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Written by 4:25 pm Blog, Securities Fraud Articles

Recovery of Cornerstone’s CIP Leveraged Fund Advisors, LLC (CLFA) Investment Losses

The White Law Group’s investigation into the sale of the Cornerstone Real Estate Funds continues. We continue to receive information and calls from concerned investors who have purchased one or more of Cornerstone Ventures, Inc.’s Cornerstone Real Estate Funds. We are working with those investors to accumulate information and evaluate their potential claims against the brokerage firms that recommended these investments.

Based on what we have discovered thus far, it appears that Cornerstone Ventures, Inc. has two entities which serve to manage and support other REITs and Real Estate Funds. The first is Cornerstone Industrial Properties (CIP) which is linked to the growth and development of Cornerstone Realty Fund, LLC and Cornerstone Core Properties Real Estate Investment Trust (Cornerstone REIT).

The second entity is the CIP Leveraged Fund Advisors (CLFA) which, according to a letter issued to CLFA investors, is tied to the growth and performance of Cornerstone Healthcare Plus REIT (CHP REIT), Cornerstone Healthcare Real Estate Fund (CHREF) and Meadowbrook Healthcare Properties, LLC (MHP).

The letter to CLFA investors mentioned above, dated August 24, 2011, had some disturbing news for investors in the CIP Leveraged Fund Advisors and for any Cornerstone Ventures, Inc. investor. The letter revealed that “given the information we have today…we have determined to reduce the estimated value of your investment from $1.00 to $0.00 per unit of membership interest.” As such, it appears that any investment in CIP Leveraged Fund Advisors is a total loss.

Cornerstone states in the letter that “[they] intend to continue to seek opportunities for CLFA in the healthcare industry, but there can be no guarantee that our efforts will result in a beneficial outcome.” While they will continue to look for a way to help the fund recover, the previous paragraph indicated that it is quite unlikely for the fund to recover. The letter states, “Without current fundraising activity by any of the leveraged funds we advise, we have little ability to earn an income. The active consideration by the Committee of a possible sale of CHP REIT’s assets or a merger make it particularly unlikely that fees to CLFA will increase in the future.”

As indicated, the performance and condition of the Cornerstone Healthcare Plus REIT is a driving factor in the current state of the CIP Leveraged Fund Advisors investments. The letter to the CLFA investors details the condition of the CHP REIT investment over this year which led to the change in the CLFA investment status as worth $0.

According to the August 24th letter, in April, “CHP REIT stockholders were informed that the Committee was not satisfied by the rate at which the funds were being raised for the REIT.” By the end of May, “in consideration of the uncertainty,” the Committee reportedly suspended the public offering of the REIT, the distribution reinvestment plan, and “stock repurchase program for reasons other than death…”

The CHP REIT Board of Directors in an August 4th stockholder letter indicated that “the financial condition of the REIT is strong…” However, they also indicated that restructuring of the fund and its relationship to the Advisor and Sub-Advisor would be necessary. As the fund’s directors decided what is best for the fund they “determined to maintain a conservative approach with respect to the dividend level and reduce the annualized distribution rate from 7.5% to 2.5% to be paid to CHP REIT stockholders on a quarterly basis rather than a monthly basis effective with the third quarter 2011.”

The White Law Group will continue to follow this situation closely.  If you have invested in any Cornerstone Real Estate Funds investment and would like to speak to a securities attorney, please call our Chicago office at 312-238-9650.

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 Boca Raton, Florida.

For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.

Other links related to our investigation into Cornerstone Real Estate Funds:
Cornerstone REIT and CIP Leveraged Fund Securities Fraud Investigation
Continued Securities Investigation into the Sale of Cornerstone Real Estate Funds (REITs)

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