SEC charges head of small REIT and BDC with fraud
Suneet Singal allegedly lied about owning a dozen hotels to close a deal.
The Securities and Exchange Commission on Friday charged the CEO and owner of a small nontraded real estate investment trust, First Capital Real Estate Trust Inc., with fraud, alleging that he lied about owning a dozen hotels and contributing them to the REIT to close a deal.
Mr. Singal “received consideration valued at more than $15 million for the hotels,” the SEC alleged. “Singal’s sham contribution diluted the value of First Capital REIT’s shares and resulted in First Capital REIT selling shares at inflated prices to unsuspecting investors.”
“Singal and First Capital REIT then made material misrepresentations and omissions concerning the hotels in several commission filings,” according to the complaint.
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At the time of the transaction in September 2015, the REIT had about $42 million in net assets. Mr. Singal is CEO and chair of the REIT’s board, as well as the beneficial owner and CEO of the REIT adviser.
Mr. Singal also allegedly lied about conflicts of interest and misappropriated $1.5 million lent by the BDC, which was not fully named in the complaint, to a company he secretly controlled, according to the SEC complaint.
In all, the BDC lost $3 million. Mr. Singal was acting CEO and chief financial officer of the BDC, according to the SEC.
Reached by phone, Mr. Singal said that he was “disappointed” by the SEC’s allegations and that the company has provided numerous documents and evidence to the contrary.
“We believe that we will be fully absolved after the process, and also believe that the SEC has ignored plenty of evidence we provided,” he said. “We will prevail in the legal process and are still working for an exit for our shareholders and believe we will deliver a profitable one soon.”
Mr. Singal acquired the REIT, First Capital Real Estate Trust Inc., which was formerly named United Realty Capital Trust Inc., in 2015. InvestmentNews reported that the firm had payroll problems in 2016 and then reorganized a year later.
“The company has had challenges related to its previous sponsor and we’ve cleaned all that up,” Mr. Singal said.
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