Investors Who Invested in Apple REITs Recommended By David Lerner Associates May Recover Investment Losses


David Lerner Associates Underwriter for Apple REITs

David Lerner Associates was formed in 1975, by former high school teacher David Lerner, as a full service FINRA registered broker dealer with $8 billion in assets under management. Reportedly, over the last seven years David Lerner Associates marketed and solicited investments in Apple REITs to the senior citizens, retirees and unsophisticated investors located primarily in New York, Connecticut, New Jersey and South Florida. The branch offices are located in Teaneck, Syosset, White Plains, New York, and Princeton, New Jersey, and Westport, Connecticut, and Boca Raton Florida. An estimated $600 million in fees and commissions were generated by David Lerner Associates as the underwriter and soliciting broker for the Apple Real Estate Investment Trusts (REITs) which represented 60%-70% of the firm revenues. The Apple REITs were illiquid non-traded investments with risks related to no secondary market for the security, securities concentration in single sector and reliance on due diligence from a single syndicate underwriter. Recently, David Lerner Associates investors were stunned when they received their June 2011 account statements when their Apple REIT investments, which had been consistently priced at $11 per share, were told the investment was “not priced”. In light of these developments, investors must consider their investment recovery options besides the limited quarterly redemptions provided in the Apple REIT prospectuses.

David Lerner Associates Legal Issues

David Lerner Associates is the subject of two class action lawsuits and a FINRA Disciplinary Complaint that allege misrepresentations and omissions of material facts concerning Apple REITs Offering documents and Prospectuses, and David Lerner Associates’ sales materials, public seminars and website used to promote the investments. Additionally, the allegations assert improprieties concerning the reported $11 per share price for Apple REIT to investors and the reported 7-8% yield paid to investors.

Class Action Lawsuits

A class action lawsuit (Case No. 11 CV 02919) was filed on June 17, 2011, in the United States District Court for the Eastern District of New York for the class period from April 24, 2008 through June 17, 2011. The class action Defendants included, David Lerner Associates, Inc. (DLA) who was the sole underwriter and distributor for the Apple REIT Ten investment solicited and sold to DLA customers. The class action lawsuit alleges the Offering documents related to the Apple REIT Ten investments “contained materially false and misleading statements and omitted to state facts necessary to make the statements made therein not materially misleading.”

File against david lerner associates to recover apple reit investment losses through finra securities arbitration claim.Another class action lawsuit (Case No. 2:33-av-00001) was filed on June 20, 2011, in the United States District Court for the District of New Jersey. The class action Defendants include, David Lerner Associates, Inc. (DLA) who was the syndication underwriter and distributor for the Apple REIT Series 6-10, solicited and sold to DLA customers. The class action lawsuit alleges the Offering documents related to the Apple REITs Series 6-10 “represented to potential investors that the Apple REITs paid a steady 7-8% return on investment, but did not clearly disclose that the Apple REITs paid those returns by borrowing money and paying back capital because income from operations was never sufficient to fund the distributions.” The class action further alleges that the REITs share price was “arbitrarily” set at $11 per share even though, “the value of the REITs fluctuated as a result of the substantial commissions and fees paid at the outset, declines in the value of the properties due to the economic downturn, borrowings and returns of capital to investors.” According to the class action filing, “DLA and the Individual DLA Defendants marketed and sold the Apple REITs to DLA’s customers as conservative, safe low risk investments.” The class action states that Apple REITs were marketed to the investing public through, “internet, radio, cold calling, mailings, open invitation seminars at senior centers, retirement communities, and country clubs.”

FINRA Complaint

The Financial Industry Regulatory Authority, (FINRA) is a self regulating organization with sales practice rules and regulations that govern the securities industry’s conduct and safeguard the investing public. On May 17, 2011, FINRA filed Disciplinary Proceeding No. 2009020741901 which was a complaint against FINRA member David Lerner Associates, Inc. for violation of NASD Rule 2310, 2210(d)(1) and FINRA Rules 2310(b), 2010. According to FINRA, DLA personnel did not conduct reasonable due diligence concerning the risks associated with the investment and failed to disclose the fact that income from the REIT was insufficient to pay the projected 7-8% returns without the use of borrowed funds.

In light of these developments, RTGN urges investors who hold Apple REITs recommended by David Lerner Associates to consider what recourse is available to recover their investment losses besides the limited quarterly redemptions provided in the Apple REIT prospectuses. Many investors were advised by David Lerner Associates that investments in Apple REITs were stable safe investments with predictable investment returns. According to the Financial Industry Regulatory Authority, unsuitable investment advice, failure to supervise the activities of financial advisors and fraudulent misrepresentations and omissions of material facts are causes of action that are available to investors against David Lerner Associates and their financial advisors in an individual securities arbitration claim filed with FINRA.