Securities Lawyers Blog
The law offices of Gana Weinstein LLP continue to investigate broker sales of the Walton Land Fund companies (Walton Land). Walton Land has been solicited many brokers across the country as investments in real estate. Walton Land is a highly speculative private placement that invests on vacant undeveloped properties that do not generate income. The hope is that one day in the far future Walton Land can sell the properties for a profit to someone else to develop. The problem is that Walton Land needs to pay carrying costs on the properties while they do not generate income. In addition, newsources have exposed that Walton Land makes a profit on these properties by selling them to the funds at a huge mark up
As a recent Bloomberg article exposed a “markup of five times Walton’s own price wasn’t unusual across hundreds of properties. In one 2008 investment vehicle, Walton bought 304 acres northeast of Atlanta at a price of $13,600 an acre in U.S. dollars, and syndicated it to investors at about $68,000 an acre.” In other words, Walton is sure to profit on its own deals by selling properties it bought for way cheaper to ignorant retail investors for many times the properties’ actual value. In addition, broker’s are paid huge commissions to never reveal these facts to their clients and get their “cut” of the land fraud. “Walton also was paying sales commissions as high as 13.25% in some cases, even though 6% is more typical for speculative investments, securities experts say.”
Bloomberg interviewed a consultant who stated the obvious, “’a reasonably intelligent investor who had seen the markup would have some questions,’ said Steven Kelman, a Canadian investment consultant, who once advised a mutual fund dealer to avoid a Walton investment vehicle.” An attorney with Greenberg Traurig, which often represents broker-dealers in retail disputes, even agreed that “It does not seem to be the kind of high-risk investment that an unsophisticated individual retail investor can properly evaluate.” Id.
In sum, Walton’s “$3.8 billion in land assets, 92,000 investors and 106,000 acres later…[s]ome backers say their shares were worth only 20% of what they put in based on the most recent 2017 appraisal.” In sum, there was no justification for Respondents’ recommendation to invest in meritless Walton land deals.
Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client after conducting due diligence. Due diligence includes an investigation into the investment’s properties including its benefits, risks, tax consequences, issuer, history, and other relevant factors. Appropriate due diligence would identify that an Walton Land’s structure, illiquidity, and conflicts of interests would make the investment not suitable for investors. Investors often fail to understand that they have lost money until many years after agreeing to the investment in programs like Walton Land.
Some of the Walton Land’s investment entities include the following:
Walton U. S. Land Fund 5, LP
Walton U.S. Development Fund, LP
Walton U.S. Land Fund 1, LP
Walton U.S. Land Fund 2, LP
Walton U.S. Land Fund 3, LP
Walton U.S. Land Fund 4, LP
Walton U.S. Land Fund 6, LP
Walton U.S. Land Fund 7, LP
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. Investors who have suffered losses may be able recover their losses through securities arbitration. The attorneys at Gana Weinstein LLP are experienced in representing investors in cases of investment fraud and brokerage firms failure to supervise their representatives. Our consultations are free of charge and the firm is only compensated if you recover.