Lightstone REITs Proxy Provisions may Reduce Transparency, Rights for Shareholders
The White Law Group is investigating potential securities claims involving broker dealers who may have improperly recommended non-traded REITs such as Lightstone Value Plus REIT I, II, and III to investors.
According to FactRight, an alternative investment news site, multiple Lightstone REITs (Lightstone Value Plus REIT I, Inc., Lightstone Value Plus REIT II, Inc., Lightstone Value Plus REIT III, Inc. each seek amendment of their respective charters to remove multiple NASAA shareholder protections through various proxy proposals.
FactRight notes that the elimination of these charter provisions will generally “reduce shareholder participation in the governance of the respective REITs, enhance the power of the respective boards of directors, and eliminate protections for shareholders, including provisions that seek to guide the Lightstone REITs toward liquidity events for shareholders.”
The charter amendments reportedly include eliminating the provision for the REITs to provide liquidity to shareholders by the 8th or 10th anniversary or otherwise seek liquidation. The board also is reportedly seeking to reduce its obligation of its fiduciary duties to its shareholders and eliminate other protections such as appraisal rights for shareholders. The three boards of directors are also purportedly looking to eliminate the quorum requirements up to 50% to be cast a shareholder meeting.
According to FactRight, the Lightstone REITs reported cumulative total assets of approximately $900 million as of June 30, 2022. Debt-to-total assets allegedly ranged from 41% to 49% of each of the Lightstone REITs as of that date. The Lightstone REITs were allegedly declared effective beginning in 2006 (Lightstone I), 2009 (Lightstone II), and 2014 (Lightstone III), according to the article.
To learn more about the investigation, please see: Lightstone Value Plus REIT IV Proxy Provisions may Reduce Transparency for Shareholders
Lightstone IV Suspends Share Redemptions
On March 25, 2020, the board of directors suspended share redemptions but reinstated redemptions for “hardship, including death and disability” in May 2021. While Lightstone IV shares were originally sold for $10.00, the most recently estimated NAV per share was reportedly $8.50 as of December 31, 2020. The Company reportedly paid special distributions per share of $0.37 in January 2021 and $0.215 in September 2021, according to filings with the SEC.
Lightstone IV’s offering was reportedly declared effective on February 26, 2015. The Company had raised gross proceeds of $85.6 million through the sale of approximately 8.9 million shares through 2017.
Are Non-traded REITs a Safe Bet?
Non-traded REITs come with several risks including lack of liquidity. High commissions could be a motivating factor for unscrupulous financial advisors to sell the REIT regardless of whether the investment is in line with the client’s investment objectives and profile. Moreover, the total commissions and expenses make it difficult for non-traded REITs to perform in line with the market.
Prior to making recommendations to an individual investor, brokerage firms are required by the Financial Industry Regulatory Authority (FINRA) to disclose all the risks of an investment. Recommendations should only be made if the investment is suitable for an individual investor given their age, investment objections, investment experience and risk tolerance.
Brokerage firms that do not perform adequate due diligence on an investment and/or make unsuitable recommendations can be held accountable for investment losses through FINRA arbitration.
Potential Lawsuits to Recover Investment Losses
If you suffered losses in a Lightstone REIT and would like to discuss your litigation options, please call the securities attorneys of The White Law Group at 888-637-5510 for a free consultation.
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.
To learn more about the firm’s investigation, please see:
Lightstone Value Plus REIT V Redemptions Limited to “Stockholder’s Death”
For more information on The White Law Group, please visit https://www.whitesecuritieslaw.com.
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