The White Law Group continues to investigate potential claims involving the CORE Series 2007 8% Secured Debentures. Specifically, the firm is investigating whether brokerage firms improperly recommended the investment to their clients.
Brokerage firms have an obligation to perform due diligence on any investment they recommend and to ensure that all recommendations are in line with their clients suitability. To the extent that a firm fails to do either of these two things, the firm can be held responsible for any losses in a FINRA arbitration claim.
In the claims already filed by The White Law Group with respect to the core Series 2007 8% Secured Debentures, here is what has been discovered thus far:
CORE Series 2007 8% Secured Debenture was issued starting September 1, 2007. The maturity date of the offering was April 11, 2014. The trustee is Deutsche Bank Trust Company Americas.
Fully-subscribed the offering was $36,600,000 in aggregate principal.
The assets of the underlying investment appears to consist of three separate multi-family properties in the Baltimore-Washington DC Metro area, individually known as: Seasons at Bel Air, Ashford at Henson Creek, and Ashford at Coopers Crossing.
Upon information and belief, in March 2007, Lehman Brothers Holdings, Inc. ("LBHI") made a mortgage loan in the principal amount of $217,000,000, to the "owners" of the properties. LBHI appears to have sold and assigned Note A to a trust securitized through the sale of commercial mortgage backed securities. Note B was sold to Arbor Realty SR, Inc., which later became Arbor Realty Participation, LLC ("Arbor Realty"). On August 28, 2012, Arbor Realty transferred its interest in Note B to an affiliate, Equity Realty Funding Group, LLC ("Equity Realty").
In September 2008, CORE executed a Purchase and Sale Agreement ("PSA") with Bethany under which Bethany would acquire CORE's interests in CORE-Bethany JV for a total of $44,220,000 by December 31, 2008-later extended into early 2009.
Bethany was the original Operating Partner of the Joint Venture who's Bethany Management Group managed the properties. In February 2009 Bethany confirmed to CORE that a number of Bethany properties-with the exception of CORE-Bethany JV-were in serious financial condition and may be facing bankruptcy. In late March 2009, most of the Bethany portfolio went into bankruptcy, foreclosure, or receivership.
Based on Bethany's inability to provide $750,000 in additional escrow deposits as required by the PSA in January 2009, CORE informed Bethany that CORE would be exercising its right to assume property management responsibilities through its CORE Realty Holdings Management, Inc. affiliate, which it appears to have done
According to CORE, CORE then audited the property and uncovered a number of critical problems, which Bethany had allegedly failed to communicate to CORE.
In May 2010, CORE requested that the Indenture holders approve a Modification Plan that essentially deferred all base interest payments until Maturity. Based on this modification, investors in CORE Series 2007 8% Secured Debentures that back interest payments were to be paid this past April.
On April 11, 2014, the maturity date, CORE officially notified the Indenture holders that CORE would not be in a position to repay the debentures. This marks the first time that investors in CORE Series 2007 8% Secured Debentures realize that they have been damaged and that they will not be receiving the interest payments they were promised.
Given what has been discovered thus far, it appears unlikely that brokerage firms that sold this investment failed to perform adequate due diligence. Had they performed proper due diligence it appears that the outcome of this investment would have been easily ascertained.
Additionally, given the high cost structure of these investments, it appears likely that some firms pushed the CORE Series 2007 8% Secured Debentures despite the fact that they were not suitable for their clients.
If you invested in CORE Series 2007 8% Secured Debentures through a brokerage firm and would like to discuss your litigation options, please call The White Law Group's Chicago office at 312/238-9650 for a free consultation.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida. The firm represents investors in FINRA arbitration claims throughout the country.
For more information on the firm, visit www.whitesecuritieslaw.com.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.