LVP - Least Valuable Player

I did not follow last year's merger of two non-traded REITs, MVP REIT I and and MVP REIT II, which raised a combined $165 million, but recent filings from the resulting REIT are worth a read.  Upon completion of the merger last fall, the new entity renamed itself The Parking REIT.  The merger is an example of a non-liquidity capital event, which are becoming all to familiar, but that is another post for another day.  In early April, the new REIT filed Form 12b-25, which is a notice of late filing.  The Parking REIT stated that it could not file its financial statements due to the following:

In February 2018, the Audit Committee of the Registrant's Board of Directors (the "Audit Committee") engaged independent legal counsel to conduct an internal investigation arising from the Audit Committee's receipt of allegations from an employee of MVP Realty Advisors, LLC, the Registrant's external advisor (the "Advisor"), regarding possible wrongdoing by the Registrant's Chairman and Chief Executive Officer, Michael V. Shustek, relating to (i) potentially inaccurate disclosures by MVP American Securities, the broker-dealer affiliated with the Advisor, to the Financial Industry Regulatory Authority, Inc. ("FINRA") relating to total underwriting compensation paid by the Advisor and its affiliates (other than the Registrant)  in connection with the initial public offerings of MVP REIT, Inc. and the Registrant and (ii) potential inaccuracies in personal financial statements of Mr. Shustek that were provided to one or more of the Registrant's lenders in connection with mortgage loans or guarantees where Mr. Shustek is a personal non-recourse carve-out guarantor.

The Audit Committee commenced the internal investigation and engaged independent legal counsel promptly upon becoming aware of the allegations. As a result of the pendency of the internal investigation, the Registrant is unable to finalize the Registrant's annual financial statements for the periods covered by the Annual Report.  While the investigation is ongoing, the Audit Committee has not found any irregularities in the Registrant's financial statements or accounting procedures, but no assurance can be given that such findings will not occur.

Just your normal financial chicanery.  On May 3, 2018, The Parking REIT's board's Audit Committee issued the results of its investigation.  I read the Audit Committee's findings as a confirmation of the allegations, but because of the REIT's plan to correct its past mistakes the board has been placated.  The REIT's broker dealer, MVP American Securities, amended its disclosures, and the REIT's Chairman and CEO Michael Shustek corrected the inaccuracies in his financial statements.  In addition the REIT agreed to hire a third party consultant to assess the REIT's internal controls, and the REIT will train employees on legal and regulatory obligations, and adopted the following Audit Committee recommendations:

o	Regularly evaluating the Board's composition for, among other things, independence;

o	Requiring the CFO to also report directly to the Board and to meet independently with the  Board at regularly scheduled meeting and on at least a quarterly basis; and

o	Assess and evaluate, at least on an annual basis, potential additional corporate  governance enhancements with the advice of outside legal counsel.

o	The Board declined to implement the Audit Committee's recommendation to bifurcate  the roles of Chairman and Chief Executive Officer, but agreed to further evaluate this  proposal for possible implementation in the future.

It is no shock that the board declined to limit Shustek's authority.  Board and Audit Committee member Allen Wolff resigned from the board, because his "philosophy and vision" are not aligned with the thinking of a majority of the board.  I am glad this REIT solved all its problems so fast and booted that pesky board member.  I can't think of any systemic financial or regulatory problems that a little training won't solve.

It does not take a genius to know that the wrong person resigned from this REIT and who is its LVP (Least Valuable Player).