Investors accuse First National Realty Partners of fraud in RICO suit

Start with the pitch. According to the filing, the firm told investors it acquired commercial properties, largely shopping centers, at or below market value, then paid distributions of 6% or more a year. The suit quotes marketing that said the firm’s investment committee looked for assets “that can be acquired at perceived discounts to both market value and replacement cost.” 

The investors say it worked the other way around. The lawsuit alleges the firm bought at or above market, marked the properties up, sold shares at the inflated number, and then charged fees pegged to that inflated value. To support the theory, the plaintiffs attached an outside expert report that concludes the firm “is not buying these properties at below market prices as it claims” and instead “buys a property at or above market and shaves more than half of the returns for itself.” 

Then there is the structure, which is where the case turns pointed for real estate professionals. The filing says the firm gave itself three roles on every deal – asset manager, sole realtor on tenant-leasing deals, and manager of the investment LLCs – and drafted the paperwork so investors could not remove it from any of them. The suit calls that arrangement a “Golden Ticket” and “a textbook conflict-of-interest.” 

From those roles, the plaintiffs allege, money flowed back to companies the sponsor controlled: property-management fees, leasing commissions, and billings from an in-house construction arm the filing says was created “under the guise of being separate.” The court papers offer one leasing figure – reported leasing costs of $1,071,380 on one tenant lease the suit values at only $2,286,284 over 10 years, which the filing calls illogical. 

The investors point to specific properties. They say one center, Summerdale Plaza, later sold for about $15 million, which the filing describes as a roughly 60% loss to investors in that deal. They allege a purchase-price gap of about $10.5 million on the Tropicana Center property. And they include a chart showing that many centers in the portfolio have suspended investor distributions.