Losses on Real Estate Investment Trusts? Recovery Options for Investors

Non-traded real estate investment trusts  (REITs) were sold to many with the promise of steady distributions of income and the understanding that the investment could be sold in the near future. Instead, many REITs have been funding distributions with capital or, worse yet, debt. Now many have ceased distributions completely. Here are six REITs whose value has dropped dramatically, as reported by the Investment News.

Name   Offering price, per share    Current estimated value   % decline per share  
Behringer Harvard Opportunity REIT I $10.00 $4.12 -58.80%
Behringer Harvard REIT I $10.00 $4.64 -53.60%
Behringer Harvard Short-Term Opportunity Fund $10.00 $0.40 -96%
Cornerstone Core Properties REIT $8.00 $2.25 -71.88%
Inland Western Retail Real Estate Trust Inc. $10.00 $6.95 -30.50%
KBS Real Estate Investment Trust Inc. $10.00 $5.16 -48.40%

If you have REIT losses or other stock market losses, you may be able to recover some or all of the losse through FINRA arbitration.

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Nationwide Representation

Rex Securities Law

TollFree: 877-224-3199

Florida-561 391 1900 

Texas-512-329-2870

TVIX Plummets 60%-Securities & Exchange Commission Investigating

March 29, 2012

According to the Wall Street Journal, the SEC is looking into VelocityShares 2x long VIX Short Term Exchange traded note ( TVIX ),  managed by Credit Suisse Group AG.

TVIX had about $700 million in assets before its recent decline in which it lost 60% of its value during the last week of March.

Share price for TVIX over the past year has ranged from a high of $109 to a low of $5.85. TVIX is a complex exchange-traded note (ETN) that is designed to track stock market volatility, however its dramatic decline last week, during a period when market volatility was little changed has regulators and investors concerned and curious as to the reason for the price drop.

While hedge funds are generally the most active traders of exchange traded notes (ETNs), they have become more popular with smaller investors due to the fact they are low cost and east to trade. A similar type of securities, exchange-traded funds (ETFs) have become popular for the same reasons.

An ETN doesn’t actually hold any underlying investment as does an ETF, but rather is a contractual agreement by the issuer to pay shareholders returns equal to the investments it is designed to track. Risk is amplified by the fact that TVIX is linked to the Chicago Board Options Exchange Volatility Index, the VIX, an index that can experience wild swings. Investors make….or lose….twice as muchas the daily move in the VIX.

ETNs, like TVIX, are complex investments that are not generally suitable for the average investor who may not be aware of the risks associated with this type of investment.

If you are an investor who has losses from investing in TVIX or other ETNs or ETFs that were suggested to you by your broker or financial adviser, you may be able to recover some or all of your losses. 

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Nationwide Representation

Rex Securities Law

TollFree: 877-224-3199

Florida-561 391 1900 

Texas-512-329-2870

Recovery Options for Investors with Losses in Cornerstone Core Properties REIT, Inc.

March 28, 2012

According to the Investment News, investors in Cornerstone Core Properties REIT were told in March 2012 that shares had plunged 72% in value, from $8 to $2.25. This reduction in estimated value is attributed to the recent global economic downturn which has negatively impacted the small business tenant base, according to the company, which says occupancy rates are down to 69% compared to 92% at the end of 2008.

FactRight, a due diligence firm that covers managers of alternative investmentsrecommended last year that broker dealers pull Cornerstone Core
Properties REIT from their sales platforms. Pacific Cornerstone Capital, Inc was the sponsoring broker-dealer. Pacific Cornerstone also sold another troubled product, CIP Leveraged Fund Advisors, see our prior blog post.

Cornerstone Core Properties REIT is following in the footsteps of other REITs who have seen their values plummet recently. Behringer Harvard Short-Term Opportunity Fund I, LP went from $6.48 to $.40. Behringer Harvard Opportunity REIT I, Inc fall to $4.12 from $7.66 a year earlier.

Other REITs like Cole Credit Property Trust II, Lerner Apple REITs,
Hines REIT, Inland American, KBS, Inland Western Retail Real Estate (now  Retail Properties of America) and the Wells and Wells Timberland REITs have faced similar issues resulting in reduced estimated values and/or termination of distributions.

Many REITs were sold with the promise of regular and dependable
distributions of income. In many cases these distributions were funded with debt or a return of capital and were not really distributions  of income. Investors who relied on these representations when making the decision to invest may have legal rights entitling them to the recovery of a portion or all of their losses.

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Nationwide Representation

Rex Securities Law

TollFree: 877-224-3199

Florida-561 391 1900 

Texas-512-329-2870

Investors Beware! Do Not Sign Blank Forms Presented to You by Your Broker

The Financial Industry Regulatory Authority (FINRA) , filed a complaint in February 2012, against two UBS Financial Services brokers, Charles Kern, III and Thomas Haskins,  alleging that they made unsuitable recommendations and material misrepresentations or omissions regarding options
investments in the S&P 500 Euro Index.

The option strategy suggested involved selling uncovered calls with a strike price 10% above the market price of the S&P 500 Index and selling uncovered puts at a strike price 10% below the market price of the S&P 500 index. If the calls and puts expired unexercised, the customer retained the premiums collected on the option sales. If the calls or puts were exercised, the customer would have to purchase the securities to cover the exercise of the options.

Broker Kern told broker Haskins, who apparently did not have personal professional experience with this strategy, represented that it would be successful 90% of the time and did not explain that losses were potentially unlimited, but rather told the customer that losses would be limited to $2-3,000 per transaction.

Two clients, referred to as WH and CH in the complaint were instructed to sign a Client Qualification Form for option trading, but were told not to fill in the part of the form dealing with liquid net worth, annual income, risk tolerance and experience. WH had completed the 8th grade and CH had completed high school. They were 61 and 62 years old.

One was disabled and the other a sewing machine operator. Annual combined income was about $35,000. Clearly they should not have been advised to follow such a risky trading strategy.

Customers should never sign any forms that are not completed and it is a warning sign that something may be amiss. In this case the brokers filled the forms out using false information so that the firm’s compliance department would approve the trading. Had the correct information been submitted(net worth, experience, risk tolerance, etc.) the trading would have been prohibited by the compliance department.

These clients lost $25,000, a significant portion of their $75,000 nest egg.

Other clients who were similarly enticed to follow this option trading strategy had losses of nearly $800,000.

If you have lost money as a result of option trading or other trading strategies which you did not understand at the time of the recommendation, call to speak with an experienced securities attorney and learn how you may be able to recover damages.

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Nationwide Representation

Rex Securities Law

TollFree: 877-224-3199

Florida-561 391 1900 

Texas-512-329-2870

Losses on Lexington Capital Funding III CDO?

Have you or your loved ones suffered losses as a result of purchasing Lexington Capital Funding III Collateralized Debt Obligation  (CDO) ?

This complex product was sold by Merrill Lynch to institutions and customers with high net worth. Just over a year after offering these CDOs to the market,  virtually all of the CDOs Merrill had underwritten were in technical default.

On August 8, 2008, Fitch Ratings downgraded 4 classes of Lexington Capital Funding III notes, stating “Fitch’s rating actions reflect the significant collateral deterioration within the portfolio, specifically from subprime residential mortgage-backed securities…..” Fitch went on further to describe that the portfolio was  91% comprised of vintage US sub-prime residential mortgage backed securities from 2005, 2006 and 2007, and that since Fitch’s prior rating in November 2007, 92% of the portfolio had been downgraded. Fitch’s press release.

Given the fact the offering closed in January 2007, and was in default 18 months later, securities attorneys nationwide are concerned about the apparent lack of due diligence prior to the offering as well as the marketing methods employed.

Call to discuss you legal options.

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Nationwide Representation

Rex Securities Law

TollFree: 877-224-3199

Florida-561 391 1900 

Texas-512-329-2870

 

Securities Regulators Warn Investors to Be Wary When Purchasing Annuities

March 25, 2012

The Financial Industry  Regulatory Authority (FINRA) has expressed concerns to investors about annuities for many years. In 2006, concerned about unjustified annuity exchanges, they posted an alert showing investors how to determine if they should exchange their variable annuity for another annuity and cautioned investors about the complexity of the products that contain hidden costs and risks.

In 2009, FINRA posted another alert advising investors to closely scrutinize variable annuities, especially senior investors. Seven factors were listed as warranting close attention before investing:

  • Liquidity & Early Withdrawals-there may be penalties for 6-8 years if you need to liquidate.
  • Sales & Surrender Charges-Surrender charges may start at 7 percent and decline one percent per
  • Fees& Expenses-In addition to sales and surrender charges there may be a variety of other fees related to administration, mortality and other special features.
  • Taxes-Annuities do not provide the tax benefits of 401(k) plans and other before tax retirement plans.
  • Bonus Credits-While they may appear advantageous, these credits often come with another hidden cost.
  • Guarantees-these benefits are only as good as the company you are buying from. Make certain it is a company with adequate financial strength.
  • Variable Annuities in an IRA-Generally not a good idea, since the IRA is already tax advantaged.

In 2010, FINRA warned investors about complexity of indexed annuities, (EIAs), also knows as fixed-indexed insurance products. The internal workings of these investments is very complicated and is set out in the alert, so you may want to take a look at it if you are considering such a purchase. Forbes published an article in 2010 “AreEquity-Indexed Annuities Right for You?” which you may also find helpful.

As previously reported on this blog, in March 2012, a state court jury in Lake County, CA found Glenn Neasham guilty of felony-theft for selling complex annuities to an elderly woman. He was sentenced to 90 days in jail. According to a Wall Street Journal covering the story, “the case underlines authorities’ continuing discomfort with “indexed” annuities”.

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Nationwide Representation

Rex Securities Law

TollFree: 877-224-3199

Florida-561 391 1900 

Texas-512-329-2870

 

 

Former David Lerner Officer Leaves to Start New Firm

March 21, 2012

The former chief compliance officer of David Lerner Associates, Inc. has formed a new firm, Cabot Lodge Securities, and has opened three offices in New York City and is opening a fourth in Boca Raton, FL.

Cabot has 20 advisers at the time, according to the Investment News, and plans to grow to 100 or 125 by the end of the year. Cabot promises a higher payout and an ownership interest in the firm. The firm will sell proprietary products like private placements, real estate programs, oil & gas programs as well as publicly traded and nontraded real estate investment trusts.

Albert Ackerman, Cabot’s CEO has extensive experience with Lerner. Lerner has sold over $6 billion of nontraded REITs to over 100,000 customers since 1992.

David Lerner and his company have recently been the subject of a FINRA investigation in connection with their REIT sales. More information on Lerner’s problems can be found here.  

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Nationwide Representation

Rex Securities Law

TollFree: 877-224-3199

Florida-561 391 1900 

Texas-512-329-2870