A securities class action suit was filed against a real estate investment trust following claims that the REIT violated federal securities laws.
The lawsuit against Brixmor Property Group Inc. was filed in the U.S. District Court for the Southern District of New York on behalf of investors who purchased shares in the company during the class period from Oct. 27, 2014 through Feb. 5, 2016, according to a press release. The company is a publicly traded REIT. Brixmor operates a wholly-owned portfolio of grocery-anchored community and neighborhood shopping centers. It is the largest portfolio of its kind in the U.S.
REITs such as Brixmor are typically valued using alternative performance metrics. One of these gauges is Net Operating Income. NOI was developed for commercial real estate investors to help them determine the level of real cash flow available to cover the mortgage and other expenses on a cash-flowing property. Brixmor’s NOI lies at the root of the class action complaint against the REIT.
Class action suits alleges lack of controls
The lawsuit alleges that the defendants made false and/or misleading statements and/or failed to disclose information, regarding the REIT’s financial and internal controls, to investors. Specifically, the securities class action filing claims that Brixmor and certain executives of the REIT purposefully smoothed income items for nine quarters. The goal of this improper action was to hit upon consistent property NOI growth each quarter.
“Brixmor announced a series of resignations.”
The class action suit goes on to allege that the REIT did not have adequate internal or financial controls. As a result, the lawsuit claims that the defendants’ statements concerning the REIT’s operations, prospects and business were false and misleading and/or lacked a reasonable basis through the class period.
Brixmor announces NOI issues and resignations
On Feb. 8, 2016, Brixmor disclosed that it, as well as certain executives with the REIT, had engaged in a plan to smooth NOI numbers, a practice considered fraudulent. The same day as the announcement, Brixmor announced a series of resignations. Michael Carroll, chief executive officer, Michael Pappagallo, president and chief financial officer and Steven Splain, chief accounting officer, each stepped down from their positions.
Following this announcement, shares in Brixmor securities dropped. Stock fell $5.32 per share, or 20.13 percent from its previous closing price of $26.42 on Feb. 5, to close at $21.10 per share on Feb. 8.
For more information on this case or other class action litigations, please contact Adam Foulke at 203-987-4949 or info@battea.com.