On September 5, 2023, the Commission issued the Order instituting and simultaneously settling cease-and-desist proceedings 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 the offering materials of Prime Storage Fund II, LLP (“Fund II”), relating to millions of dollars of earned real estate brokerage fees paid between 2017 and 2021 to an affiliated 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 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 in disgorgement, $2,561,197 in prejudgment interest, and a $6,500,000 civil money penalty, for a total of $20,571,822, to the Commission. The Commission also created the Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the penalty collected, along with the disgorgement and interest collected, can be distributed to harmed investors.

As calculated using the methodology detailed in the Plan of Allocation (Plan Exhibit A), investors in Fund II will be compensated for Respondent’s payment of improperly disclosed real estate brokerage fees paid to Affiliate between March 29, 2017 and April 28, 2021, inclusive (the “Relevant Period”). In the view of the Commission staff, this methodology constitutes a fair and reasonable allocation of the Fair Fund.