In the Matter of Prime Group Holdings, LLC

Admin Proc. File No. 3-21602

On September 5, 2023, the Commission issued an Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Sections 8A of the Securities Act of 1933, Making Findings, and Imposing a Cease-and-Desist Order (the “Order”) against Prime Group Holdings, LLC (the “Respondent”). In the Order, the Commission found that Respondent, a private equity real estate firm focused on alternative real estate asset classes, made inadequate disclosures and materially misleading statements in offering of Prime Storage Fund II, LP (“Fund II”), relating to millions of dollars of earned real estate brokerage fees paid between 2017 and 2021 to an affiliated real estate brokerage firm (“Affiliate”) which is wholly owned by Respondent’s CEO.

The Respondent managed and oversaw the operations of numerous self-storage real estate properties, some of which are fully owned by Fund II, with others managed on behalf of other investors including Respondent’s CEO. Respondent retained employees and independent contractors to source real estate acquisition transactions (“Deal Teams”). The brokerage fees paid to Affiliate in connection with property acquisition were used, in part to compensate the Deal Teams that sourced transactions on behalf of Fund II, as well as to pay for operational expenses of Respondent’s operations. Fund II’s offering materials, including its limited partnership agreement, private placement memorandum, and due diligence questionnaires, included statements regarding certain contemplated fees to be paid by Fund II for services, including brokerage fees. These offering materials, however, did not adequately disclose that certain brokerage fees would be paid to an affiliate or that such payment could create a conflict of interest, or that fees received by Affiliate paid for, in part, operation expenses of Respondent. These failures to disclose material information rendered statements made by Respondent to investors in Fund II misleading.

The Commission ordered the Respondent to pay $11,510,625.00 in disgorgement, $2,561,197.00 in prejudgment interest, and a $6,500,000.00 civil money penalty, for a total of $20,571,822.00, to the Commission. The Commission also created a Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the penalty paid, along with the disgorgement and interest paid, can be distributed to harmed investors. Commission’s Order: Release No. 33-11228. 

The Fair Fund consists of the $20,571,822.00 paid by the Respondent. The Fair Fund has been deposited in a Commission-designated account at the U.S. Department of the Treasury, and any accrued interest will be added to the Fair Fund.

On November 30, 2023, the Commission issued an order appointing Heffler, Radetich & Saitta, LLP as the Tax Administrator of the Fair Fund. See the Commission’s Order: Release No. 34-99055.

On February 5, 2024, the Commission issued an Order appointing SS&C GIDS, Inc. (“SS&C”) as the Fund Administrator to oversee the administration and distribution of the Fair Fund and set the administrator’s bond amount.  See the Commission’s Order: Release No. 34-99466

On September 18, 2024, the Commission published a notice of the proposed plan of distribution and opportunity for comment and simultaneously published the proposed plan of distribution (“Proposed Plan”).  The notice provides the public with 30 days to submit their comments on the Proposed Plan.  See the Commission’s Notice:  Release No. 34- 101072 and the Proposed Plan.

The Proposed Plan provides that the distribution of the Fair Fund shall be made to investors who were harmed by the Respondent’s payment of improperly disclosed real estate brokerage fees to an affiliated real estate brokerage firm as described in the Order.

On November 13, 2024, the Commission issued an order approving the plan of distribution and published the approved plan of distribution (“Plan”).  See the Commission’s Order:  Release No. 34-101598 and the Plan

For more information, please contact the Commission Office of Distributions
Email: ENFOfficeofDistributions@sec.gov