Published in the Journal of Real Estate Portfolio Management, Vol. 20, No 2, 2014.

In this paper, we value a large sample of tenant-in-common (TIC) investments based on cash flow projections found in 194 private placement memoranda. Our sample of TIC offering documents covers approximately 20% of the TIC industry from 2004 to 2009. Based on the sponsor’s projections, we find that the TICs on average were worth 83.6 cents per $1 paid by TIC equity investors. However, we have found that sponsors’ cash flow projections overstate likely returns to investors by assuming unrealistically high rental growth rates and unrealistically low vacancy and caps rates.

Adjusting only the sponsors’ cap rates alone to rates reflecting market conditions lowers the average valuations by 9.5 cents to 74.1 cents per $1. Adjusting the sponsors’ unrealistic rental growth rate and vacancy assumptions lowers the average value further. These low valuations are consistent with average upfront fees and reserves equal to 28% and 12% of equity. Our results suggest that private placement sponsors have considerable latitude in their projections, and that investors should view projected returns with skepticism.

Published in the Journal of Index Investing, Winter 2010, Vol. 1, No. 3: pp. 45-57.

Leveraged and Inverse Leveraged ETFs replicate the leveraged or the inverse of the daily returns of an index. Several papers have established that investors who hold these investments for periods longer than a day expose themselves to substantial risk as the holding period returns will deviate from the returns to a leveraged or inverse investment in the index. It is possible for an investor in a leveraged ETF to experience negative returns even when the underlying index has positive returns. This paper estimates the distributions of holding periods for investors in leveraged and inverse ETFs.

The SLCG study shows that a substantial percentage of investors may hold these short-term investments for periods longer than one or two days, even longer than a quarter. The study estimates the investment shortfall incurred by investors who hold leveraged and inverse compared to investing in a simple margin account to generate the same leveraged or short investment strategy.

The study finds that investors in leveraged and inverse ETFs can lose 3% of their investment in less than 3 weeks, an annualized cost of 50%.

Published in The Journal of Alternative Investments, Spring 2012, Vol. 14, No. 4: pp. 69-78.

In this article, we explain that, while marketed as an arbitrage strategy, the leveraged municipal bond strategy was simply an opaque high-cost, highly leveraged bet on the value of call options, interest rates and liquidity and credit risk. Brokerage firms misrepresented the strategy by comparing the yields on callable municipal bonds with the yields on non-callable Treasury securities without adjusting the yields on municipal bonds for their embedded call features and by ignoring 30 years of published literature which demonstrates the remaining difference in after-tax yields is compensation for liquidity and credit risk. We also show that much of the losses suffered by investors were suffered during a period of relatively routine interest rates and not during an unprecedented interest rate environment.

Related Awards:
– Puglisi v Citigroup – $750,000 MAT Five Award
– Young v Deutsche Park Securities – $1 million Aravali Fund Award
– Hosier et al v Citigroup – $54.1 million MAT Finance, MAT Two, MAT Three, MAT Five Award
– Coleman v Citigroup – $230,667 ASTA Five Award
– Beard v Citigroup – $336,000 ASTA Five Award
– Barnett et al v Citigroup – $2,428,000 MAT Five Award