REIT Troubles Mount for Cornerstone Non-Traded REIT Investors

In what continues to be a disturbing trend in the non-traded REIT industry, thousands of investors learned last month that their non-traded REIT investment has plummeted in value and most of their money is gone. Investors in the Cornerstone Core Properties REIT Inc. were told on Feb. 17, 2012, that the shares, once valued at $8, are now worth no more than $2.25.

The new per share valuation resulted, among several other factors, from Cornerstone’s need to negotiate extensions to pay its loans. For example, according to an SEC filing on Feb. 13, 2012, Cornerstone negotiated a loan maturity date extension with Wells Fargo. The loan maturity extension required Cornerstone to pay more than half of the total outstanding amount due and prohibited any amounts repaid to be re-borrowed by the REIT.

But more disturbing for investors now stuck in the Cornerstone Core REIT is the fact that the $2.25 per share valuation may be inaccurate and potentially even lower. In its 8-K form filed with the SEC on Feb. 12, 2012, Cornerstone Core Properties REIT disclosed that the valuation method performed by Cornerstone Realty Advisors LLC, an affiliate of the REIT itself, is based upon “a number of estimates and assumptions that may later prove to be inaccurate or incomplete.”  Furthermore, Cornerstone discloses the following disturbing fact:

“[w]ith respect to our estimated per-share value, we can provide no assurance that…the estimated share value, or the methodologies relied upon to estimate the share value, will be found by any regulatory authority to comply with FINRA, ERISA, or any other regulatory requirements.”

The above disclosure is shocking in the sense that it essentially states that share valuable information being distributed to investors could not only be inaccurate but also may not comply with FINRA regulations.

Investors in the Cornerstone Core REIT have been unable to sell their shares for over a year now. According to Cornerstone’s first quarterly report for 2012, Cornerstone’s board of directors concluded on Nov. 23, 2010, that the non-traded REIT: “did not have sufficient funds available to continue funding share repurchases. Accordingly, [the] board of directors suspended repurchases under the program effective Dec. 31, 2010.”

But investors in the Cornerstone Core REIT are not alone in facing REIT problems. In the past several months, thousands of people who invested in other non-traded REITs around the country have received similar devastating news. Some of the non-traded REITs that have also drastically re-priced their shares in recent months include Behringer Harvard, KBS, and Cole.

Vernon Litigation Group is a nationwide law firm based in Naples, Florida. Vernon Litigation Group’s investment fraud attorneys are currently representing investors nationwide who have collectively suffered millions of dollars in REIT losses in non-traded REITs such as Behringer Harvard, Wells, Cornerstone, Inland, KBS, and several other non-traded REITs.  The attorneys at Vernon Litigation Group collectively have more than 30 years of experience representing investors who are victims of financial losses due to misconduct, negligence, and all manner of securities fraud.

Categories