A Real Estate Investment Trust (REIT) is a company that owns or finances income-producing real estate. Investors in Lightstone Value Plus REIT I sued the company in the lawsuit Ayer et al v. Lightstone Value Plus REIT I, Inc.
The lawsuit against Lightstone Value Plus REIT I, Inc., claims Lightstone tricked investors. Lightstone allegedly hid important facts about changes to its rules in 2022 and 2023. These changes made it harder to sell the REIT and get money back.
The lawsuit says Lightstone’s information misled investors into approving these changes. One change removed a rule requiring the REIT to list its stock on a stock exchange by its eighth or tenth anniversary.
Another change made it harder for shareholders to call meetings and access company records. It also took away their appraisal rights. The lawsuit says these changes helped David Lichtenstein.
He’s a leader at Lightstone. He earned over $7 million in management fees in 2023. His investment in the company is potentially worth $59.8 million. Investors want the 2023 changes reversed.
Did you lose money investing in Lightstone REITs? You may be entitled to recover your losses. Our experienced securities fraud attorneys have helped investors recover damages from unsuitable non-traded REIT recommendations. Lightstone REIT shares have dropped significantly, with some trading as low as $4.50 per share compared to the original $10.00 offering price.
Why You May Have a Case:
- High-risk, illiquid investments often unsuitably sold to retail investors
- Brokers earned excessive commissions up to 15% for selling these products
- Recent moves by Lightstone REITs to eliminate key shareholder protections
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They also want money for damages and legal fees. Find out why.
Key Takeaways
Table of Contents
- Investors in Lightstone Value Plus REIT I filed a class-action lawsuit, Ayer et al v. Lightstone Value Plus REIT I, Inc., alleging that Lightstone hid crucial information about 2022-2023 charter amendments. These amendments made it harder to liquidate the REIT.
- The lawsuit claims Lightstone’s proxy statements misled investors into approving amendments that removed durational provisions requiring the REIT to seek a stock exchange listing by its eighth or tenth anniversary.This benefited David Lichtenstein, a key figure at Lightstone, who earns management fees and has a subordinated equity investment.The suit alleges breaches of fiduciary duties.
- The amendments also changed shareholder rights.The required quorum for stockholder meetings dropped from 50% to 33%.Access to shareholder lists now requires owning 5% of company stock for six months. Appraisal rights were also removed.
- David Lichtenstein earned over $7 million in management fees in 2023, and his subordinated equity investment is potentially valued at $59.8 million.The lawsuit argues his financial interests motivated the amendments.
- Plaintiffs seek rescission of the 2023 charter amendments, a declaration of breaches of fiduciary duties, compensatory damages, and coverage of legal costs.
Allegations Against The Lightstone Group LLC and Named Defendants
Investors claim Lightstone hid facts. These actions may have tricked them into delaying the REIT’s liquidation. Learn more about these claims of market manipulation and broken trust.
Misleading investors into approving charter amendments
The lawsuit, Ayer et al v. Lightstone Value Plus REIT I, Inc, centers on charter amendments. These amendments made it harder to liquidate investments. Plaintiffs claim Lightstone misrepresented information in proxy statements.
This misled investors into approving the changes. The Securities and Exchange Commission oversees proxy statements. These statements detail proposed changes affecting shareholder rights.
Lightstone pursued these amendments in fall 2022. Shareholders approved them in December 2022 and January 2023. This affected Lightstone Value Plus REIT I and other REITs. These non-traded REITs often promise high yields.
Investors seek investment return. However, these investments carry risks, including conflicts of interest.
Investors allege breaches of fiduciary duties. David Lichtenstein, a key figure in The Lightstone Group LLC, pushed for the amendments. The changes removed durational provisions. These provisions would have facilitated liquidation.
The lawsuit claims the amendments served Lichtenstein’s financial interests. He earns management fees. He also has a subordinated equity investment. The amendments potentially protect these interests.
Investors now face difficulty accessing their equity investments. Many investors purchased shares based on projected rates of return and net asset value (NAV). They now feel misled by the 2022 proxy statements.
Some investors experienced this firsthand. They joined the class action to recoup losses and pursue compensatory damages. They allege tortious acts and seek rescission of the 2023 charter amendments.
Failure to disclose key information
Investors claim Lightstone hid important facts about the 2023 charter amendments. These changes gave officers and directors more power. The amendments also made it harder for investors to access their investments’ value.
Lightstone did not tell investors about David Lichtenstein’s financial interest in these changes. His subordinated equity investment and management fees were affected. This lack of disclosure violated securities exchange laws and impacted investor options.
This lawsuit involves fiduciary relationships, contracts, and potential liability. This legal action seeks compensatory damages. Now, let’s examine the specific changes in the charter amendments.
Details of the Charter Amendments
Changes to the company’s governing document affected how long it would exist. These changes also affected stockholder voting power. Want to learn more? Read on.
Removal of durational provisions
Lightstone REIT investors filed a lawsuit in federal court. The suit involves securities exchange act violations. The REIT charter amendments removed key provisions. These provisions obligated the REITs to seek a stock exchange listing.
This listing was required by the eighth or tenth anniversaries. The amendments impacted shareholder rights. The changes allowed an indefinite extension. David Lichtenstein, an investment manager, benefited financially.
He earned management fees. His subordinated equity investment also benefited. The plaintiffs demand rescission of the 2023 charter amendments. They want the changes unwound. They seek compensatory damages and costs.
They claim they were misled. They say Lightstone said the changes would improve liquidity.
Changes affecting shareholder rights
The 2023 charter amendments significantly altered shareholder rights. These changes impact stockholder meetings and access to investor lists. The required quorum for stockholder meetings dropped from 50% to 33%.
This makes it easier for the corporation to pass resolutions, even with less shareholder participation. Stockholders now need to own 5% of company stock for six months to access shareholder lists.
This restricts smaller investors’ ability to communicate with each other. The amendments also removed appraisal rights. Appraisal rights protect stockholders during roll-up transactions.
These changes, combined with the elimination of fiduciary duties, give Lightstone Group LLC and David Lichtenstein more control. The SEC plays a crucial role in regulating proxy statements related to such charter amendments.
This situation highlights the importance of investor vigilance and understanding of securities laws. These actions could affect the net asset value and rate of return for investors, particularly those involved in joint ventures or holding stocks in the REIT.
This leads to discussion about David Lichtenstein’s financial interests.
Financial Interests of David Lichtenstein
David Lichtenstein’s financial stake in the company raises questions. His earnings and investments deserve scrutiny.
Potential impact on subordinated equity investment
Lightstone REIT investors claim David Lichtenstein benefited from the charter amendments. These changes indefinitely extended the REITs’ duration. This extension impacted the potential $59.8 million value.
Investors holding subordinated equity investments likely saw a negative impact. Their investment managers now face an indefinite timeline for returns. The SEC oversees such securities transactions.
Proxy statements likely failed to disclose this impact. This lack of disclosure affected investor decisions. The litigation claims breaches of fiduciary duties by Lichtenstein. The lawsuit seeks compensatory damages for affected investors.
These investors now face an uncertain financial future. The case highlights the importance of disclosure in investment offerings. Investors must understand the leverage ratio and potential risks.
The federal courts will decide the outcome of this civil case.
Lichtenstein’s personal financial interests possibly influenced these decisions. He earned management fees from the REITs. The indefinite extension allowed him to continue earning these fees.
The lawsuit alleges a conflict of interest. Investors argue he prioritized personal gain over investor returns. This situation raises concerns about corporate governance. The plaintiffs seek rescission of the 2023 charter amendments.
They want the court to unwind these changes. This action could restore the original terms and protect investor value. The plaintiffs also want a declaration of breaches of fiduciary duties.
They demand coverage of costs. This case emphasizes the importance of shareholder rights.
Management fees earned
David Lichtenstein’s financial interests are key to this lawsuit. He earned over $7 million in management fees in 2023. This income is separate from his subordinated equity investment in the REIT.
Investors allege this personal profit motivated him. They claim he pushed for charter amendments. These changes benefited him financially. The Securities and Exchange Commission requires proxy statements.
These statements must disclose such financial interests to investors. Plaintiffs claim these disclosures were inadequate. They believe this lack of transparency violated their shareholder rights.
This affected their decisions about the Lightstone REIT liquidation. They now seek compensatory damages. They want the court to recognize these breaches of fiduciary duty. My experience as a financial advisor shows such conflicts of interest often arise.
Investors should always carefully review proxy materials. They must understand how management’s interests may affect their investments. A thorough review can help avoid financial injury.
Investors can also seek advice from a qualified financial advisor.
Plaintiffs’ Demands and Legal Actions
Investors want the court to undo the 2023 charter changes. They also seek money for their losses. Want to learn more about their legal fight? Read on.
Class action certification
The plaintiffs seek class action status. This legal action aims to represent all similarly affected Lightstone REIT investors. They want the Securities and Exchange Commission to investigate potential securities violations.
They claim David Lichtenstein and The Lightstone Group LLC misled them. This alleged deception influenced their proxy statements regarding the 2023 charter amendments. These changes impacted shareholder rights and the net asset value calculation.
Plaintiffs argue this harmed their finances. They want their losses covered. They seek rescission of the charter amendments.
Rescission and unwinding of the 2023 charter amendments
Investors want the 2023 charter amendments reversed. They seek rescission. This action would undo the changes. These changes impact shareholder rights and the Lightstone REIT’s net asset value.
Investors claim David Lichtenstein, through proxy statements, misled them. They want the Securities and Exchange Commission to investigate. They argue these amendments benefit Lichtenstein.
They cite his subordinated equity investment and management fees. They demand their original charter provisions. Investors want their limited partner rights restored. They filed a class action lawsuit.
They want compensation for damages. They also want their legal costs covered. Many investors lost money during the Great Recession. They now fear similar losses. Some investors handled their own claims pro se.
They appeared in court without lawyers. They participated in mediation. They submitted pleadings. They observed motions to dismiss and summary action. They learned about personal jurisdiction and minimum contacts.
They now understand legal processes better. They saw how these amendments affect their annualized rate of return. They experienced the impact of taxation and deductions. They seek justice through the courts.
Declaration of breaches of fiduciary duties
Beyond reversing the 2023 charter amendments, the lawsuit targets the directors’ actions. Plaintiffs claim the directors breached their fiduciary duties. They allege directors failed to act in the best interests of Lightstone REIT investors.
The lawsuit seeks a formal declaration from the court. This declaration would confirm these breaches. The plaintiffs claim directors violated their charters. They want a similar declaration for these breaches.
These breaches relate to the net asset value of the REIT and David Lichtenstein’s financial interests. The SEC and proxy statements are relevant to this claim.
Compensatory damages and coverage of costs
Breaches of fiduciary duty can lead to investors seeking compensation. Investors claim Lightstone, led by David Lichtenstein, misled them. They want money back for their losses. These compensatory damages are not specified.
Investors also want Lightstone to pay for legal costs. They want the court to cover attorneys’ fees. Expert witness fees and other costs are included. This legal action involves proxy statements and the Securities and Exchange Commission.
It impacts net asset value and potential acquisitions. This case affects investors like those in mutual funds or income trusts. It involves venture capital and David Lichtenstein’s financial interests.
Conclusion
Investors claim Lightstone hid vital information. These changes hurt shareholder returns. The lawsuit seeks to reverse these changes. Investors want their money back. Will they succeed?
Frequently Asked Questions
Q: What is the main issue in the Lightstone REIT lawsuit?
A: Investors are suing Lightstone Value Plus REIT I for allegedly concealing important information about 2022-2023 charter amendments that made it harder to sell shares and recover investments.
Q: What specific changes did Lightstone make to harm investors?
A: The company removed requirements to list stock on an exchange by its eighth/tenth anniversary, reduced shareholder meeting quorum from 50% to 33%, restricted access to company records, and eliminated appraisal rights.
Q: How much have investors lost on their Lightstone REIT investments?
A: Shares have dropped significantly, trading as low as $4.50 per share compared to the original $10.00 offering price.
Q: How did David Lichtenstein personally benefit from these changes?
A: Lichtenstein earned over $7 million in management fees in 2023, and his investment in the company is potentially worth $59.8 million.
Q: What are the investors demanding in their lawsuit?
A: Investors want the 2023 charter amendments reversed, compensation for damages, coverage of legal costs, and a formal declaration that Lightstone breached its fiduciary duties.
