Disgruntled investors appear to be lining up to sue Syosset New York brokerage David Lerner Associates over the sale of Apple Real Estate Investment Trusts (REITs). The Apple REITs, which invest in extended stay hotels, also got David Lerner Associates in trouble with the Financial Industry Regulatory Authority (Finra) earlier this month.
The latest class action lawsuit against David Lerner Associates was filed this week in federal court in Newark, New Jersey. It alleges that the REITs were sold to retail investors and retirees at $11 per share and paid returns of 7 percent to 8 percent. But investors were never told that investments weren’t generating enough income to cover those returns. Instead, investors were paid through loan proceeds and capital raised from investors, meaning that investors were essentially paying themselves, the complaint says.
Apple REIT Investors have Incurred Substantial Unrealized Losses.
The lawsuit also claims that Apple REIT investors have incurred substantial unrealized losses because their interests are worth far less than the price paid for their shares. It also alleges that David Lerner Associates marketed the REITs as appropriate for conservative investors, stating they had never lost money by investing in hotels.
The New Jersey lawsuit follows another that was recently filed in federal court in Brooklyn, New York and makes essentially the same claims. Both lawsuits seek to represent all investors who incurred losses due to investments in the Apple REITs.
The firm also faces a number of individual investor arbitration lawsuits filed through Finra.
Earlier this month, Finra announced its intent to seek disciplinary action over the way David Lerner Associates allegedly sold Apple REITs. According to Finra, as the exclusive brokerage for Apple REITs, the firm earned more than $600 million in fees and commissions from sales of the investments since 1996. During that time period, sale of Apple REITs accounted for 60 percent to 70 percent of the firm’s business.
Need Legal Help Regarding Apple REITs?
New York | Brooklyn | Queens | Long Island | New Jersey | Florida
Call us at: 1-800-YOURLAWYER (800-968-7529) | Schedule your free consultation