In her Texas securities lawsuit, investor Lillian Hohenstein is suing Behringer Harvard REIT I, one of the biggest nontraded real estate investment trusts. Hohenstein, who purchased 1,275 shares from the trust between 2004 and 2008, claims that the REIT, Behringer Harvard Holdings LLC, President and Chief Executive Robert Aisner, other company executives, and its board members of breach of fiduciary duty and negligence. Aisner and board members also are accused of making allegedly misleading and false statements when they recommended that investors turn down outside fund offers from those wanting to pay the REIT’s shares for as low as $180/share.
According to Hohenstein ‘s Texas REIT lawsuit, the REIT attempted to conceal its poor performance by using investors’ own money to pay them, while simultaneously depleting the company of millions of dollars even as top executives benefited. Behringer Harvard REIT I is among the nontraded REITs that have seen their value drop significantly following the collapse of the real estate market.
The REIT complaint contends that for a certain period of time, HPT Management Services LP and Behringer Advisors respectively collected fees of $77 million and $104 million, which, per the securities lawsuit, over the life of the trust is about 4% of the REITs existing assets. Behringer Harvard COO Jason Mattox, who says Hohenstein ‘s case is meritless, says the company has since lowered his fees, even waiving asset management fees of over $30 million.
The Texas investor lawsuit is also accusing Behringer Harvard REIT I of not being able to pay for dividends or distribution from “funds from operation.” It said that from 2003 to 2011 the nontraded REIT made $172 million in such funds, while paying $569 in distributions and setting up a $397 million shortfall. Hohenstein believes that the REIT will not likely be able to take care of distributions in the future.
Hohenstein’s lawsuit is the first step towards a class action case. Now, Behringer Harvard REIT I, Inc. shareholders of record from beginning April 1, 2011 who were allowed to vote on the Schedule 14 that Behringer Harvard REIT I submitted to the SEC on that date, persons belonging to the “tender class,” and shareholders that bought or acquired shares in the nontraded REIT beginning February 19, 2003 until now may be able to recover damages.
At Shepherd Smith Edwards and Kantas, we represent persons and institutions with respective individual securities claims and lawsuits. While filing with a class may allow you to recover along with the class members, submitting your own case and working one-on-one with an experienced securities law firm increases your chances of recovering more. If you sustained losses from investing in Behringer Harvard REIT I, do not hesitate to contact our REIT law firm immediately to ask for your free case evaluation.
Behringer Harvard hit with suit, Investment News, September 24, 2012
Investor suing Behringer Harvard real estate investment trust, says it operates “as a Ponzi scheme,” Dallas News, September 18, 2012
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REIT Retail Properties of America’s $8 Public Offering Results in Major Losses for Fund Investors, Institutional Investor Securities Blog, April 17, 2012
Private REITs: The Need for Tougher Oversight?, Institutional Investor Securities Blog, February 25, 2012
Investor Complains to FINRA About Behringer Harvard Holdings, LLC-Related Real Estate Investment Losses, Institutional Investor Securities Blog, January 24, 2012