More Trouble for Inland American Real Estate Trust
(Mar 2013)
Inland American's March 2012 quarterly report revealed that the company was the subject of an ongoing SEC investigation (we wrote about this in our blog post titled "SEC Investigation into Largest Non-Traded REIT May Be A Sign of Things To Come"). Inland American's 2012 annual report further disclosed that several stockholders have sued the company seeking recovery of damages (View the SEC filing). According to the information in Inland American's SEC filings, both the SEC investigation and...
Another Non-Traded REIT to be Absorbed into a Traded REIT
(Jan 2013)
Spirit Realty Capital, a large traded real estate investment trust (REIT), announced on Tuesday that it has acquired Cole Credit Property Trust II (CCPT II), a non-traded REIT. This is the second major merger between a traded and non-traded REIT; we covered the first last month. Like the previous deal, it appears that the non-traded REIT is the larger entity, but the resulting company will be market traded and assume the traded REIT's brand and ticker (SRC).
A major question for non-traded...
Traded and Non-Traded REIT to Merge
(Dec 2012)
Earlier this week, American Realty Capital Properties (ARCP), a traded REIT under the American Realty Capital (ARC) family of real estate investments, announced that it will be merging with American Realty Capital Trust III (ARCTIII), a non-traded REIT in the same family. Investors in ARCTIII will be entitled to either $12.00 in cash or $12.26 per share in ARCP stock, a significant premium over the $10 per share purchase price.
This merger is remarkable for a number of reasons. While the...
Another Non-Traded REIT Revises Share Value Downwards
(Dec 2012)
Following in the footsteps of several other large non-traded REITs, Wells Timberland REIT has revised its estimated per share value down to $6.56, from approximately $9.50 reported in the company's last 10-Q. The shares were sold for $10.00 per share starting in August 2006 and as late as December 2011.
Non-traded REITs are largely illiquid real estate investments that can be sold to retail investors but are not traded on major exchanges (see our white paper on non-traded REITs for details)....
Massachusetts Securities Regulators Getting Tough on Non-Traded REITs
(Dec 2012)
LPL Financial, the largest independent broker-dealer in the US, is being sued by Massachusetts securities regulators for "numerous regulatory violations in connection with the sale of non-traded REITs." We have covered non-traded REITs extensively on this blog, as well as in a detailed working paper, and it appears that many of the problems that have been identified with these products are finally attracting attention from regulators.
According to the complaint, the action is specifically...
SEC Charges KCAP Financial with Overvaluing Assets
(Nov 2012)
The SEC alleges that KCAP Financial, a publicly traded business development company (BDC), did not accurately report the fair value of its corporate debt and collateralized loan obligation (CLO) assets during the financial crisis, thereby misleading investors. According to the press release, KCAP valued some of their assets at cost, not at fair market value, overstating the net asset value by over 25% during the peak of the financial crisis.
BDCs are similar to REITs in that they hold...
FINRA Fines and Suspends David Lerner for Apple REIT Ten Misrepresentations
(Oct 2012)
Today, FINRA fined David Lerner Associates $14 million, including $12 million in restitution to investors, for charging excessive markups and misleading investors in a non-traded real estate investment trust (REIT) known as Apple REIT Ten. They also suspended David Lerner himself for one year from the securities industry and for two more years from acting as principal for a securities firm. From the news release:
As the sole distributor of the Apple REITs, DLA solicited thousands of...
The Small Price of Big Favors
(May 2012)
Yesterday the Securities and Exchange Commission issued a press release announcing that it had filed a complaint alleging Detroit officials -- including former mayor Kwame M. Kilpatrick and former city treasurer Jeffrey W. Beasley -- influenced the city's pension fund investments to favor an advisor, MayfieldGentry Realty Advisors LLC, in exchange for personal gifts. This story illustrates an all too common occurrence in municipal finance. According to the SEC, Kilpatrick and Beasley...
FINRA Press Release: Non-Traded REITs
(May 2011)
FINRA Charges David Lerner & Associates Over Sale of Non-traded Apple REITs
The Financial Industry Regulatory Authority (FINRA) issued a press release yesterday in which it announced that it had
"filed a complaint against David Lerner & Associates, Inc. (DLA), of Syosset, NY, charging the firm with soliciting investors to purchase shares in Apple REIT Ten, a non-traded $2 billion Real Estate Investment Trust (REIT), without conducting a reasonable investigation to determine whether...
