In re PRIME GROUP

Warning: TT: undefined function: 32


 
  
 
UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES ACT OF 1933 
Release No. 11228 / September 5, 2023 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-21602 
 
 
 
In the Matter of 
 
PRIME GROUP 
HOLDINGS, LLC,  
 
Respondent. 
 
 
 
 
 
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO 
SECTION 8A OF THE SECURITIES ACT 
OF 1933, MAKING FINDINGS, AND 
IMPOSING A CEASE-AND-DESIST 
ORDER 
  
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act 
of 1933 (“Securities Act”) against Prime Group Holdings, LLC (“Prime Group” or “Respondent”).  
 
II. 
 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose 
of these proceedings and any other proceedings brought by or on behalf of the Commission, or to 
which the Commission is a party, and without admitting or denying the findings herein, except as 
to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are 
admitted, Respondent consents to the entry of this Order Instituting Cease-and-Desist Proceedings 
Pursuant to Section 8A of the Securities Act of 1933, Making Findings, and Imposing a Cease-and-
Desist Order (“Order”), as set forth below. 
 

 
 
  
2 
III. 
 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that:  
 
SUMMARY 
 
1. This matter involves certain inadequate disclosures and materially misleading 
statements made by Prime Group – a private equity real estate firm focused on alternative real estate 
asset classes – in the offering of Prime Storage Fund II, LP (“Fund II”), relating to millions of 
dollars of earned real estate brokerage fees (hereinafter referred to as brokerage fees) paid between 
2017 and 2021 to an affiliated real estate brokerage firm (“Affiliate”), which is wholly owned by 
Respondent’s CEO.  
 
2. Respondent managed and oversaw the operations of numerous self storage real 
estate properties, some of which are owned by Fund II, with others managed on behalf of other 
investors, including Respondent’s CEO.  
 
3. Respondent retained employees and independent contractors to source real estate 
acquisition transactions (“Deal Teams”). The brokerage fees paid to Affiliate in connection with 
property acquisitions 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. 
 
4. 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 payments could create a conflict of interest, or that fees received by Affiliate 
paid for, in part, operational expenses of Respondent. These failures to disclose material 
information rendered statements made by Respondent to investors in Fund II misleading.   
 
5. As a result of the conduct described above and set forth below, Respondent violated 
Section 17(a)(2) of the Securities Act. 
 
RESPONDENT 
 
6. Prime Group, headquartered in Saratoga Springs, New York, is the property 
manager for self storage real estate properties, including those owned by Fund II, and is the 
 
1
  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not 
binding on any other person or entity in this or any other proceeding.  
 
 

 
 
  
3 
sponsor of Fund II. Prime Group is not registered with the Commission in any capacity. Its owner 
serves as its CEO. 
 
OTHER RELEVANT ENTITIES 
 
7.  Fund II, a Delaware limited partnership, is an investment fund formed in January 
2017 to purchase self storage facilities across North America. Respondent’s CEO owns and 
controls the limited liability company which serves as general partner for Fund II. 
 
8. Affiliate is a real estate brokerage firm licensed in New York State wholly owned 
by Respondent’s CEO. Respondent is not a licensed real estate brokerage firm, and thus, Affiliate 
received brokerage fees for property acquisitions sourced by the Deal Teams on behalf of Fund II.  
 
FACTS 
 
Background 
 
9. In seeking acquisition opportunities for investment, Fund II generally did not 
pursue self storage properties that were being offered through the auction process utilized by 
national brokers. Rather, it relied on the Deal Teams cold calling “mom and pop” owners of 
targeted properties to inquire of their interest in selling their properties, or alternatively to cultivate 
relationships with the owners with the hope that they would ultimately sell to Fund II.  
 
10. The Deal Teams were comprised of Respondent’s employees and independent 
contractors located nationwide to find properties to acquire on an “off-market” basis. The costs and 
compensation of the Deal Teams were paid, in part, through a 3% brokerage fee received by 
Affiliate on acquisitions sourced by the Deal Teams. The fees paid by Fund II to Affiliate for 
transactions sourced by the Deal Teams, which are sent to Respondent’s and other related parties’ 
accounts following property acquisitions, are an integral component of Respondent’s business 
model.  
 
Fund II Marketing 
 
11. In 2016, Respondent began preparing to launch Fund II. Respondent retained a new 
placement agent (“Placement Agent”) to find investors to raise over $500 million for this new fund 
through an offering of limited partnership interests. Placement Agent assisted Respondent in 
drafting marketing materials and offering documents for Fund II, including its private placement 
memorandum (“PPM”) for limited partnership interests and a due diligence questionnaire 
(“Generic DDQ”) to provide to investors based on information provided by Respondent. 
Respondent also provided Placement Agent with copies of due diligence materials created for use 
with a prior fund and other marketing and legal materials, including a limited partnership 
agreement (“LPA”).  
 

 
 
  
4 
12. In meetings with investors and in its marketing materials, Respondent, inter alia, 
emphasized the low fee structure of the Fund, which, in turn, would contribute to higher returns. 
For example, Respondent touted that investors would have direct access to investment returns with 
“zero dilution” and “elimination of multiple layers of promote,” while its competitors’ “[t]hird 
party property management pushes costs on properties in lieu of absorbing such costs within its 
management fee.” (emphasis in original). 
 
13. In 2017, Respondent and Placement Agent began marketing Fund II. Throughout 
2017 and early 2018, Respondent and/or Placement Agent provided prospective investors via 
email and in-person with the Fund’s offering and marketing materials, including the LPA, PPM, 
and Generic DDQ. These materials were also made available to prospective investors via the data 
room maintained by Placement Agent. 
 
14. During this time, executives of Respondent attended meetings and calls with 
investors and potential investors, where Respondent’s method for sourcing real estate acquisitions 
was described. 
 
Fund II Offering and Marketing Materials 
  
15. Fund II’s offering and marketing materials contained misleading statements and 
omissions concerning fees and conflicts of interest. This information was material to investors and 
prospective investors as reasonable investors would have wanted to know about fees paid by Fund 
II to Respondent’s affiliates, including potential conflicts created by such payments. 
 
LPA 
 
16. The LPA addresses, in a section titled “Engagement of Other Persons,” the 
engagement of persons including brokers to render services on behalf of Fund II: 
 
The General Partner may, from time to time, engage any person to 
render services to the Fund on such terms and for such 
compensation as the General Partner may determine, including 
attorneys, investment consultants, brokers, independent auditors and 
printers. Person so engaged may be Affiliates of the General Partner 
or employees of Related Persons.  
 
17. Although this section refers to “Affiliates of the General Partner” merely being 
engaged “from time to time,” the use of Affiliate, however, was an important component of 
Respondent’s business model, and Affiliate received fees on the majority of Fund II’s transactions. 
 
 
 
 

 
 
  
5 
 PPM 
  
18. The PPM provided an “Overview of Key Terms of the Fund,” which in turn 
disclosed “Other Fees” paid by Fund II. In this sub-section of the PPM, Respondent disclosed a 1% 
acquisition fee charged on all transactions and 5% property management fee paid to an affiliate, 
but failed to disclose the 3% brokerage fee charged by Affiliate on most transactions. The PPM’s 
“Other Fees” section contained in the “Summary of Principal Terms” also listed the acquisition fee 
and property management fee paid to an affiliate, but did not disclose Affiliate’s fee. 
  
19. The PPM’s description of “Fund Expenses,” in the “Summary of Principal Terms” 
provided: “[Fund II] will pay all expenses related to its operations including “certain costs and 
expenses directly related to the purchase or sale of a Property Investment by the Fund (including 
third party brokerage fees and commissions, and transfer taxes)....” As discussed, however, Fund 
II routinely paid 3% brokerage fees to an affiliate, not just to unaffiliated third party brokers. 
 
20. The PPM also contained a section on potential conflicts. In this section, the PPM 
disclosed other business activities of the general partner which would result in potential conflicts of 
interest for Respondent but failed to disclose any information on Affiliate.  
 
Due Diligence Questionnaires 
 
21. Fund II’s Generic DDQ was presented in a “question-and-answer” format. In 
response to the question “Do you use the service of a broker to source deals,” the Generic DDQ 
stated: “Prime has not and does not use a broker; all sourcing is done internally.” Although 
Respondent, on behalf of Fund II, did not generally retain brokers outside the Deal Teams, 
Respondent routinely used Affiliate as a broker on transactions sourced by the Deal Teams which 
charged Fund II fees on these transactions.  
 
22. In response to a question seeking to identify brokerage fees paid in connection with 
its previous fund, Prime Storage Fund I, LLC (“Fund I”), Respondent stated: “at the property level, 
a buyer’s brokerage commission (paid to individual broker[s], not to an affiliate of Prime or the 
fund manager) equal to 1% to 3% of net purchase price[.]” This was misleading. Affiliate also 
routinely charged brokerage fees to Fund I. 
 
23. In a section on actual or potential conflicts, the Generic DDQ stated “There are no 
significant conflicts of interest,” without disclosing the brokerage fees paid to Affiliate.  
 
24. During the offering of Fund II, certain prospective investors also provided their 
own customized due diligence questionnaires to Placement Agent and Respondent. These 
customized DDQs sought information about, inter alia, Fund II’s fees and conflicts of interest. In 
its responses, Respondent failed to include information about Affiliate and the fees paid on 
transactions sourced by the Deal Teams. 
 

 
 
  
6 
25. For example, one investor requested that Respondent “describe all fee income 
generated from investments, including but not limited to property management, asset management, 
development, transaction, monitoring, advisory and loan servicing fees.” The response only listed 
the asset management, acquisition, and property management fees and failed to disclose the 
brokerage fees received by Affiliate. The response to a question about actual or potential conflicts 
of interest stated that there were no significant conflicts of interest. The investor’s DDQ also 
included a spreadsheet for Respondent to “detail all fees received by the firm and its affiliates from 
all portfolio investments since inception.” The response included the acquisition, asset 
management, and property management fees, but not the brokerage fees charged by Affiliate. 
 
26. A separate investor provided Respondent with a spreadsheet requesting detailed 
information on any fees charged by Respondent or its affiliates. The DDQ requested “any fees, 
including consulting fees, paid to any affiliated group or person.” The response provided to this 
question was “NA.” 
 
27. A response to a request for information about “Any other fees” in a DDQ by a third 
investor stated: “Individual deal team members, unaffiliated with Prime Group Holdings or the 
fund manager, receive a brokerage fee of 1% to 3% of net purchase price.”  
 
28. Between 2017 and 2021, Affiliate received nearly $18 million in brokerage fees at 
the closing of Fund II property acquisitions. The brokerage fees were used to fund Respondent’s 
cost-intensive sourcing operations and to compensate the members of the Deal Teams. 
 
29. As a result of the conduct described above, Respondent violated Section 17(a)(2) of 
the Securities Act which prohibits “any person in the offer or sale of any securities ... directly or 
indirectly ... to obtain money or property by means of any untrue statement of a material fact or 
any omission to state a material fact necessary in order to make the statements made, in light of the 
circumstances under which they were made, not misleading.”
2
 
 
DISGORGEMENT 
 
The disgorgement and prejudgment interest ordered in paragraph IV.B is consistent with 
equitable principles and does not exceed Respondent’s net profits from its violations and will be 
distributed to harmed investors to the extent feasible. The Commission will hold funds paid 
pursuant to paragraph IV.B in an account at the United States Treasury pending distribution. 
Upon approval of the distribution final accounting by the Commission, any amounts remaining 
that are infeasible to return to investors, and any amounts returned to the Commission in the 
future that are infeasible to return to investors, may be transferred to the general fund of the U.S. 
Treasury, subject to Section 21F(g)(3) of the Exchange Act. 
 
 
2
  Negligence is sufficient to establish a violation of Section 17(a)(2) of the Securities Act. 
See Aaron v. SEC, 446 U.S. 680, 696-97 (1980). 

 
 
  
7 
 
 
REMEDIAL EFFORTS 
 
In determining to accept the Offer, the Commission considered remedial acts promptly 
undertaken by Respondent. 
 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent Prime Group’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 
 A. Pursuant to Section 8A of the Securities Act, Respondent cease and desist from 
committing or causing any violations and any future violations of Section 17(a)(2) of the Securities 
Act.  
 
B. Respondent shall, within 10 days of the entry of this Order, pay disgorgement of 
$11,510,625 and prejudgment interest of $2,561,197 to the Securities and Exchange Commission. 
If timely payment is not made, additional interest shall accrue pursuant to SEC Rule of Practice 
600. 
 
 Payment must be made in one of the following ways:  
 
(1) Respondent may transmit payment electronically to the Commission, which 
will provide detailed ACH transfer/Fedwire instructions upon request;  
 
(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
 
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to:  
 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 
Payments by check or money order must be accompanied by a cover letter identifying 
Prime Group Holdings, LLC as a Respondent in these proceedings, and the file number of these 

 
 
  
8 
proceedings; a copy of the cover letter and check or money order must be sent to Osman Nawaz, 
Division of Enforcement, Securities and Exchange Commission, 100 Pearl St., Suite 20-100, New 
York, NY 10004. 
 
C. Respondent shall, within 10 days of the entry of this Order, pay a civil money 
penalty in the amount of $6,500,000 to the Securities and Exchange Commission. If timely 
payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717.  
 
 Payment must be made in one of the following ways:  
 
(1) Respondent may transmit payment electronically to the Commission, which 
will provide detailed ACH transfer/Fedwire instructions upon request;  
 
(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
 
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to:  
 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 
Payments by check or money order must be accompanied by a cover letter identifying 
Prime Group Holdings, LLC as a Respondent in these proceedings, and the file number of these 
proceedings; a copy of the cover letter and check or money order must be sent to Osman Nawaz, 
Division of Enforcement, Securities and Exchange Commission, 100 Pearl St., Suite 20-100, New 
York, NY 10004. 
 
 D. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair Fund is created 
for the disgorgement, prejudgment interest and penalties referenced in paragraphs IV.B and C. 
above. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated 
as penalties paid to the government for all purposes, including all tax purposes. To preserve the 
deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it shall 
not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 
compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in 
this action ("Penalty Offset"). If the court in any Related Investor Action grants such a Penalty 
Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting the 
Penalty Offset, notify the Commission's counsel in this action and pay the amount of the Penalty 
Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an 

 
 
  
9 
additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 
in this proceeding. For purposes of this paragraph, a "Related Investor Action" means a private 
damages action brought against Respondent by or on behalf of one or more investors based on 
substantially the same facts as alleged in the Order instituted by the Commission in this 
proceeding. 
  
 
 By the Commission. 
 
 
 
Vanessa A. Countryman 
Secretary 

UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES ACT OF 1933 

Release No. 11228 / September 5, 2023 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-21602 

 

 

 

In the Matter of 

 

PRIME GROUP 

HOLDINGS, LLC,  

 

Respondent. 

 

 

 

 

 

ORDER INSTITUTING CEASE-AND-

DESIST PROCEEDINGS PURSUANT TO 

SECTION 8A OF THE SECURITIES ACT 

OF 1933, MAKING FINDINGS, AND 

IMPOSING A CEASE-AND-DESIST 

ORDER 

  

I. 

 

 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-

and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act 

of 1933 (“Securities Act”) against Prime Group Holdings, LLC (“Prime Group” or “Respondent”).  

 

II. 

 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose 

of these proceedings and any other proceedings brought by or on behalf of the Commission, or to 

which the Commission is a party, and without admitting or denying the findings herein, except as 

to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are 

admitted, Respondent consents to the entry of this Order Instituting Cease-and-Desist Proceedings 

Pursuant to Section 8A of the Securities Act of 1933, Making Findings, and Imposing a Cease-and-

Desist Order (“Order”), as set forth below. 

 



 

   

2 

III. 

 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that:  

 

SUMMARY 

 

1. This matter involves certain inadequate disclosures and materially misleading 

statements made by Prime Group – a private equity real estate firm focused on alternative real estate 

asset classes – in the offering of Prime Storage Fund II, LP (“Fund II”), relating to millions of 

dollars of earned real estate brokerage fees (hereinafter referred to as brokerage fees) paid between 

2017 and 2021 to an affiliated real estate brokerage firm (“Affiliate”), which is wholly owned by 

Respondent’s CEO.  

 

2. Respondent managed and oversaw the operations of numerous self storage real 

estate properties, some of which are owned by Fund II, with others managed on behalf of other 

investors, including Respondent’s CEO.  

 

3. Respondent retained employees and independent contractors to source real estate 

acquisition transactions (“Deal Teams”). The brokerage fees paid to Affiliate in connection with 

property acquisitions 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. 

 

4. 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 payments could create a conflict of interest, or that fees received by Affiliate 

paid for, in part, operational expenses of Respondent. These failures to disclose material 

information rendered statements made by Respondent to investors in Fund II misleading.   

 

5. As a result of the conduct described above and set forth below, Respondent violated 

Section 17(a)(2) of the Securities Act. 

 

RESPONDENT 

 

6. Prime Group, headquartered in Saratoga Springs, New York, is the property 

manager for self storage real estate properties, including those owned by Fund II, and is the 

 
1  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not 

binding on any other person or entity in this or any other proceeding.  

 
 



 

   

3 

sponsor of Fund II. Prime Group is not registered with the Commission in any capacity. Its owner 

serves as its CEO. 

 

OTHER RELEVANT ENTITIES 

 

7.  Fund II, a Delaware limited partnership, is an investment fund formed in January 

2017 to purchase self storage facilities across North America. Respondent’s CEO owns and 

controls the limited liability company which serves as general partner for Fund II. 

 

8. Affiliate is a real estate brokerage firm licensed in New York State wholly owned 

by Respondent’s CEO. Respondent is not a licensed real estate brokerage firm, and thus, Affiliate 

received brokerage fees for property acquisitions sourced by the Deal Teams on behalf of Fund II.  

 

FACTS 

 

Background 

 

9. In seeking acquisition opportunities for investment, Fund II generally did not 

pursue self storage properties that were being offered through the auction process utilized by 

national brokers. Rather, it relied on the Deal Teams cold calling “mom and pop” owners of 

targeted properties to inquire of their interest in selling their properties, or alternatively to cultivate 

relationships with the owners with the hope that they would ultimately sell to Fund II.  

 

10. The Deal Teams were comprised of Respondent’s employees and independent 

contractors located nationwide to find properties to acquire on an “off-market” basis. The costs and 

compensation of the Deal Teams were paid, in part, through a 3% brokerage fee received by 

Affiliate on acquisitions sourced by the Deal Teams. The fees paid by Fund II to Affiliate for 

transactions sourced by the Deal Teams, which are sent to Respondent’s and other related parties’ 

accounts following property acquisitions, are an integral component of Respondent’s business 

model.  

 

Fund II Marketing 

 

11. In 2016, Respondent began preparing to launch Fund II. Respondent retained a new 

placement agent (“Placement Agent”) to find investors to raise over $500 million for this new fund 

through an offering of limited partnership interests. Placement Agent assisted Respondent in 

drafting marketing materials and offering documents for Fund II, including its private placement 

memorandum (“PPM”) for limited partnership interests and a due diligence questionnaire 

(“Generic DDQ”) to provide to investors based on information provided by Respondent. 

Respondent also provided Placement Agent with copies of due diligence materials created for use 

with a prior fund and other marketing and legal materials, including a limited partnership 

agreement (“LPA”).  

 



 

   

4 

12. In meetings with investors and in its marketing materials, Respondent, inter alia, 

emphasized the low fee structure of the Fund, which, in turn, would contribute to higher returns. 

For example, Respondent touted that investors would have direct access to investment returns with 

“zero dilution” and “elimination of multiple layers of promote,” while its competitors’ “[t]hird 

party property management pushes costs on properties in lieu of absorbing such costs within its 

management fee.” (emphasis in original). 

 

13. In 2017, Respondent and Placement Agent began marketing Fund II. Throughout 

2017 and early 2018, Respondent and/or Placement Agent provided prospective investors via 

email and in-person with the Fund’s offering and marketing materials, including the LPA, PPM, 

and Generic DDQ. These materials were also made available to prospective investors via the data 

room maintained by Placement Agent. 

 

14. During this time, executives of Respondent attended meetings and calls with 

investors and potential investors, where Respondent’s method for sourcing real estate acquisitions 

was described. 

 

Fund II Offering and Marketing Materials 

  

15. Fund II’s offering and marketing materials contained misleading statements and 

omissions concerning fees and conflicts of interest. This information was material to investors and 

prospective investors as reasonable investors would have wanted to know about fees paid by Fund 

II to Respondent’s affiliates, including potential conflicts created by such payments. 

 

LPA 

 

16. The LPA addresses, in a section titled “Engagement of Other Persons,” the 

engagement of persons including brokers to render services on behalf of Fund II: 

 

The General Partner may, from time to time, engage any person to 

render services to the Fund on such terms and for such 

compensation as the General Partner may determine, including 

attorneys, investment consultants, brokers, independent auditors and 

printers. Person so engaged may be Affiliates of the General Partner 

or employees of Related Persons.  

 

17. Although this section refers to “Affiliates of the General Partner” merely being 

engaged “from time to time,” the use of Affiliate, however, was an important component of 

Respondent’s business model, and Affiliate received fees on the majority of Fund II’s transactions. 

 

 

 

 



 

   

5 

 PPM 

  

18. The PPM provided an “Overview of Key Terms of the Fund,” which in turn 

disclosed “Other Fees” paid by Fund II. In this sub-section of the PPM, Respondent disclosed a 1% 

acquisition fee charged on all transactions and 5% property management fee paid to an affiliate, 

but failed to disclose the 3% brokerage fee charged by Affiliate on most transactions. The PPM’s 

“Other Fees” section contained in the “Summary of Principal Terms” also listed the acquisition fee 

and property management fee paid to an affiliate, but did not disclose Affiliate’s fee. 

  

19. The PPM’s description of “Fund Expenses,” in the “Summary of Principal Terms” 

provided: “[Fund II] will pay all expenses related to its operations including “certain costs and 

expenses directly related to the purchase or sale of a Property Investment by the Fund (including 

third party brokerage fees and commissions, and transfer taxes)….” As discussed, however, Fund 

II routinely paid 3% brokerage fees to an affiliate, not just to unaffiliated third party brokers. 

 

20. The PPM also contained a section on potential conflicts. In this section, the PPM 

disclosed other business activities of the general partner which would result in potential conflicts of 

interest for Respondent but failed to disclose any information on Affiliate.  

 

Due Diligence Questionnaires 
 

21. Fund II’s Generic DDQ was presented in a “question-and-answer” format. In 

response to the question “Do you use the service of a broker to source deals,” the Generic DDQ 

stated: “Prime has not and does not use a broker; all sourcing is done internally.” Although 

Respondent, on behalf of Fund II, did not generally retain brokers outside the Deal Teams, 

Respondent routinely used Affiliate as a broker on transactions sourced by the Deal Teams which 

charged Fund II fees on these transactions.  

 

22. In response to a question seeking to identify brokerage fees paid in connection with 

its previous fund, Prime Storage Fund I, LLC (“Fund I”), Respondent stated: “at the property level, 

a buyer’s brokerage commission (paid to individual broker[s], not to an affiliate of Prime or the 

fund manager) equal to 1% to 3% of net purchase price[.]” This was misleading. Affiliate also 

routinely charged brokerage fees to Fund I. 

 

23. In a section on actual or potential conflicts, the Generic DDQ stated “There are no 

significant conflicts of interest,” without disclosing the brokerage fees paid to Affiliate.  

 

24. During the offering of Fund II, certain prospective investors also provided their 

own customized due diligence questionnaires to Placement Agent and Respondent. These 

customized DDQs sought information about, inter alia, Fund II’s fees and conflicts of interest. In 

its responses, Respondent failed to include information about Affiliate and the fees paid on 

transactions sourced by the Deal Teams. 

 



 

   

6 

25. For example, one investor requested that Respondent “describe all fee income 

generated from investments, including but not limited to property management, asset management, 

development, transaction, monitoring, advisory and loan servicing fees.” The response only listed 

the asset management, acquisition, and property management fees and failed to disclose the 

brokerage fees received by Affiliate. The response to a question about actual or potential conflicts 

of interest stated that there were no significant conflicts of interest. The investor’s DDQ also 

included a spreadsheet for Respondent to “detail all fees received by the firm and its affiliates from 

all portfolio investments since inception.” The response included the acquisition, asset 

management, and property management fees, but not the brokerage fees charged by Affiliate. 

 

26. A separate investor provided Respondent with a spreadsheet requesting detailed 

information on any fees charged by Respondent or its affiliates. The DDQ requested “any fees, 

including consulting fees, paid to any affiliated group or person.” The response provided to this 

question was “NA.” 

 

27. A response to a request for information about “Any other fees” in a DDQ by a third 

investor stated: “Individual deal team members, unaffiliated with Prime Group Holdings or the 

fund manager, receive a brokerage fee of 1% to 3% of net purchase price.”  

 

28. Between 2017 and 2021, Affiliate received nearly $18 million in brokerage fees at 

the closing of Fund II property acquisitions. The brokerage fees were used to fund Respondent’s 

cost-intensive sourcing operations and to compensate the members of the Deal Teams. 

 

29. As a result of the conduct described above, Respondent violated Section 17(a)(2) of 

the Securities Act which prohibits “any person in the offer or sale of any securities … directly or 

indirectly … to obtain money or property by means of any untrue statement of a material fact or 

any omission to state a material fact necessary in order to make the statements made, in light of the 

circumstances under which they were made, not misleading.”2 

 

DISGORGEMENT 

 

The disgorgement and prejudgment interest ordered in paragraph IV.B is consistent with 

equitable principles and does not exceed Respondent’s net profits from its violations and will be 

distributed to harmed investors to the extent feasible. The Commission will hold funds paid 

pursuant to paragraph IV.B in an account at the United States Treasury pending distribution. 

Upon approval of the distribution final accounting by the Commission, any amounts remaining 

that are infeasible to return to investors, and any amounts returned to the Commission in the 

future that are infeasible to return to investors, may be transferred to the general fund of the U.S. 

Treasury, subject to Section 21F(g)(3) of the Exchange Act. 

 

 
2  Negligence is sufficient to establish a violation of Section 17(a)(2) of the Securities Act. 

See Aaron v. SEC, 446 U.S. 680, 696-97 (1980). 



 

   

7 

 

 

REMEDIAL EFFORTS 

 

In determining to accept the Offer, the Commission considered remedial acts promptly 

undertaken by Respondent. 

 

IV. 

 

 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Respondent Prime Group’s Offer. 

 

 Accordingly, it is hereby ORDERED that: 

 

 A. Pursuant to Section 8A of the Securities Act, Respondent cease and desist from 

committing or causing any violations and any future violations of Section 17(a)(2) of the Securities 

Act.  

 

B. Respondent shall, within 10 days of the entry of this Order, pay disgorgement of 

$11,510,625 and prejudgment interest of $2,561,197 to the Securities and Exchange Commission. 

If timely payment is not made, additional interest shall accrue pursuant to SEC Rule of Practice 

600. 

 

 Payment must be made in one of the following ways:  

 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;  

 

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:  

 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

Payments by check or money order must be accompanied by a cover letter identifying 

Prime Group Holdings, LLC as a Respondent in these proceedings, and the file number of these 

http://www.sec.gov/about/offices/ofm.htm


 

   

8 

proceedings; a copy of the cover letter and check or money order must be sent to Osman Nawaz, 

Division of Enforcement, Securities and Exchange Commission, 100 Pearl St., Suite 20-100, New 

York, NY 10004. 

 

C. Respondent shall, within 10 days of the entry of this Order, pay a civil money 

penalty in the amount of $6,500,000 to the Securities and Exchange Commission. If timely 

payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717.  

 

 Payment must be made in one of the following ways:  

 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;  

 

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:  

 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

Payments by check or money order must be accompanied by a cover letter identifying 

Prime Group Holdings, LLC as a Respondent in these proceedings, and the file number of these 

proceedings; a copy of the cover letter and check or money order must be sent to Osman Nawaz, 

Division of Enforcement, Securities and Exchange Commission, 100 Pearl St., Suite 20-100, New 

York, NY 10004. 

 

 D. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair Fund is created 

for the disgorgement, prejudgment interest and penalties referenced in paragraphs IV.B and C. 

above. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated 

as penalties paid to the government for all purposes, including all tax purposes. To preserve the 

deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it shall 

not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 

compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in 

this action ("Penalty Offset"). If the court in any Related Investor Action grants such a Penalty 

Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting the 

Penalty Offset, notify the Commission's counsel in this action and pay the amount of the Penalty 

Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an 

http://www.sec.gov/about/offices/ofm.htm


 

   

9 

additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 

in this proceeding. For purposes of this paragraph, a "Related Investor Action" means a private 

damages action brought against Respondent by or on behalf of one or more investors based on 

substantially the same facts as alleged in the Order instituted by the Commission in this 

proceeding. 

  

 

 By the Commission. 

 

 

 

Vanessa A. Countryman 

Secretary 


	OLE_LINK1
	OLE_LINK2