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Investors in Inland Land Appreciation Fund II May Have Arbitration Claims

investing in real estate through a limited partnership Investors in Inland Land Appreciation Fund II, L.P. (“Inland II” or the “Limited Partnership) may be able to recover losses on their investment through initiating an arbitration proceeding with FINRA Dispute Resolution.  Inland II is based in Oak Brook, IL and is structured as a Delaware Limited Partnership.  The Limited Partnership was formed in June 1989, to invest in undeveloped land on an all-cash basis and realize the upside appreciation upon resale.  In October 1989, the Partnership commenced an offering of limited partnership units at $1,000 per unit.  In connection with this initial offering, Inland II received $50,476,170 in gross offering proceeds, and accepted all unit holders into the partnership.  The General Partner is Inland Real Estate Investment Corporation.

Pursuant to their business model, Inland II purchased, on an all-cash basis, 27 parcels of undeveloped land and two buildings.  All of these investments were made in the Chicago, IL metropolitan area.  Initially, the partnership anticipated holding the properties for a period of 2 -7 years from the time of land portfolio acquisitions.  However, due to several factors, including lengthy rezoning and entitlement processes, the Limited Partnership’s holding period greatly exceeded their initial estimates.

According to publicly available documents filed with the Securities and Exchange Commission (“SEC”), as of December 31, 2016, the Limited Partnership had a remaining parcel of land it had yet to sell.

As a general rule, limited partnerships — particularly non-traded limited partnerships — are very complex and risky investments.  For this reason, investing in a limited partnership through a private placement is typically only available to accredited investors (to be accredited an investor must have an annual income of $200,000 or joint annual income of $300,000, for the last two years, or alternatively, have a net worth in excess of $1 million).  A significant risk associated with investing in non-traded partnerships has to do with their typically high fees (in many instances, a broker or promoter recommending such an investment will earn considerable commissions, perhaps as high as 10-15% of the initial investment).  In addition, investing in a non-traded partnership carries with it liquidity risk — often, uninformed investors find out too late that they cannot readily sell their partnership Units, or if they can redeem their Units directly with the sponsor or sell their Units on a secondary market, it will usually be at a significant discount.

With regard to Inland II, Units were recently listed for a sale on a secondary market platform at $80 per unit.  As compared to the initial offering price of $1000 per unit, it would appear that investors in Inland II would incur substantial losses on their initial capital outlay if they were to sell on the secondary market, even when factoring in monies received for previous distributions.

Applicable industry rules and regulations mandate that broker-dealers and their financial advisors must perform adequate due diligence on an investment before recommending such a financial product to an investor.  Further, a financial advisor must perform a suitability analysis in connection with the sale of a private placement offering to ensure that the investment is suitable based on the investor’s stated investment objectives and other criteria, including the investor’s net worth and income, age and experience with investing, in addition to risk tolerance.

If you have invested in Inland II, or a similar real estate partnership, and you have suffered losses in connection with your investment (or are currently unable to exit your illiquid investment position without incurring considerable losses), 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 for a no-cost, confidential consultation.

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