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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).

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