Confluene of Crap

This blog has tracked UDF IV's lack of financial statements, which culminated in yesterday's de-listing announcement for UDF IV due to its inability to file financial statements.  Well, UDF IV is not the only non-traded REIT with a failure to file financial statements problem.  A small public REIT, First Capital Real Estate Trust, which was formerly United Realty Trust, has not filed financial statements since the 2015 second quarter 10-Q.  In September 2015, United Realty's former sponsor, advisor, property manager, and principal entered into a sales agreement with First Capital Real Estate Investments, LLC, in a deal that provided cash and a consulting contract to United Realty's former principal.  The REIT changed its advisor and changed its name to First Capital Real Estate Trust.

In October of 2015, First Capital Real Estate Trust fired its auditor, Ernst & Young, and has not filed an 8-K disclosing a replacement auditor.  The REIT has not filed any financial statements since the transaction with First Capital, and it has been through three CFOs since August 2015, with the last leaving in early April of this year.

There is much more related to First Capital Real Estate Trust.  Take thirty minutes to read through First Capital's public flings for the past year to get your Halloween fright.  You'll need to reference United Realty's 2014 10-K to partially grasp, or at least put in some jaw-dropping context, what the heck First Capital did in September with its Brooklyn, New York, Tilden Avenue property. 

Here is another Halloween scare:  I read a "due diligence" report, dated late August 2016, on First Capital Real Estate Investment's new private debt offering that failed to mention any of the issues at the REIT.  Maybe it is just me, but I'd think any broker dealer reading a "due diligence" report would find it material that an affiliated flagship REIT had no auditor, had no CFO while churning through three CFOs in less than a year, and had not filed any financial statements since 2Q 2015.  Thanks for the heads-up, Bozo. 

Did Not See That Coming

UDF IV missed its Tuesday (October 17, 2016) deadline to file its financial statements to avoid Nasdaq de-listing, and Nasdaq notified UDF IV that it will de-list UDF IV's shares.  In a press release yesterday, October 18, 2016, UDF IV gave no specifics on when it plans to release its updated financial statements.  In addition, UDF IV notified investors that the SEC provided a Wells Notice to the REIT and certain individuals associated with the REIT, where the U.S. Securities and Exchange Commission's ("SEC") Division of Enforcement made a preliminary determination to recommend that the SEC file an enforcement action alleging violations of certain provision of the Securities Act of 1933 and the Securities Exchange Act of 1934.

The SEC's allegations were not released.  None of this news comes as a big surprise.  It is an understatement to say this is a serious situation.