--- In AsburyPark@yahoogroups.com, "bluebishop82" <[EMAIL PROTECTED]>
wrote:
>
> Dan I read it too, and I still don't see where these investors
were
> given equity as you say. The complaint makes clear they were
> selling "Notes, Investment Contracts and OTHER FORMS OF
INDEBTEDNESS
But it also says the following
A. Defendants Offer Sale of unregistered Securties;l to
Investors
I 39. The RE1 Notes are offered as 'investment
vehicles" for the real estate ventures of REI. REI's real
estate ventures purportedly earn investment income or capital
appreciation. (Leone Cert. 84 24-27, 42, Ex. D) ; (Winters Cert.
s
9% 18-25, EX. C . )
How do you get capital appreciation without an equity kicker?
41. Most RE1 Notes are titled "Assignments of
Interest - . . . Preferred Return on Investment (ROI) . " Under
the RE1 Notes, the maker, usually Klein, "assigns his share of
the property described [in the note]," which entitles the
investor to the 'rate of return" on the face of the RE1 Note.
(Leone Cert. Ex. D.); (Winter Cert. 9 9, Ex. F.)
Tom, as I said, Klein or the LLCs assigned their interest in the
property. What interest did they have? Equity interests. The
investors were debt investors BUT NOT ON THE REAL ESTATE. They were
debt investors to the ownership interests who pledged their equity
interests as collateral. Call them what yoy will, but the investors
have no recorded debt liens on the property. They can only come to
the trough after the PROPERTY LENDERS have their fill.
Some more to show the distinction. Property 101. You owe me tuition.
e. "the total debt and investor equity on the
properties would not exceed 75% to 85%; and
b. that the property securing and underlying
some of the REI Notes did not fully protect
investors because the properties were
encumbered by mortgages and other
undisclosed debt;
c. that commercial and institutional lenders
received first mortgages on the properties
and would have priority over the investors'
interest in the property;
72. Furthermore, the solicitation materials and the
RE1 Notes represented that the investment properties would not
be encumbered by debt greater than 75% to 85% of the market
value of the property. (Leone Cert. 9 40) ; (Winters Cert, % 37,
Ex. N.)
75. Most of REI's properties were also encumbered by
the first mortgages of institutional and commercial lenders, but
investors were unaware of these mortgagees. (Leone Cert. Exs.
K, L.)
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