Investigating Claims Involving CAI Reno Hotel Partners and CAI Reno Hotel OZ Fund
Are you concerned about your investment in CAI Reno Hotel Partners Fund? If so, the securities attorneys at The White Law Group may be able to help you.
CAI Investments, headquartered in Las Vegas, is a vertically integrated real estate development company that finances, develops, and manages commercial properties across the United States. According to The DI Wire, CAI Investments partnered with Gryphon Private Wealth Management in October 2020 to purchase the 1.3 million-square-foot Harrah’s Reno Hotel and Casino in Nevada with a purchase price of $50 million. The plan was for Harrah’s Reno to undergo conversion into the Reno City Center. The mixed-use project will feature approximately 528 market-rate rental apartments, 150,000 square feet of office space, and 80,000 square feet of retail space, including bars, coffee shops, restaurants, grocery store, gym, and entertainment.
Reno City Center Files Bankruptcy
According to the Reno Gazette Journal, the Reno City Center project, once seen as a promising redevelopment venture in downtown Reno, filed for Chapter 11 bankruptcy on February 16, 2024. Unlike Chapter 7 bankruptcy, which involves asset liquidation, Chapter 11 allows the project to continue operations while it works on a repayment plan for creditors.
The bankruptcy filing underscores the significant hurdles that the project, originally spearheaded by CAI Investments, has encountered. Delays in construction due to the COVID-19 pandemic and other factors have plagued the development. Additionally, the withdrawal of Clear Capital as an anchor office tenant dealt a significant blow, leading to financing challenges, according to the article.
CAI Investments Sells Stake in Gryphon
CAI Investments, based in Las Vegas, initially played a leading role in promoting the project but decided to sell its stake to Gryphon Private Wealth Management in 2023.
This decision came after Gryphon expressed interest in expanding the project to include hotel rooms alongside apartments. However, Clear Capital’s departure triggered financing issues, prompting the bankruptcy filing.
The bankruptcy petition lists various entities, including contractors, the city of Reno, and the Washoe County Treasurer’s office, that the project owes money to. Despite these setbacks, Gryphon Private Wealth Management, the majority owner, reiterated the firm’s dedication to seeing the project through.
CAI Investments – Reg D Private Placements – Complex Investments
The White Law Group is investigating potential securities claims involving broker dealers who may have improperly recommended CAI Investments offerings to investors. Our firm is investigating the following among others:
CAI Reno Hotel Partners Fund
CAI Reno Hotel OZ Fund
CAI Las Vegas Partners fund
CAI Tempe Hotel Partners Fund
The Risks of Non-Traded REITs – Liquidity Issue- CAI Reno Hotel Parnters Fund
However, non-traded REITs are illiquid investments, and they aren’t listed on any exchange. If the investor wants to sell, they may be able to find a secondary market for non-traded REITS, but will have to sell at a much-reduced price.
The other risks include the very real possibility of halting redemptions, unclear valuations, and high fees. There is also the risk that the company may not be able to generate enough revenue to cover monthly and quarterly distributions to investors.
Non-traded REITs are rarely, if ever, suitable for short-term investors and even long-term investors must be willing to bear the risks of illiquidity. You should consider the front-end cost relative to the sales costs you would incur to buy and sell other securities during the same holding period as the life of the REIT. You may also want to consider how much share price appreciation and distributions you will need to receive to overcome these front-end charges
Beware promises of high yields and stability while glossing over the product’s lack of liquidity, fees and other risks. Ask your advisor to explain why they think the non-traded REIT is the right investment for you and how it will help you achieve your specific investment goals.
Broker Due Diligence
According to FINRA these products are an ongoing concern for the regulator and firms must ensure they are suitable for an investor’s risk profile and investment strategy. Many of these non-traded REITs were promised to provide steady growth, and invulnerability from volatile markets, which is not the case.
Brokerage firms are required to perform adequate due diligence on any investment they recommend and to ensure that all recommendations are suitable for the investor considering that investor’s age, investment experience, net worth, risk tolerance, investment objectives, and income. Firms that fail to perform adequate due diligence or that make unsuitable recommendations can be held responsible for investment losses in a FINRA arbitration claim.
Class Action vs. Individual FINRA Arbitration Lawsuit
People often wonder whether a large class action lawsuit is a better litigation option for them than an individual FINRA arbitration case. The answer depends on many factors, but typically if the loss sustained is large (say larger than $100,000), an individual arbitration claim is likely a better option. Class actions as a recovery option are more appropriate for grouping large numbers of individuals who have small claims – too small to generally pursue individually.
Free Consultation
If you have suffered losses investing in CAI Reno Hotel Partners or another CAI Investments offering, please call The White Law Group at 1-888-637-5510 for a free consultation.
The foregoing information, which is all publicly available, is being provided by The White Law Group.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Seattle, Washington. For information on the firm please visit www.whitesecuritieslaw.com.
