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Wednesday, 08 February 2017

Scott Landress, Co-Founder of Liquid Realty, Gets Barred from Securities Industry

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Commercial Real Estate Direct Staff Report

Scott Landress, a co-founder of the former Liquid Realty Partners, a San Francisco investment manager that specialized in buying interests in real estate funds, has been permanently barred from the securities industry by the SEC, which had accused him of improperly withdrawing fees from two funds he managed.

The SEC, in an announcement yesterday, said that Landress also must pay a $1.25 million penalty to settle those charges. It said that Landress had agreed to the SEC's order without admitting or denying the regulator's findings.

Liquid Realty, which he had founded in 2006 with Mark Berman, shuttered its doors in 2012. Well before that, management of what then was Liquid Realty Partners III, a fund that had raised $700 million of equity commitments, was taken over by Landress, who had formed SLRA Inc. for that purpose. The investment vehicle bought interests in other funds that owned properties in the United Kingdom.

The SEC complaint said that Landress, facing declining asset management fees as a result of the market downturn between 2009 and 2011, had sought additional compensation from the fund's investors. The asset management fees generated by the fund declined by 62 percent in 2009 and, according to the SEC complaint, were not enough to cover expenses.

Landress, starting in 2009, had asked the fund's advisory three times for additional compensation to offset the drop in management fees. In July 2010, he sought $1.6 million of additional fees and later sought more fees. Each request was rejected.

The SEC complaint noted that Landress "worked to minimize the funds' losses and avoid threatened foreclosures, including through asset dispositions, negotiations with the funds' lenders, and restructurings and recapitalization."

In early 2014, the SEC says that Landress had invoiced the fund for 16.25 million pounds and deposited proceeds of the payment in an SLRA account. A month later, he informed the fund's limited partners and said the fees were the result of work related to acquisition, disposition, financing, workout and recapitalization of a specific investment known as Project Ursula.

When limited partners in the fund objected to the fees, Landress deposited the funds into a personal account. Landress' company, SLRA, in 2014 filed suit against certain investors in the fund in order to get a court to rule that it was entitled to the fees.

Two years later, the SEC launched its investigation and soon after the fund's investors and SLRA reached a settlement whereby SLRA agreed to return $24.4 million to the investors.

The SEC concluded that SLRA and Landress had breached their fiduciary duties to the fund by withdrawing fees and not properly disclosing them.

Comments? E-mail Orest Mandzy, or call him at (267) 247-0112, Ext. 211.



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Read 2521 times Last modified on Thursday, 09 February 2017

Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

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