Seeking Alpha

Robert Rex's  Instablog

Robert Rex
Send Message
This blog is written by Robert H. Rex, Esq. who is a securities attorney and a passionate advocate for investors rights. With over 30 years of legal experience, 25 of which have dealt almost exclusively with the recovery of stockmarket and investment losses for mostly elderly clients, he and his... More
My company:
Rex Securities Law
My blog:
Rex Investment Loss Recovery Blog
  • Do You Own Lerner Apple REIT Ten? Read Why FINRA Is Concerned. Part One 3 comments
    Jun 6, 2012 3:51 PM

    In December 2011, the Financial Industry Regulatory Authority (FINRA) amended their complaint against the company David Lerner Associates, Inc. and added David Lerner, individually. That amended complaint contains information that should be of interest to anyone who owns any of the Lerner Apple REITs, and especially those owning Apple REIT Ten. The amended complaint can be accessed here.

    Since the complaint is 58 pages long I will break this analysis into several separate posts. Here are highlights of the FINRA allegations that you should be aware of. Annotations are to the page number of the amended complaint:

    • Lerner continues to solicit thousands of customers to purchase Apple REIT Ten without performing adequate due diligence that there is reasonable basis to recommend the security to any customer......and has sold the illiquid investment to unsophisticated and elderly customers. (Pages 1 & 2)
    • Through June 2011, Lerner marketed Apple Ten by using misleading results from Apple REITs Six, Seven, Eight & Nine, by misrepresenting the rate of return and the misleading investors into believing distributions are income by using slide presentations that omit material information and present statements and claims that are misleading and exaggerated. (Pages 2&3)
    • Lerner , to counter negative press following the filing of the original FINRA complaint, sent out letters and conducted seminars regarding the performance , prospects, risks, a potential merger and the liquidity of the Apple REIT programs that are exaggerated and misleading. (Pages 3&4)
    • The Apple REITs are illiquid and concentrated in one sub sector, extended stay hotels, however, many Lerner investors own two or more of the Apple REITs. Many of the investors are elderly and/or unsophisticated and were solicited by internet, radio, cold calls, mailings and seminars at senior centers, restaurants and country clubs. Nearly all of Lerner's sales are solicited. (Pages 7& 8)
    • The $11 share valuation for Apple REIT shares is currently inaccurate and has been inaccurate in the past. The valuation is incorrect due to market conditions , performance declines and debt incurred by the REITs to fund distributions. Lerner did not take any of this economic reality into consideration and continued misleading investors by publishing the $11 a share value. (Pages 8-12)
    • Distributions from the Apple REITs have exceeded the REIT's Net Income by hundreds of millions per quarter. These distributions were funded by incurring debt and by returning some of the investors capital. While investors believed they were receiving income they were actually being handed back some of their own money, while the investment fell in value. (Pages 12-15)
    • Until June 2011, Lerner's web advertising provided misleading figures for the performance of Apple REIT Six through Nine. (page 17) Did you rely on this misinformation when purchasing Apple REIT Ten?
    • Since Mid-2011 sales of Apple REIT Ten have plummeted while investor requests to redeem shares have skyrocketed. In January 2011, Apple 10 sales were about 100,000,000. By October 2011, they had dropped to about $14 million. Redemption requests for Apple Six, Seven, Eight and Nine for the the fourth quarter of 2010 were just over three million shares. By the third quarter of 2011, requests for redemption were nearly 50 million shares. Since there is a limit on the number of shares Lerner is obligated to redeem, only a small percentage of each series were actually redeemed. (Page 20)

    In a future post I will cover the highlights of the rest of the FINRA amended complaint against Lerner and his company.

    Brokers have a duty to make suitable recommendations to investors and to provide accurate and complete information related to the risks and rewards of a particular investment. Many purchasers of Lerner Apple REITs were led to believe the investment would provide a safe haven for their nest eggs while generating regular and dependable income. If you have questions about the purchase of Lerner Apple REITs, or any other issue with your brokerage account, we may be able to help.

    Call 561 391 1900 for a free consultation or contact us online.

    Nationwide representation.

    Rex Securities Law

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Back To Robert Rex's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (3)
Track new comments
  • SA_Member_31164265
    , contributor
    Comment (1) | Send Message
    I own significant amounts of the newly formed Apple 6 and some of Apple 10. Point: You refer to them as Learner's. Lerner sells them but they are a product of Apple Hospitality in Richmond, VA. I have little trust for either entity at this point, however, they are good income producers. If you are attempting to create a class action against either or both of the above, I would like details, so I can consider possible inclusion. This would require solid hard facts, not a conglomeration of suppositions and vague conclusions. Richard A Herman.
    2 Sep, 10:02 PM Reply Like
  • Bigelow942
    , contributor
    Comments (2) | Send Message
    If you've been in it for 3 years, you can fill out a redemption form to get you r money back at 11.00$ instead of the 9.20 Apple is offering. David Lerner himself squash the deal of having it go public.
    15 Nov, 10:45 AM Reply Like
  • Bigelow942
    , contributor
    Comments (2) | Send Message
    Get redemption form before Apple Reit hospitality offers you 9.20$ instead of the 11. Have to be in it 3 year to do this. Greed is getting to both Apple Reit and David Lerners heads.
    15 Nov, 10:47 AM Reply Like
Full index of posts »
Latest Followers


More »

Latest Comments

Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.