment in a Highland Floating Rate Fund. The sales literature for this fund understates the risk of the fund when it states that the funds seek “capital preservation and the management of credit risk while utilizing leverage to increase yield potential.” In recent years, the Highland Floating Rate Funds have suffered significant declines in value. These funds include the Highland Floating Rate Opportunities Fund, the Highland Floating Rate Advantage Fund and the Highland Floating Rate Fund. For example, in 2008, the Highland Floating Rate Advantage Fund’s value declined by more than half. Even relative to the market’s overall decline in 2008, these are significant losses.

Investors of Highland Floating Rate Funds Could Recover Losses

According to securities arbitration lawyers, the increase in floating rate funds sales has caused the Financial Industry Regulatory Authority (FINRA) to pay more attention to these funds — specifically how they are marketed and sold. A recent FINRA Investor Alert exhibited concern related to how financial advisors may place emphasis on high potential returns while placing less emphasis on the potential risks associated with floating rate funds.

FINRA 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. As a result, stock fraud lawyers are investigating whether firms and advisers registered with FINRA recommended floating rate funds unsuitably, given investors’ risk tolerance.