Ayer v. Lightstone Tests Fiduciary Claims Over Sponsor-Calculated NAV in Non-Traded REITs
Three investors in the Lightstone family of non-traded real estate investment trusts are pursuing a putative class action against the REITs, their sponsor David Lichtenstein, and several directors, alleging breach of fiduciary duty in how the vehicles are valued and governed. The case, Ayer v. Lightstone Value Plus REIT I, Inc., No. 3:24-cv-10371 (D.N.J.), was filed in New Jersey Superior Court and removed to federal court on November 7, 2024 under the Class Action Fairness Act. Plaintiffs Kenneth N. Ayer, Martha Harvey, and Larry Melton sue on behalf of investors in Lightstone Value Plus REIT I, II, and III and their successor entities.
The structural allegation at the center of the complaint is about who sets the number investors see. Because non-traded REIT shares do not trade on an exchange, there is no market price; the complaint alleges that "the net asset value of the shares is calculated by the investment sponsor itself" and that investors must rely on the sponsor's estimated NAV to know what their investment is worth. The externally managed REITs pay fees to advisory entities owned by Lichtenstein that scale with those NAVs: the complaint pleads $9.8 million in fees in 2022 (REIT I paying $5.9 million on a $323.7 million NAV, REIT II $2.7 million on $173.8 million, and REIT III $1.2 million on $134.1 million) and more than $7.2 million in 2023.
The Tender Offers as a Benchmark
The complaint's most concrete valuation allegations come from third-party tender offers. In late 2023, REIT II shareholders received a tender offer at $5.51 per share while the sponsor's most recently published estimated NAV, as of December 31, 2022, was $10.12; an earlier tender came at $6.55 per share against published NAVs of $11.69 and $11.82. Whatever an estimated NAV represents, the complaint uses the gap between the sponsor's number and the prices actually offered for the shares as its evidence that the published values overstated what investors could realize.
The complaint also challenges governance changes: 2023 charter amendments that it alleges removed liquidation triggers and appraisal-rights protections, with the effect of keeping the vehicles, and the fee streams they generate, in place indefinitely with no mechanism forcing a liquidity event.
Procedural History and the Ratification Ruling
The case has already produced one significant ruling. On August 31, 2025, the court issued an opinion and order on the defendants' first motion to dismiss that rejected the state law fiduciary claims as originally pleaded, reasoning that investors had ratified the challenged arrangements through the disclosures they received; the offering documents described the sponsor's valuation role and fee structure. Plaintiffs filed an amended complaint on October 15, 2025. The defendants' renewed motion to dismiss was filed January 9, 2026 and fully briefed as of March 23, 2026, and a decision is pending.
The ratification holding places Ayer within a recurring pattern in fund and REIT litigation: claims that fail when courts conclude the challenged practice was disclosed, however consequential the practice itself. The amended complaint's fate will likely turn on whether the plaintiffs have pleaded conduct outside the four corners of the disclosures, such as the accuracy of the published NAVs themselves as against the tender-offer evidence, rather than the existence of the disclosed fee and valuation structure.
Non-traded REITs have generated a disproportionate share of valuation litigation for a structural reason the complaint captures: with no exchange price, the sponsor's estimated NAV is the only value investors ever see, the fees are computed on it, and the only external checks are episodic events like tender offers and liquidations. The Ayer docket is one of several active cases testing whether that arrangement can support fiduciary claims when the external checks and the published numbers diverge. A decision on the renewed motion to dismiss is expected in the coming months.
From the Complaint Public Court Record
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY KENNETH N. AYER, MARTHA HARVEY, and LARRY MELTON, on behalf of themselves and all others similarly situated, Plaintiffs, v. LIGHTSTONE VALUE PLUS REIT I, INC., LIGHTSTONE VALUE PLUS REIT LLC, LIGHTSTONE VALUE PLUS REIT II, INC., LIGHTSTONE VALUE PLUS REIT II LLC, LIGHTSTONE VALUE PLUS REIT III, INC., LIGHTSTONE VALUE PLUS REIT III LLC, YEHUDA I. ANGSTER, HOWARD E. FRIEDMAN, DAVID LICHTENSTEIN, ALAN RETKINSKI, and GEORGE R. WHITTEMORE, Defendants. Civil No. ____________________ (Related to Class Action Complaint filed in the Superior Court of the State of New Jersey, Law Division, Ocean County, Docket No. OCN-L- 002385-24) NOTICE OF REMOVAL Defendants Lightstone Value Plus REIT I, Inc., Lightstone Value Plus REIT LLC, Lightstone Value Plus REIT II, Inc., Lightstone Value Plus REIT II LLC, Lightstone Value Plus REIT III, Inc., Lightstone Value Plus REIT III LLC, Yehuda I. Angster, Howard E. Friedman, David Lichtenstein, Alan Retkinski, and George R. Whittemore (each individually a “Defendant,” and collectively, the “Defendants”), 1 through undersigned counsel, file this notice of removal (the “Notice”) on the grounds of federal diversity jurisdiction as amended by the Class Action Fairness Act of 2005 (“CAFA”) pursuant to 28 U.S.C. §§ 1332, 1441, 1446, and 1453, and in support state as follows: 1 Defendants are filing this Notice of Removal without waiver of their right to contest service, as discussed further below. PageID: 1
2 I. Parties 1. Plaintiffs are alleged shareholders of Lightstone Value Plus REIT I, Inc., (“REIT I”), Lightstone Value Plus REIT II, Inc., (“REIT II”), and Lightstone Value Plus REIT III, Inc., (“REIT III” and collectively with REIT I and REIT II, the “REIT Defendants”). Plaintiffs purport to bring each of their claims on behalf of themselves, as well as a putative class. (Compl. ¶¶ 1, 72–79). 2. Defendants include the REI
Questions about this topic: david@newmanbrunk.com