REIT urges Thompson to resign in wake of regulatory charges

Fraud allegations cited as reason for cutting ties with Thompson's advisory and management companies.

Aug 14, 2013 @ 2:25 pm

By Bruce Kelly

+ Zoom

In the wake of allegations by the Financial Industry Regulatory Authority Inc. against Tony Thompson, the board of the nontraded REIT he runs have asked him to resign.

In addition to stripping Mr. Thompson of his co-CEO title, the board of TNP Strategic Retail Trust Inc. doesn't plan to renew his contract to work as the real estate investment trusts' adviser; and it also took away his management of the REIT's 19 properties.

The board cited last month's fraud allegations from Finra against Mr. Thompson as the reason to sever the relationship with him and the various advisory and management companies he controls through his main company, Thompson National Properties LLC.

On July 30, Finra charged Mr. Thompson and affiliated companies “with securities violations, including misleading investors, withholding material information and possibly fraud in connection with the offering and sale of certain investment programs,” the REIT said in a filing with the Securities and Exchange Commission.

The REIT, which will soon change its name to Strategic Realty Trust Inc., was not one of the programs at the center of the Finra charges, according to the filing.

“Given the severity of the charges against Mr. Thompson, [the REIT] has formally asked Mr. Thompson to resign from the board,” according to the SEC filing. Mr. Thompson still has connections to the REIT, according to his attorney, H. Thomas Fehn.

Mr. Thompson “is still a member of the [REIT's] board,” Mr. Fehn said. And there is a dispute over the property management contracts, he said. The REITs' board “attempted to terminate the property management contracts. We don't believe that is effective.”

The REIT's new adviser and property manager are affiliated with Glenborough LLC, a real estate investment company that has managed a listed REIT in the past. The new chief executive is Andrew Batinovich.

Glenborough last month bought a 12% stake in the REIT for close to $2 million.

“The other board members and I read the Finra charges [against Mr. Thompson], and they are very severe — allegations of misleading investors and withholding negative information,” Mr. Batinovich said. “I can see the case that Finra is making, and it's troubling.”

The REIT has struggled, and stopped paying its dividend to investors this year. Restoring the dividend is a top priority, Mr. Batinovich said.

Glenborough will also cut a variety of fees at the REIT.

“We do think we can turn this around and do our best to solve the problems,” Mr. Batinovich said. “That includes giving a dividend as soon as possible and then looking to increase it.”

Mr. Thompson is perhaps best known in the independent-broker-dealer industry for a merger of one of his former holdings, NNN Realty Advisors Inc., in 2007 with Grubb & Ellis Co. That deal failed to prosper.

Burdened by debt, Grubb, that once-iconic commercial real estate company, filed for bankruptcy protection last February and then sold its remaining assets for $30 million.

Mr. Thompson started Thompson National Properties in 2008, eventually raising $250 million from investors through a series of real-estate-related offerings. One of those is the REIT in question, TNP Strategic Retail Trust, which eliminated its dividend to investors this year.

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