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Plaintiffs' analysis: Lerner used dividends, credit line, other sources
An eye-opening analysis of the distributions of nontraded REITs sold exclusively by David Lerner Associates Inc. shows that the REITs' property investments largely underperformed the level required to pay promised dividends to investors
Indeed, the analysis claims that the real estate investment trusts consistently borrowed from a line of credit and used distributions that investors were recycling back into the REITs to meet the targeted dividend payout.
The examination of the REITs sold by David Lerner Associates brokers, known as Apple REITs, is included in an amended complaint of a prospective class action filed by investors last week in U.S. District Court in Newark, N.J.
MISMATCH CLAIMED
The original class action was filed in June, weeks after the Financial Industry Regulatory Authority Inc. sued David Lerner Associates, a broker-dealer based in Syosset, N.Y., for misleading investors. The firm allegedly provided misleading performance figures for Apple REITs and implied that future investments could be expected to achieve similar results, according to Finra.
According to the amended class action complaint, the distribution paid to investors didn't match the level of income generated from the various Apple REITs, which invested primarily in Marriott and Hilton extended-stay hotels. Brokers at David Lerner Associates allegedly told clients that the Apple REITs were safe, conservative investments that would protect their savings from the volatility of the stock market.
Investors were promised steady, annualized returns in the neighborhood of 7% to 8%, according to the suit.
read more Tricks plumped up REIT distributions, according to suit - InvestmentNews
An eye-opening analysis of the distributions of nontraded REITs sold exclusively by David Lerner Associates Inc. shows that the REITs' property investments largely underperformed the level required to pay promised dividends to investors
Indeed, the analysis claims that the real estate investment trusts consistently borrowed from a line of credit and used distributions that investors were recycling back into the REITs to meet the targeted dividend payout.
The examination of the REITs sold by David Lerner Associates brokers, known as Apple REITs, is included in an amended complaint of a prospective class action filed by investors last week in U.S. District Court in Newark, N.J.
MISMATCH CLAIMED
The original class action was filed in June, weeks after the Financial Industry Regulatory Authority Inc. sued David Lerner Associates, a broker-dealer based in Syosset, N.Y., for misleading investors. The firm allegedly provided misleading performance figures for Apple REITs and implied that future investments could be expected to achieve similar results, according to Finra.
According to the amended class action complaint, the distribution paid to investors didn't match the level of income generated from the various Apple REITs, which invested primarily in Marriott and Hilton extended-stay hotels. Brokers at David Lerner Associates allegedly told clients that the Apple REITs were safe, conservative investments that would protect their savings from the volatility of the stock market.
Investors were promised steady, annualized returns in the neighborhood of 7% to 8%, according to the suit.
read more Tricks plumped up REIT distributions, according to suit - InvestmentNews
