Recent evidence indicates that investors were misled about the “income” being generated by non-traded Apple REITs. Brokers at David Lerner Associates regularly represented to investors that the Apple REITs were safe, conservative investments that would protect savings from the volatility of the stock market and had produced steady, annualized returns in the neighborhood of 7% to 8%. A recent expert report, however, concluded that the Apple REITs consistently paid distribution using borrowed fund or funds received from investors ? effectively recycling investors’ funds back to them as “distributions.”
As a result, investors in a suit against David Lerner Associates Inc. have filed an amended complaint attaching this expert report showing that the REITs’ property investments largely underperformed the level required to pay promised dividends to investors and that the REITs used borrowed funds to support distributions. The action was filed in U.S. District Court in Newark, N.J. See “Lerner resorted to tricks to plump up Apple distributions: Suit,” by Bruce Kelly, InvestmentNews.
The Financial Industry Regulatory Authority Inc. (FINRA) had already sued David Lerner Associates earlier for providing misleading pricing of $11 per share on account statements and misleading performance figures. Investors bought $5.7 billion in five Apple REIT offerings from David Lerner Associates brokers from 2004 to 2011, and the REITs were routinely valued at $11 a share until several months ago. When the commercial real estate market plummeted, Lerner did not adjust the REITs’ valuations, but left them at $11. Lerner now describes them as “not priced.”
The Apple REITs are reportedly controlled and managed by Glade Knight, a real estate investor based in Richmond, Va., who is also named in the lawsuit.
David Lerner Associates and its brokers received a 7.5% commission from each Apple REIT share sold plus 2.5% marketing expense for a total of $341.5 million from just the sale of Apple REITs Eight, Nine and Ten.
Page Perry is an Atlanta-based law firm with over 150 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 45 occasions. Page Perry’s attorneys have extensive experience in representing investors in cases involving non-traded REITs. For further information, please contact us.