Articles Tagged with investment attorney

Published on:

by

Piggybank in a CageOn November 9, 2018, GPB Capital Holdings, LLC (“GPB”) notified certain broker-dealers who had been selling investments in its various funds that GPB’s auditor, Crowe LLP, elected to resign.  As reported, GPB’s CEO, David Gentile, stated that the resignation purportedly came about “[d]ue to perceived risks that Crowe determined fell outside of their internal risk tolerance parameters.”  GPB has since engaged EisnerAmper LLP to provide it with audit services moving forward.

As we recently discussed, GPB has come under considerable scrutiny of late.  In August 2018, the sponsor of various private placement investment offerings including GPB Automotive Portfolio and GPB Holdings II, announced that it was not accepting any new investor capital, and furthermore, was suspending any redemptions of investor funds.  This announcement followed GPB’s April 2018 failure to produce audited financial statements for its two largest aforementioned funds.  By September 2018, securities regulators in Massachusetts disclosed that they had commenced an investigation into the sales practices of some 63 independent broker-dealers who have reportedly offered private placement investments in various GPB funds.  To name a few, these broker-dealers include: HighTower Securities, Advisor Group’s four independent broker-dealers – FSC Securities, SagePoint Financial Services, Woodbury Financial Services, and Royal Alliance Associates, in addition to Ladenburg Thalmann’s Triad Advisors.

The various GPB private placement offerings include:

Published on:

by

financial charts and stockbrokerDespite FS Investment Corporation II’s (“FSIC II”, or the “Company”) providing an estimated value of $8.31 a share, recent publicly-available information concerning pricing suggests a lower value, with secondary market transactions reportedly at prices of between $7.20 and $7.31 a share and a third-party tender offer being completed at $5.15 a share.

FSIC II is a publicly registered, non-traded business development company (“BDC”) that may have been marketed to some public investors as a relatively safe investment offering a steady yield of income.   However, as a non-traded BDC, the Company carries with it considerable risks.  Accordingly, in those instances where retail investors were solicited by a financial advisor to invest in FSIC II without first being fully informed of the risks associated with the investment, including the potential for principal losses, high upfront fees and commissions, and the illiquid market in the Company’s shares, investors seeking to recoup their losses may have legal claims against stockbrokers or investment advisory firms who sold them the shares.

Organized under Maryland law in July 2011, FSIC II commenced its operations on June 18, 2012 and is structured as a publicly registered, non-traded BDC under the Investment Company Act of 1940 (’40 Act).  Publicly-available information suggests numerous retail investors participated in FSIC II’s initial offering, priced at approximately $10 per share.  FSIC II is managed by FS Investments (formerly known as Franklin Square), a Philadelphia-based alternative asset management firm sponsoring a number of non-traded BDCs.  As of June 30, 2018, FSIC II reported assets under management of approximately $4.77 billion.

Published on:

by

investing in real estate through a limited partnershipRecent pricing on shares of Cole Credit Property Trust V, Inc. (“CCPT V” or, the “Company”) – at reported prices of $17.25-$17.75 – suggests that investors who chose to sell their shares on a limited secondary market may have sustained considerable losses of up to 30% (excluding any distributions received to date).  Formed in December 2012, CCPT V is structured as a Maryland corporation.  As a publicly registered, non-traded real estate investment trust (“REIT”), CCPT V is focused on the business of acquiring and operating “a diversified portfolio of retail and other income-producing commercial properties.”  As of October 31, 2018, the Company’s real estate portfolio consisted of 141 properties across 33 states, with portfolio tenants spanning some 26 industry sectors.

The shares of CCPT V, a publicly registered, non-traded REIT, were offered to retail investors in connection with CCPT V’s initial offering, which was priced at $25 per share.  The Company launched its initial offer in March 2014, and as of the second quarter of 2018, had raised $434 million in investor equity through the issuance of common stock.

Some retail investors may have been steered into an investment in CCPT V by a financial advisor, without first being fully informed of the risks associated with investing in non-traded REITs.  For example, one initial risk that is often overlooked concerns a non-traded REIT’s characteristic structure as a blind pool.  In the case of CCPT V, its blind pool offering means that not only were shares issued to public investors for a REIT lacking any previous operating history, but moreover, CCPT V did not immediately identify any of the properties that it intended to purchase.

Published on:

by

https://i1.wp.com/www.investorlawyers.net/blog/wp-content/uploads/2018/05/15.10.14-apartment-buildings.jpg?resize=300%2C210&ssl=1NorthStar Healthcare Income, Inc. (“NorthStar Healthcare”) is a public, non-traded REIT formed in October 2010 as a Maryland corporation.  NorthStar Healthcare is in the business of acquiring a geographically diverse portfolio of various healthcare real estate assets, including equity and debt investments (including various joint ventures with other non-traded REITs) in the mid-acuity senior housing sector, as well as in memory care, skilled nursing, and independent living facilities.  Pursuant to its initial offering, which closed on February 2, 2015, the non-traded REIT raised gross proceeds of $1.1 billion (subsequently, NorthStar Healthcare conducted a Follow-on Primary offering, raising total gross proceeds of $1.9 billion through March 22, 2017).

As a publicly registered, non-traded REIT, numerous retail investors were solicited by a financial advisor to invest in NorthStar Healthcare.  Unfortunately, customers who purchased shares through the IPO upon the recommendation of a broker may, in some instances, have been uninformed of the complex nature of the investment, including its high upfront commissions and fees (as set forth in its prospectus, NorthStar Healthcare charged investors a selling commission of up to 7% of gross offering proceeds, a dealer-manager fee of up to 3%, and an acquisition fee of 2.25% for properties acquired by the REIT).

Furthermore, as a non-traded REIT, NorthStar Healthcare is illiquid in nature.  Investors seeking liquidity have limited options at their disposal in the event that they wish to exit their investment position in the near term.  Briefly, investors seeking liquidity may: (i) seek to redeem their shares directly with the sponsor (it is worth noting that NorthStar is “not obligated to repurchase shares” under its Share Repurchase Program), or (ii) be presented with limited, market-driven opportunities to tender their shares to a third party professional investment firm (typically at a disadvantageous price), or finally, (iii) seek to sell their shares on a limited secondary market specializing in creating a market for illiquid securities.

Published on:

by

Wastebasket Filled with Crumpled Dollar BillsInvestors in Carter Validus Mission Critical REIT, Inc. (“Carter Validus”) may have arbitration claims to be pursued before FINRA, in the event the investment recommendation was unsuitable, or if the financial advisor’s recommendation was predicated on a misleading sales presentation.  Headquartered in Tampa, FL, Carter Validus is structured as a Maryland real estate investment trust (“REIT”).  As a publicly registered, non-traded REIT, Carter Validus was permitted to sell securities to the investing public at large, including numerous unsophisticated retail investors who bought shares through the IPO upon the recommendation of a broker or financial advisor.

In connection with its IPO, Carter Validus offered up to 150,000,000 shares of common stock at $10 per share.  As set forth in its Registration Statement as filed with the SEC, Carter Validus seeks to acquire “income-producing commercial real estate with a focus on medical facilities, data centers and educational facilities.”  As more fully described below, recent secondary market pricing for Carter Validus shares, at a bid-ask spread of between $3.15 – $3.30 per share, suggests investors who opted to sell their shares through a limited secondary market have sustained a principal loss of approximately 67%, excluding distributions.

Non-traded REITs like Carter Validus pose many risks to investors that are often not readily apparent, or in some instances adequately explained by the financial advisors recommending these complex and esoteric investments.  To begin, one significant risk associated with non-traded REITs has to do with their high up-front fees and commissions, which act as an immediate drag on investment performance.  In connection with its IPO, Carter Validus charged investors a “selling commission” of 7%, in additional to a “dealer manager fee” of 2.75%, and certain “organization and offering expenses” of 1.25%.  Thus, in aggregate, investors who participated in the IPO were charged 11% in commissions and fees from the outset.

Published on:

by

Money WhirlpoolOn November 6, 2018, Sierra Income Corporation (“Sierra”) filed a Registration Statement (on Form N-14) with the SEC, notifying Sierra investors and the public at large of a proposed merger transaction.  Specifically, Sierra’s board of directors is seeking shareholder approval on a series of related transactions designed to effectuate a merger between and among Sierra, a publicly registered non-traded business development company (BDC), as well as Medley Capital Corporation (“MCC”), a publicly traded BDC, and Medley Management Inc. (“MDLY”), a publicly traded asset management firm.

MDLY is the parent company of both MCC’s and Sierra’s investment adviser, and the same portfolio management team and officers are responsible for both MCC’s and Sierra’s operations.  While a date for a special shareholder meeting has yet to be set, Sierra’s board of directors is seeking shareholder approval on the contemplated merger, a transaction which will reportedly create the second largest internally managed and seventh largest publicly traded BDC.

Sierra is currently externally managed by SIC Advisors LLC, which in turn, is affiliated with MDLY.  MDLY operates a national direct origination franchise through which it seeks to market its financial products, including Sierra.  As of December 31, 2016, Sierra reported that it had raised in excess of $900 million in connection with its equity capital raise.  As of July 31, 2018, Sierra had closed its public offering.  Most recently, shares of Sierra have been assigned a NAV of $7.27 per share by management, and has reported approximately $1.1 billion in total assets.

Published on:

by

woodbridge-1-300x82As recently reported, the U.S. Securities & Exchange Commission (SEC) has accused the founder and former CEO of the Woodbridge Group of Companies, LLC (“Woodbridge”), Mr. Robert Shapiro, of defrauding more than 8,400 investors nationwide in an elaborate real-estate related Ponzi scheme.  Specifically, the SEC has alleged that Mr. Shapiro purportedly utilized a “web of more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $1.22 billion… through fraudulent unregistered securities offerings.”  At this stage, Woodbridge is in the midst of Chapter 11 bankruptcy proceedings in the U.S. Bankruptcy Court for the District of Delaware (Case No. 17-12560-KJC) as investors wait to hopefully recoup a fraction of the money they invested in Woodbridge.

If you invested in Woodbridge upon the recommendation of former financial adviser Max Jacob Hechtman (“Hechtman”), you may be able to recover your losses through arbitration or litigation.  According to SEC records, Mr. Hechtman (CRD No. 6709423) was formerly affiliated with the Registered Investment Advisor (RIA) firm AE Wealth Management, LLC (“AE Wealth”, IARD No. 282580) from October 5, 2016 until September 27, 2018.  If you invested in any Woodbridge securities during this time frame, you may possess a viable legal claim to recover your losses against Mr. Hechtman and/or his former employer, AE Wealth.

Beginning as early as 2012, Woodbridge and its affiliate companies offered securities nationwide through a network of in-house promoters, as well as various licensed and unlicensed financial advisors.  Woodbridge investments came in two primary forms: (1) “Units” consisting of subscription agreements for the purchase of an equity interest in one of Woodbridge’s seven Delaware limited liability companies, and (2) “Notes” or what have commonly been referred to as “First Position Commercial Mortgages” or “FPCMs” consisting of lending agreements underlying purported hard money loans on real estate deals.

Published on:

by

Building DemolishedInvestors in American Finance Trust (“AFIN”) may have arbitration claims to be pursued before FINRA, if their AFIN investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the broker.  AFIN was initially structured as a publicly registered, non-traded real estate investment trust (REIT).  As such, many unsophisticated retail investors participated in the AFIN IPO upon the recommendation of a financial advisor at a price of $25 per share.

In the wake of AFIN’s listing as a publicly-traded stock, AFIN’s stock price has languished at far below the $25 a share price that many investors paid for AFIN stock at the recommendation of stockbrokers or advisors.  As of October 18, 2018, AFIN shares closed at $14.26 a share.

Earlier this year — as we have discussed in several recent blog posts — the board of directors of AFIN announced the approval of a plan to list the REIT’s common stock on the Nasdaq Global Select Market (“NasdaqGS”), under the symbol ‘AFIN’.  In connection with this planned “liquidity event,” AFIN’s board also approved a phased liquidity plan, pursuant to which certain amendments were made to AFIN’s corporate charter:

Published on:

by

Money in WastebasketAs recently reported, the Massachusetts Securities Division (the “Division”) has commenced an investigation into the sales practices of some 63 independent broker-dealers who offered private placements sponsored by alternative asset manager GPB Capital Holdings, LLC (“GPB”).  Specifically, the Division has intimated that it began an investigation into GPB following a recent tip concerning the firm’s sales practices which allegedly occurred not long after GPB announced that it was temporarily halting any new capital raising efforts, as well as suspending any redemptions.

According to the Division’s head, Mr. William Galvin, the investigation is in its “very nascent stages.”  At this time, Massachusetts securities regulators have requested information about GPB from more than 60 broker-dealers, including HighTower Securities, Advisor Group’s four independent broker-dealers, as well as Ladenburg Thalmann’s Triad Advisors.

In August 2018, GPB – the sponsor of certain limited partnership offerings including GPB Automotive Portfolio and GPB Holdings II – announced that it was not accepting any new capital.  According to filings with the SEC, sales of the two aforementioned GPB private placements allegedly netted the broker-dealers marketing these investment products some $100 million in commissions, at a rate of about 8%, since 2013.

Published on:

by

Building DemolishedInvestors in AR Global’s Healthcare Trust, Inc. (“HTI”), may have FINRA arbitration claims, if their investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the stock broker.  AR Global’s HTI was incorporated on October 15, 2012, as a Maryland corporation that elected to be taxed as a real estate investment trust (REIT).  HTI invests in multi-tenant medical office buildings and, as of year-end 2017, owned a portfolio consisting of 8.4 million-square-feet including 164 properties, with a total purchase price of $2.3 billion.

As a publicly registered non-traded REIT, HTI was permitted to sell securities to the investing public at large, including numerous unsophisticated retail investors who bought shares through the IPO upon the recommendation of a broker or money manager.  HTI terminated its offering in November 2014 after raising approximately $2.2 billion in investor equity.

Recently, third party real estate investment firm MacKenzie Realty Capital, LP (“MacKenzie”) initiated an unsolicited mini-tender offer to purchase up to 1 million shares of HTI for $10.99 per share.  Accordingly, investors who acquired HTI shares through the offering at $25 per share will incur substantial losses on their initial investment of approximately 55% (exclusive of commissions paid and distributions received to date).