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Prominent North Texas family is being sued for allegedly defrauding real estate fund investors

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Nine investors accuse members of a prominent North Texas family of committing securities fraud in connection with a high profile mixed-use project in Allen and other real estate investments, according to newly amended court documents.

The complaint, originally filed by Palazzo Holdings LLC in October 2020, alleges members of the Thakkar family defrauded investors who bought $ 2.5 million worth of securities in real estate funds that were then used to run businesses family owned, including Thakkar Development Group LLC.

Saumil Thakkar, Poorvesh Thakkar, Mahesh Thakkar and Vaishali Thakkar were named in the lawsuit alongside several Thakkar family businesses. Some of the Thakkar’s best-known ventures, such as FunAsia Radio Station and the Fun Movie Grill Theaters, were not listed in the lawsuit.

Palazzo Holdings was founded by investors who collectively invested money in a Thakkars-managed fund after reportedly building strong relationships with family members.

“My clients really trusted and respected the Thakkar family, which is one of the reasons they invested so much money in the fund,” said Favad Bajaria, managing partner of Bajaria & Forgerson law firm.

In a statement, Thakkar Developers denied the lawsuit’s allegations.

“The plaintiff is a group that includes veteran medical investors who are now accused of fraud because the Thakkar family refused to buy them out of an investment they no longer wish to be involved in,” the Thakkar Developers statement said . “This is a group of investors who have made investments in the Thakkars even after this lawsuit was filed.”

Investors allege in their lawsuit that they were told the fund would raise $ 20 million by October 2018 to invest in five real estate projects in North Texas, including the Park Plaza Tower in Dallas, lots in Plano for a mixed-use development project and lots in Allen for a mixed-use development project to be anchored by a 15,000-seat cricket stadium.

The 80 acre avenue development will include a combination of commercial and residential construction.

Members of Palazzo Holdings were reassured by the fund’s affiliation with Perfect Tax and Finance, a McKinney tax advisory firm owned by Thakkar, the complaint said.

“Most [the investors] are health professionals who have had a relationship with the Thakkar family through their accounting firm, ”Bajaria said. “You are just devastated and dejected by what is happening in this fund.”

According to the lawsuit, members of the Thakkar family and its affiliates misrepresented information about the mutual fund, including the amount the Thakkar family would invest and the registration status of the securities issued.

Investors said they had received little information about the fund’s activities, which reportedly included “fraudulent transfers of assets to Thakkar affiliates”. The lawsuit also alleged that the fund would continue to add new members beyond the agreed date of October 31, 2018, which dilutes Palazzo Holdings’ ownership stake.

In total, the investors are suing the Thakkars in 17 cases, ranging from violations of the Texas Securities Act to breach of contract and unjust enrichment. You are trying to reimburse damages out of the investment and related expenses.

The lawsuit is currently on trial and is due to go to court in March, Bajaria said.

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Higher, higher, higher – Dallas home prices are up almost 25% from a year ago

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A slowdown in home sales over the summer has not slowed real estate prices in Dallas.

In the latest S&P CoreLogic Case-Shiller Home Price Index, home values ​​in the Dallas area rose nearly 25% year over year.

It is the largest annual house price win for Dallas in the closely watched monthly real estate measurement.

Prices in the Dallas area rose nearly 2% in August alone.

And the local rise in home prices was well above the 19.8% nationwide increase in August 2020, according to Case-Shiller.

“The US housing market showed continued strength in August 2021,” said Craig J. Lazzara of S&P in the report. “Each of our city and composite indices are at their all-time highs, and year-over-year price growth continues to be very strong, albeit a little slower from the previous month’s level.

“August data also suggests that property price growth, while still very strong, may be slowing.”

Phoenix led the metropolitan areas with an annual price increase of 33.3%. San Diego prices rose 26.2% year over year and Tampa rose 25.9%.

Dallas had the fourth-highest rise in home prices among the top 20 markets included in the Case-Shiller survey.

US house prices are rising faster than ever in the monthly Case-Shiller poll, which has tracked house prices in major US cities for 30 years.

Case-Shiller’s price estimate is believed to be more accurate than real estate sales data, which can be influenced by the type of properties being sold each month.

The Case-Shiller Index compares changes in sales prices of certain properties over time.

Case-Shiller estimates that home prices in the Dallas area have increased about 50% over the past five years.

The tremendous price growth has continued even though total home sales in the region have declined in the last four months from a year earlier.

Home prices in the Dallas area have increased since the COVID-19 pandemic began and more tenants have moved into their homes.

A chronic shortage of homes in the market has added unprecedented upward pressure on home costs in North Texas.

Some real estate forecasters hope that price increases will slow down in the coming months.

“While demand remains strong and buyers are generally still paying more for property than asking price, the declining acceleration in property prices suggests buyer fatigue is on the way, especially for higher-priced properties that have seen price growth accelerating from the previous month, which is greater than that of the previous month to houses in the lower category, ”said Selma Hepp, Chief Economist at CoreLogic. “The persistently strong demand from traditional homebuyers was reinforced this summer by increasing demand from investors.”

Zillow economist Kwame Donaldson said nationwide housing construction had cooled somewhat before the fall season.

“It took a little longer to sell homes in September than it did in August, and the sales inventory increased by inches,” said Donaldson. In other words, although exceptional market conditions drove house prices higher between spring 2020 and summer 2021, recent signs suggest that the market is weakening.

“And while house price increases will remain elevated for the next few months, further acceleration is unlikely.”

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U.S.-Based CIM Group Enters UK Real Estate Market with Acquisition of Cathedral Square, a Three-Building Office Campus in Guildford

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LONDON–(BUSINESS WIRE) – CIM Group, a community owner, operator, lender and developer of real estate and infrastructure, today announced the acquisition of Cathedral Square, a three-building office campus in Guildford, United Kingdom. The acquisition is the US company’s first transaction in the Western European market as part of its value-add strategy in Europe.

Headquartered in Los Angeles, CIM Group has a network of offices from which to manage its extensive real estate portfolio, which includes office, residential, retail, hospitality and logistics properties. The company’s initiative in Western Europe is led by its London-based team looking for well-located office, residential, retail and logistics properties in select metropolitan markets with strong demographics, well-connected to public transport and with extensive knowledge – based economies, such as those supported by universities, scientific research, intellectual property development, or technology centers.

“With this acquisition in Great Britain, the CIM Group is launching its value-add strategy in Western Europe and using our community-oriented approach, which is a hallmark of the company. After a comprehensive assessment of the commercial real estate markets in Western European countries, we identified the UK as a target market for expanding our commercial real estate holdings and real estate activities. This thorough process was carried out by our team of professionals experienced in all aspects of European commercial real estate, ”said Avi Shemesh, Co-Founder and Principal of CIM Group.

Cathedral Square corresponds to the acquisition focus of CIM as it has an attractive location in Guildford, a business center about 30 miles outside of London, which is one of the leading production centers for video games in Great Britain.

“Cathedral Square is a premier creative office campus, a type of asset that we are very familiar with as we develop, own and operate similar assets in markets across the United States. The property’s location in a regional innovation hub attractive to technology, science and knowledge-based businesses and in a metropolitan area with strong demographics and public transportation are attributes that match our program criteria when we entered the UK, “noted Shemesh .

Cathedral Square benefits from easy access to the A3, a major regional thoroughfare and connection to London, and close proximity to the University of Surrey, Guildford city center, Guildford Mainline Railway Station and Heathrow Airport. Cathedral Square also provides workers with easy access to the area’s shopping and dining areas, as well as the city’s many recreational and recreational opportunities.

Built in 2000, Cathedral Square consists of three buildings: Buildings 1000 and 2000, which were extensively refurbished in 2017 and are interconnected three-story Category A offices. Building 3000 is a three-story building that is being converted into a class A creative office with a focus on outdoor facilities, outdoor landscape, and health and wellbeing, with delivery scheduled for 2023. Additionally, the entire property will benefit from upgraded facilities including a new gym, additional rental space, electric vehicle chargers and outdoor recreational facilities. Each building has a central atrium and modern, flexible rooms with plenty of natural light.

Cathedral Square offers a staff-centric work environment with amenities like collaborative breakout areas, a manicured outdoor environment, an on-site coffee shop, changing rooms and showers, bike storage and shared electric bikes, and a free shuttle bus. The property hosts a range of courses, services, and events with an emphasis on wellness, including sports and fitness programs, retail stores, and more.

In addition, Cathedral Square is committed to sustainability in the workplace and Buildings 1000 and 2000 have all received the BREEAM rating of “Very Good”. Building 3000 is aiming for a BREEAM rating of “Excellent”.

The CIM Group was advised on the acquisition of Savills.

For more information on Cathedral Square, visit www.cathedralsquareguildford.com.

About the CIM group

CIM is a community based real estate and infrastructure owner, operator, lender and developer. Since 1994, CIM has sought value on projects and positively impacts the lives of people in communities across America by donating more than $ 60 billion in major real estate and infrastructure projects. The diverse team of experts at CIM applies its broad knowledge and disciplined approach to the practical management of real estate from due diligence through operation to sale. CIM strives to make a meaningful difference in the world by implementing key environmental, social and governance (ESG) initiatives and improving every community it invests in. Further information is available at www.cimgroup.com.

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Real estate commission structures do need changing

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Earlier this month the editors of the Boston Herald called on the National Association of Realtors to amend a number of rules that they believe are anti-competitive and are designed to keep real estate commissions artificially high.

In response to the editorial, NAR President Charlie Oppler pointed out that commission rates have steadily declined in recent years. The consequence of this decline, according to Oppler, is that the commissions are fully negotiable, which suggests that agent compensation is not anti-competitive. However, a closer look at the commission data actually supports the opposite conclusion; namely, that there is substantial evidence that the current commission structure is against antitrust law.

When analyzing real estate commissions, it is important to recognize that the total real estate commission consists of two components: the broker’s commission and the buyer’s commission.

Because listing agents negotiate their commissions directly with sellers, there are no anti-competitive concerns with this component of total commission. However, this is not the case with the brokerage commission because the brokerage commissions do not negotiate their commissions directly with their buyers like they would in any other industry. Instead, the NAR rules stipulate that when listing the home, the seller must offer a preset, non-negotiable commission to the buyer’s agent who mediates the buyer.

This means that the buyer’s brokerage commission is not dictated by free market forces when the price of a service equals the value of the service. Instead, it is determined by how high the buyer’s commission is in the respective market. This notion of a common price exists because most sellers either from experience or from their brokerage agents know that offering a lower brokerage commission to the buyer would encourage brokers to illegally distract their customers from their offers and towards properties with higher commissions .

The declining commission data referenced by Oppler emphatically supports this characterization of real estate commissions. According to industry news site RealTrends, the average national commission rate has fallen from 5.40% in 2012 to 4.90% to 4.94% in 2020. (For simplicity we assume it is 4.90%.)

However, as explained above, we have to split the total commission into the broker’s commission and the buyer’s commission. According to a Redfin study, the average brokerage commission fell only slightly from 2.8% in 2012 to 2.7% in 2020. It can be deduced from this that the average brokerage commission fell from 2.6% to 2.2% during this period – four times the decrease in the buyer’s average brokerage commission.

It should come as no surprise that the average brokerage commission has dropped significantly over this period. First, the number of active brokers increased by 46% from nearly one million to nearly 1.5 million between 2012 and 2020. It is to be expected that this increasing competition will put pressure on commissions. Second, the average home sale price rose 23% (adjusted for inflation) over this eight year period, more than offsetting the decline in average listing commission. Finally, the increasing adoption of technological tools such as electronic signature software has helped streamline the process.

Therefore, the sharp drop in the average brokerage commission is an indication that free market forces are at play on the listing side. If this were the case on the buy side, we would expect a similar decline in the buyer’s average brokerage commission as the trends described above affect both sides of the deal. On the buy side, the decline is even more dramatic as buyers increasingly find their new homes on real estate websites like Zillow and realtor.com.

The fact that the buyer’s average brokerage fee has changed little since 2012 therefore supports the argument that the buyer’s brokerage fee is dictated by an arbitrary rate rather than free market forces.

Will Fried is a data scientist at REX.

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