Securities Arbitration Lawyers BlogMVP REIT/The Parking REIT Losses
The Parking REIT recently announced that the board unanimously approved the suspension of all cash distributions and stock dividends, effective March 22, 2018. Their press release states, ”The Board is focused on preserving capital in order to maintain sufficient liquidity to continue to operate the business and maintain compliance with debt covenants, including minimum liquidity covenants…”
Additionally, it has notified the SEC that the company will not be able to make its 10-K filling on time.
This company, the product of a recent merger between two REITs, (real estate investment trust) is a publicly registered, non-traded entity that focuses on a specific type of real estate. In this case, the focus is parking lots and parking-related facilities. The merger between MVP REIT and MVP REIT II was finalized in late 2017. The company is now known as “The Parking REIT,” and is based in Las Vegas, NV. (A REIT is required to pay out 90% of its income in order to avoid corporate income tax.)The company has a portfolio with 44 parking facilities across 15 states.
Right after the merger, The Parking REIT also entered into a $50 million senior secured revolving credit facility with Keybank National Association to help expand the business. The company can, under certain conditions, obtain as much as $350 million in revolving or term loan commitments.
There are a number of questions about the dealings of the owner, Michael Shustek. Just last year, he de-listed another real-estate company, called Vestin Realty Mortgage II. The plan, he was quoted as saying, would be to save money and administrative time by no longer being SEC-traded. By de-listing the company, Vestin would no longer have to file reports with the SEC, and investors wouldn’t be able to track the company’s financial activities.
The original purchase price of The Parking REIT illiquid shares was $25.00 per share. Many investors buy into a REIT because of the good rate of return. The suspension of dividends now means there is no distribution from these shares. Since it’s an illiquid investment, an investor can’t just sell it as you would shares in a publicly-traded company.
A recent tender offer from The McKenzie Group was just $12.17 per share. Investors who want to sell any of their shares will, by all accounts, lose money, should they decide to take the opportunity to liquidate. The Parking REIT is suggesting that investors do not liquidate their shares.
Centaurus Financial Group has allegedly sold investors some of these non-trading shares. Some customers allege they were not fully briefed on the high risks involved with non-trading public REIT entities including The Parking REIT. SEC filings indicate that other brokerages also have sold shares in MVP REIT and/or The Parking REIT include:
- Accelerated Capital Group
- Coastal Equities, Inc.
- Crown Capital Securities, L.P.
- Forest Securities, Inc.
- Great Point Capital LLC
- MVP American Securities
- NI Advisors
- Sandlapper Securities, LLC
- Whitehall-Parker Securities, Inc.
FINRA-registered brokerages may have sold many REITs like these to investors without disclosing all of the risks. Many people invest in these REITS because they usually have a higher rate of return being assured that their principal is secure. An un-traded REIT is particularly risky, and may only be suitable for sophisticated investors who are accustomed to high-risk ventures. (The minimum investment in The Parking REIT is $10,000.) But since REITs tend to pay the brokerage firms or financial advisors 7% to 15% in fees and commissions, stockbrokers are attracted to these investments. For the investor enjoying the higher dividends, when they stop, you are left with an illiquid investment that you can’t just sell or invest in something else.
Did You Invest In The Parking REIT?
If you have invested in the MVP REIT, the MVP REIT II, and/or the Parking REIT, you may have a claim against the broker or brokerage firm that sold you the non-traded REIT(s). If your financial advisor misrepresented these to you, contact our firm today to see how we can try to recover your losses. We only collect a fee if we recover money for you.
Silver Law Group represents the interests of investors who have been the victims of investment fraud. Please contact Scott Silver of the Silver Law Group for a free consultation at ssilver@silverlaw.com or toll free at (800) 975-4345.