The Colorado Division of Securities has ordered a Greenwood Village real estate investment firm to offer investors in a north Denver apartment building their money back with interest.
The recision order, made public Tuesday, is against Tennyson Place LLC, Allante Properties LLC and managing members Daren and Darell Schmidt, who came under investigation in May after placing ads in The Denver Post.
The ads sought $100,000 “membership interests” to fund the construction of an 81-unit apartment building at the 3900 block of Tennyson Street, which Allante Properties would manage.
The investment promoted an annualized return of 17.2 percent by the project’s sixth year and also claimed it was exempt from a securities registration under what is known as the 506(c) exemption.
But the division found no registration and no request for an exemption from registration, making the securities unregistered.
“In order to claim the exemption, you have to file the exemption. They didn’t file their form until they heard from us,”state securities commissioner Gerald Rome said.
The Schmidts have since filed the exemption request for the Tennyson project and another proposed apartment building near St. Joseph’s Hospital.
The Schmidts must also write their investors asking them if they want to stay invested in the project or obtain a refund, Rome said. Any refunds will be paid with interest, pro-rated at an 8 percent annual rate.
The Schmidts agreed to the order without admitting or denying guilt. Efforts to reach Darell Schmidt by phone and e-mail were unsuccessful.
Darell Schmidt said earlier this year that Tennyson Place was looking to raise $7 million from investors to fund the $23 million project.
Rome could not disclose how much money was improperly raised.
Improper securities transactions involving real estate have been a growing issue and now rank among the top three problems state securities regulators deal with, Rome said.
Rome said it is important that project backers have the proper paper work filed before raising money from the public. Investors with questions on a project can call the securities division at 303-894-7855 to find out if that is the case.
Aldo Svaldi: 303-954-1410, asvaldi@denverpost.com or @aldosvaldi
