APPLE REIT 8 INVESTOR ALERT - DO YOU THINK APPLE REIT 8 IS OUT OF CASH?

Apple REIT 8 Investors who recently tried to cash out of the REIT are calling and telling us they think the REIT might be out of cash after they received a response to their recent redemption requests. In a January 24th letter, Glade Knight, the Apple REIT founder and chairman, told Apple REIT 8 investors that the REIT no longer had sufficient funds to meet their redemption requests in full. This leaves investors with a security that is practically illiquid. Seeing as redemption requests are now exceeding the funds available to meet them, Apple REIT 8 will have no choice but to suspend their redemption programs indefinitely. In that event, the REIT will become completely illiquid, and investors will have no access to their funds in the foreseeable future.
REITs invest in a diversified set of income producing real estate properties and mortgages, and they must distribute 90 percent of net earnings to investors. REITs allow investors to partake in real estate investing without directly owning property, which may lock up large amounts of money for long periods of time. The most popular REITs are publicly traded on a stock exchange such as the New York Stock Exchange (NYSE) - they are relatively transparent in their finances and operations and are covered extensively by investment analysts. Non-traded REITs are not listed or registered with securities regulators and are supposed to be available only to accredited investors - $1 million or more in assets or $200,000.00 in annual income. Non-traded REITs disclose their finances publicly and offer shares to the public, but they do not list their shares on an exchange, which is one of many risk factors associated with them.
Apple REIT 8's inability to meet redemption requests is material investment information, which cannot go undisclosed. Perhaps the lack of disclosure stems from the fact that David Lerner Associates (DLA), the Long Island securities broker that single-handedly placed these high commission-paying products into the portfolios of retirees seeking safety and income, is trying to break escrow on Apple REIT 10. It could also very well be that DLA has decided that disclosing bad news on Apple REIT 8 would be bad for sales of their latest self-enrichment schemes.
The Financial Industry Regulatory Authority (FINRA) is also inquiring into Apple REIT 8's operations. FINRA recently filed a complaint describing how Apple REIT 8 is paying monthly distributions nearly 4 times over the net income its hotels are earning. To date, FINRA has not taken any formal action for restitution on behalf of investors in Apple REIT 8. This does not mean that Apple REIT 8 investors cannot make personal claims for their losses. Investors who have suffered losses in Apple REIT 8 are encouraged and are certainly entitled to file arbitration claims for damages against DLA in order to recover their lost principal.
Have you suffered losses in Apple REIT 8 sold by David Lerner Associates? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

INVESTORS NATIONWIDE BEWARE - PUBLIC, NON-LISTED REITS ARE NOT WORTH THE RISK!

For quite some time now, a lack of attractive fixed income yields has created serious issues for many investors, especially seniors. Certificates of deposit (CDs) are paying almost nothing, and interest payments on bonds are on a greater decline than a shopper's savings account during the holiday season. Therefore, many investors are turning to public, non-listed real estate investment trusts (REITs), which promise attractive quarterly distributions - 6.5% a year with full return of the invested principal. However, investors must realize that public, non-listed REITs have a multitude of risks that most stocks, bonds, and CDs do not, and many investment advisers do not believe that public, non-traded REIT distributions compensate for those risks. Some of the public, non-listed REITs to watch out for are: Apple, Behringer, Pacific Cornerstone, Desert Capital, Inland American, Inland Western, KBS, and Retail Properties of America.
REITs invest in a diversified set of income producing real estate properties and mortgages, and they must distribute 90 percent of net earnings to investors. REITs allow investors to partake in real estate investing without directly owning property, which may lock up large amounts of money for longs periods of time. The most popular REITs are publicly traded on a stock exchange such as the New York Stock Exchange (NYSE) - they are relatively transparent in their finances and operations and are covered extensively by investment analysts. Private REITs are not publicly traded, listed, or registered with securities regulators and are supposed to be available only to accredited investors - $1 million or more in assets or $200,000.00 in annual income. Public, non-listed REITs disclose their finances publicly and offer shares to the public, but they do not list their shares on an exchange, which is one of many risk factor associated with them.
The following are some of the risks associated with investing in public, non-listed REITs:
-High fees: non-listed REITs pay brokers and financial advisers large commissions, oftentimes 10 percent of the amount invested. Numerous REITs also charge investors ongoing management fees, and some of them charge fees when an investor wants to liquidate.
-Share value: more than half of non-listed REITs are sold in $10 per share allotments to investors. After the real estate bubble popped and credit markets fell apart, many REITs lost most of their value. A lack of an efficient secondary market makes it almost impossible to successfully auction off shares to recover some of the lost principal.
-Liquidity: REIT investors usually find that their original investment is locked in for seven to ten years. Also, many REITs refuse share-redemption requests except in emergency cases such as death or disability.
-Distribution cuts: many REITs are not generating enough income to pay distributions owed to shareholders. In order to circumvent this dilemma, REITs are financing payments owed by selling more shares, selling off properties, or cutting dividends.
Regulators have begun to closely scrutinize public, non-listed REITs. In 2009, the Financial Industry Regulatory Authority (FINRA) began to examine how broker-dealers advertised and sold REITs. In fact, FINRA recently ordered David Lerner and Associates (DLA) of Syosset, NY to pay $12 million to investors who were sold shares of Apple REIT. FINRA found that DLA was providing misleading materials to unsophisticated investors nationwide, which included elderly clients.
Have you suffered losses in a public, non-listed real estate investment trust such as David Lerner and Associates' Apple REIT? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

WAS THE DAVID LERNER/APPLE REAL ESTATE INVESTMENT TRUST AN UNSUITABLE INVESTMENT?

Many investors have been calling my office and asking whether the David Lerner/Apple Real Estate Investment Trust was an unsuitable investment for them. The David Lerner/Apple Real Estate Investment Trust is a non-traded Real Estate Investment Trust (REIT). For most investors, liquidity, income and risk tolerance are a concern but if you are elderly and retired they are paramount! If you have limited resources and no ability to generate income from other sources to meet your liquidity and income needs then a non-traded REIT is an unsuitable investment. Likewise, if you cannot afford a total risk of loss, then speculative non-traded REITs are unsuitable investments. The suitability problem is compounded when any investors' portfolio is concentrated in non-traded REIT investments. A rule of thumb is that no more than 10% of anyone's investment portfolio should be concentrated in real estate investments, including REIT investments, and that percentage should be far less as a person reaches retirement and advances in age, perhaps zero!

Every brokerage firm has the responsibility of "knowing the customer" and making a customer specific "suitability" determination for every investment recommendation. The "Suitability Rule," Financial Industry Regulatory Authority (FINRA) Rule 2111, requires that a firm or associated person "have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer's investment profile." This is a new rule but it contains the core features of the previous National Association of Securities Dealers ("NASD") and New York Stock Exchange ("NYSE") suitability rules and codifies well-settled interpretations of those rules. Brokerage firms and their associated persons have always had the responsibility to make suitable recommendations in light of individuals in stating investment objectives and financial condition, tax status, and other relevant factors. According to FINRA, some non-traded Real Estate Investment Trust investments ("REITs") aren't suitable for anyone based on the offering terms, misrepresentations and unreasonable projections by the promoters (see FINRA News Release "FINRA Issues Investor Alert on Public Non-Traded REITs").

The primary cause of the increased number of telephone calls to our office over the last five years is many elderly and retired investors have been steered into non-traded REIT investments as the yields on other income producing investments have steadily declined. According to many investors, the REITS were recommended as safe, secure, and steady income producing investments which sounded to be exactly what many seniors wanted and needed. But these products offer little liquidity for investors who at this stage of their life are likely to need to dip into their investment savings to support their lifestyle or for medical and other emergencies. There is no public market, early redemption of shares in REITs is often very limited, and the fees associated with the sales of these products can be high and erode the total return, if they can be sold at all. Further, many of these investments do not truly generate income but make distributions with borrowed money, with newly raised capital, or by a return of principal rather than a return on investment which can stop at any time. Although non-traded REITs may offer some diversification benefits as part of a balanced portfolio, they all have underlying risk characteristics that make them unsuitable for certain investors, particularly the elderly retired investor with limited financial resources.

When any David Lerner/Apple Real Estate Investment Trust investor calls our office, we will make a customer specific suitability determination after we learn the "essential facts" concerning that investor. We will ask, just as their stockbroker should have asked, about their age, investment experience, time horizon liquidity needs (length of time they could hold the investment without need for the principal), risk tolerance, other holdings, and financial situation in terms of liquid total net worth, tax status and investment objectives. All of these factors are relevant to suitability and determination and most weigh against the ownership of REIT investments by elderly retired investors. If we believe a brokerage firm or its representatives made an unsuitable recommendation that any person invest in a non-traded REIT, we recommend that they file a FINRA arbitration claim and attempt to recover their losses!

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

CAN I RECOVER MY DAVID LERNER/APPLE REAL ESTATE INVESTMENT TRUST LOSSES?

Many investors in the non-traded Apple REITs Six, Seven, Eight, Nine, and Ten have inquired about their ability to recover their losses after learning that their fund is no longer valued as much as they were previously led to believe. As a result, many claims are being filed by Apple REIT and other REIT investors for misrepresentation, unsuitable recommendations and/or overconcentrations of their investment funds in Apple REIT and other REIT investments to recover their REIT losses.

At first blush, one may think that the best claim is against the Apple REIT itself and its management but one needs to remember why they first invested. Undoubtedly, the Apple REIT and other REIT investments were recommended by the David Lerner & Associates brokerage firm and financial advisors who have a fiduciary duty to not misrepresent or omit to state important facts, perform due diligence on any REIT and first make sure that the investment is suitable at all for any investor and then specifically ensure that the investment is appropriate in light of the investor's actual age, investment experience, investment objectives, tax and financial condition. If the brokerage firm and its advisor fail in fulfilling any one of these duties under common law and under the FINRA Code of Conduct, investors will have the right to recover their investment losses against them through a FINRA arbitration proceeding and/or court if no arbitration agreement has been executed.

The most common misrepresentation and misleading statement claims that the Apple REIT and other REIT investors have been making relate to the risk associated with the non-traded REITs. Many investors have complained that Apple REIT and other REITs were not adequately represented before purchase and that they did not know the real truth about the valuations, performance, prospects, liquidity, or distribution and redemption practices of management relating to their investment. Many elderly investors seeking income were overconcentrated in Apple REITs and other REITs because they needed income. Sadly they learned too late that there were no guarantees that distributions would be made. Some REIT investors have just learned that they would no longer be receiving distributions or that the distributions they actually received were derived from loans and not the true cash flow of the REIT. Brokerage firms and their financial advisors were eager to push REIT investments on their clients for the high commissions compared to other products. Unfortunately, many investors are locked in and unable to sell their REIT investments without suffering without selling into deeply discounted secondary market for some other REIT investments. If you are an Apple REIT investor with the same complaints, we believe we can help you recover your REIT losses!

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

DAVID LERNER ASSOCIATES AND SLOPPY "POPPY" GET NAILED BY FINRA FOR $12 MILLION FOR SALES OF APPLE REITS TO INVESTORS IN FLORIDA AND NATIONWIDE

Over the past 20 years, David Lerner Associates (DLA) has sold $20 billion worth of non-traded Real Estate Investment Trusts (REIT) such as Apple REITs 7, 8, 9, and 10. Although FINRA has taken no formal action on behalf of investors for losses stemming from REITs 7, 8, and 9, it recently ordered DLA to pay $12 million in restitution to customers who purchased Apple REIT 10, a $2 billion non-traded REIT. As the sole distributor of the APPLE REIT, DLA targeted thousands of unsophisticated and elderly customers to sell the illiquid REIT without performing adequate due diligence to determine whether the REIT was suitable for its investors. In its sales campaign, DLA used deceptive marketing materials that did not disclose to customers that the income from the REIT was insufficient to support distributions to investors. FINRA spokeswoman Michelle Ong said that the action is the largest single restitution payment for investors involving REIT sales.

FINRA also fined David "Poppy" Lerner, DLA's founder, President and CEO, $250,000.00 and suspended him from the securities industry for one year, followed by a two-year suspension from acting as a principal. Mr. Lerner made false claims about the investment's return, value, and prospects of the REIT at various DLA investment seminars and letters to clients. FINRA also fined William Mason, the firm's head trader, $200,000.00 and suspended him from the industry for six months for charging excessive municipal bond and CMO markups. Mr. Lerner and DLA consented to the entry of FINRA's findings against them. The fines and restitution put closure on two long-running FINRA investigations into the firm, which has 190 registered representatives and six branches in New York and Florida.

FINRA's first action against DLA started with a FINRA complaint, which alleged that DLA engaged in improper sales practices of Apple REIT 10. DLA sold more than $442 million of Apple REIT between January and December 2011 without performing adequate due diligence in violation of its suitability obligations. Earlier Apple REITs under the same management wrongfully valued the REITs shares notwithstanding years of market fluctuations, performance declines, increased leverage, and excessive return of capital to investors. FINRA has required DLA to hire independent consultants to review and propose changes to its supervisory systems and training of non-trade REITs, and DLA has agreed to changes its advertising procedures and pre-file all advertisements and sales literature with FINRA at least 10 days prior to use.

To date, FINRA has not taken any formal action for restitution on behalf of investors in Apple REITs 7, 8, and 9. This does not mean that Apple REIT investors cannot make personal claims for their losses. Investors who have suffered losses in Apple REITs 7, 8, and/or 9 are encouraged to, and are certainly entitled to, file arbitration claims for damages against DLA in order to recover their lost principal.

Have you suffered losses in Apple REITs 7, 8, and/or 9 sold by David Lerner Associates? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

DAVID LERNER ASSOCIATES LOSES FIRST OF HUNDREDS OF APPLE REIT ARBITRATION CASES FILED THROUGHOUT THE UNITES STATES

Financial Industry Regulatory Authority Inc. (FINRA) arbitrator Alvin Green is ordering David Lerner Associates Inc. to pay claimants Florence Hechtel and Joseph Graziose $24,450 for the Apple REITs that they bought from the firm. They will get the money after returning the Apple REIT 9 shares to the company. The Apple REIT is the 14th largest non-traded real estate investment trust in the US. David Lerner & Associates also will have to reimburse them their $425 FINRA claim filing fee.

According to Graziose and Hechtel, the financial firm misrepresented the Apple REIT 9, as well as breached its fiduciary duty and contract to them. Other Apple REIT investors have made similar claims. However, of the hundreds of arbitration claims (there are also securities lawsuits) that have been pending, this is the first one to go to hearing.

Per FINRA, since 1992 David Lerner & Associates has sold close to $7 billion in Apple REITs, making about $600 million in revenue from the sales (60-70% of the firm's business since 1996). It is the only distributor of Apple REITs.

Last year, the SRO charged the financial firm with soliciting investors to buy Apple REIT Ten shares (a $2 billion non-traded REIT) without performing a reasonable investigation to make sure the REITs were suitable for these clients. Many of its Apple REIT investors are not only unsophisticated investors but they are also elderly. David Lerner & Associates also allegedly offered misleading information about the distribution online.

Several months ago, FINRA also sued firm owner David Lerner for similar alleged misconduct, including misleading clients about the valuation and risk involved in their Apple REIT Tens. The complaint against Lerner follows statements he is accused of making to investors after FINRA made its charges against the financial firm.

Per the amended complaint, Lerner wrote to over 50,000 clients to "counter negative press." This letter also talked about a potential opportunity for Apple REIT shareholders to take part in a listing or a sale on a national exchange to get rid of their shares at a reasonable price. Also, at a seminar he hosted Lerner allegedly made statements to investors that were misleading.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights nationwide! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

FIRST APPLE REIT ARBITRATION AWARD AGAINST DAVID LERNER OF MANY IN FLORIDA AND NATIONWIDE

It is being reported that the first of potentially hundreds of arbitration cases relating to the sale of Apple REITS by David Lerner Associates Inc. has been decided in favor of claimants Joseph Graziose and Florence Hechtel.

Financial Industry Regulatory Authority Inc. arbitrator Alvin Green ordered the firm to pay the two individuals $24,450 after they return their shares of Apple REIT Nine to the firm. (Apple REIT Nine is the fourteenth largest non-traded REIT in the U.S. In addition to Apple REIT Nine, arbitration claims have been filed involving Apple REIT Six, Apple REIT Seven, and Apple REIT Eight).

The FINRA arbitrator's decision could be an ominous sign given potentially hundreds of other claims already filed or likely to be filed against the firm over the Apple REIT investments. (According to FINRA, Mr. Lerner's firm has sold nearly $7 billion worth of the Apple real estate trusts since 1992.)
At this point, this much appears known:

(1) In May 2011, FINRA launched an investigation into David Lerner's sales practices with respect to Apple REITs;
(2) In June 2011, multiple class actions were filed against David Lerner and Apple REIT raising similar allegations as those raised by FINRA;
(3) David Lerner recently changed the way Apple REITs are valued on their account statements - stating only that the REITs are "unpriced," and acknowledging for the first time that the value may not be what the investor paid for the shares;
(4) Those that requested a redemption prior to June 30, 2011 (the last quarterly deadline to request a redemption) were told that only a partial redemption would be possible;
(5) The only known offer to purchase Apple REIT shares is at $3/share and the alleged book value is approximately $7/share (meaning that the actual value of the Apple REITs is likely between $5-7/share).

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

APPLE REIT ARBITRATION AWARD HELPS INVESTORS NATIONWIDE SUFFERING LOSSES IN NON-TRADED REITS

The first of many cases involving sales of Apple REITS by David Lerner Associates Inc. has resulted in an arbitration award in favor of the aggrieved investors, Joseph Graziose and Florence Hechtel. The decision will help hundreds of other claims already filed or likely to be filed against the firm over the investments. David Lerner Associates also faces a FINRA enforcement action over its sales of nearly $7 billion of Apple REITs. Lerner Associates received fees and commissions related to the Apple REITs of approximately $600 million, which accounted for 60% to 70% of its revenues since 1996. A Financial Industry Regulatory Authority (FINRA) arbitrator ordered the firm to pay them back $24,450 for their shares of Apple REIT Nine, and to reimburse them for the $425 FINRA filing fee.

Last December, InvestmentNews reported that the four best-selling nontraded REITs had either closed or said they were going to close in the wake of adverse press coverage, regulatory actions, and regulatory warnings and Investor Alerts about the nontraded REITs.

Likewise, many broker-dealers that sold nontraded REITs have discontinued sales as hundreds of independent broker-dealers have been forced to close their doors after selling what MarketWatch's Chuck Jaffee called a "stupid investment." Morningstar said it "does not believe that a significant investment in non-listed REITs makes sense for most investors as there are still too many drawbacks and unresolved issues."

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights nationwide! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.