Investor Lawyers Blog
Investors in certain REITs based in Las Vegas may have arbitration claims against brokers or financial advisors if a FINRA-registered broker dealer that recommended the investment did not live up to its obligations under applicable rules. As members and associated persons of FINRA, brokerage firms and their financial advisors must ensure that adequate due diligence is performed on any investment that is recommended to investors. Further, firms and their brokers must ensure that investors are informed of the risks associated with an investment, and must conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and risk profile. Either an unsuitable recommendation to purchase an investment or a misrepresentation concerning the nature and characteristics of the investment may give rise to a claim against a stockbroker or financial advisor.
Vestin Realty Mortgage I (Previously Vestin Fund I and DM Mortgage Investors)
Vestin Realty Mortgage I (VRM I) was formerly known as DM Mortgage Investors. On March 17, 2000, DM Mortgage Investors registered up to 100,000,000 shares with the Securities and Exchange Commission (SEC) at $1 per share. This registration was later amended to cover the issuance of up to 10,000,000 shares at $10 per share. On June 29, 2001, DM Mortgage Investors changed its name to Vestin Fund I, and later changed its name to Vestin Realty Mortgage I (VRM I) and began trading on the Nasdaq Capital Market on June 1, 2006. In March 2012, VRM I ceased being a REIT, but continued trading on the Nasdaq.
Vestin Realty Mortgage II (Previously Vestin Fund II)
Vestin Fund II registered up to 50 million shares with the SEC at $10 per share on December 21, 2000. In May 2005, Vestin Fund II merged into newly formed VRM II and in June 2006 VRM II began trading on the Nasdaq as VRTB.
VRM II’s maximum market capitalization was approximately $240 million. VRM II’s total return from inception on May 1, 2006 to April 11, 2017 was -93%. On March 8, 2017 VRM II announced that it notified the Nasdaq Stock Market of its intent to voluntarily delist its common stock, and that it intends to voluntarily deregister its common stock under the Securities Exchange Act of 1934 as a cost savings step to reduce expenses associated with the Company’s Nasdaq listing and compliance with SEC reporting requirements.
MVP REIT
MVP REIT is a non-traded REIT sponsored by MVP Capital Partners, LLC which at relevant times was owned by VRM I and VRM II. Beginning in September 2012 and continuing through 2015, MVP REIT issued $77 million of stock, or 14% of its proposed $500 million offering. Most of the $77 million in MVP REIT shares were issued to an entity known as SERE Holdings, which then appears to have sold the shares to investors through a brokerage firm.
MVP REIT II
MVP REIT II is a second non-traded REIT from sponsor MVP Capital Partners, LLC that was registered in September 2015 and sought to raise up to $550 million. As of September 30, 2016, the REIT had reportedly raised $45 million, or 9% of its maximum offering amount. The Board of Directors extended the close of offering from October 1, 2016, to December 31, 2016, and announced $50 million preferred stock offering after the closing date of common shares offering was determined.
Risks of Non-Traded REITs
As publicly registered non-traded REITs, MVP REITs I and II were permitted to sell shares to the investing public at large, oftentimes upon the recommendation of a broker or financial advisor. Some investors may not have been properly informed by their financial advisor or broker of the complexities and risks associated with investing in non-traded REITs. Further, a significant risk associated with non-traded REITs has to do with liquidity. Unlike traditional stocks and certain publicly- traded REITs, non-traded REITs do not trade on a national securities exchange, leaving investors with limited options if they wish to sell their shares after the initial purchase- especially if the issuer is not redeeming shares.
If you have invested in MVP REIT I or II or another non-traded REIT, and you have suffered losses in connection with your investment (or are currently unable to exit your illiquid investment position), you may be able to recover your losses in FINRA arbitration. Investors 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.