SEC Penalizes Prime Group Holdings for Failing to Disclose Brokerage Fees to Affiliate.

The Securities and Exchange Commission (SEC) today announced that Prime Group Holdings LLC, a private equity firm invested in alternative real estate assets, has been charged for failing to adequately disclose millions of dollars of real estate brokerage fees that were paid to a real estate brokerage firm owned by its CEO. Prime Group agreed to pay a $6.5 million civil penalty, as well as more than $14 million in disgorgement and prejudgment interest, to settle the charges. According to the SEC's order, Prime Group created an investment fund in 2017 that acquired “off-market” self-storage real estate properties. Its compensation costs and other expenses were partly paid from a three percent brokerage fee the fund paid on these acquisitions. Rather than disclosing in offering materials the payment of fees to the affiliated real estate brokerage firm that was wholly owned by its CEO, Prime Group made misleading statements related to fees and conflicts of interest. In total, this affiliated brokerage firm received nearly $18 million in brokerage fees between 2017 and 2021. Prime Group agreed to cease and desist from violations, and agreed to pay $20.5 million in penalties, disgorgement, and interest.