Brandon Turner ODC fund

[Guillermo Sanchez]

Hey, I invested back in July in array apartments fund. I'm worried, I was told to wait 6 months for distributions and we are now heading into May and $0 has been distributed. I came here to see if anyone else has invested in ODC and if they are in good standing. 

[Jay Hinrichs]

Quote from @Sean Barber:

Quote from @Jay Hinrichs:

Quote from @Sean Barber:

Quote from @Jay Hinrichs:

Quote from @Sean Barber:

Quote from @Chris Seveney:

Quote from @Sean Barber:

Quote from @Chris Seveney:

@Sean Barber

So are you saying if you invested $100,000 you will get back $38,000

Will you also owe taxes for any accelerated depreciation that was taken?

Yes, if they sell now they are projecting that for every $100K you invested you’d get $38K back. I’m not exactly sure how depreciation recapture would work when you lose money but I have heard that you’re still taxed. Hopefully someone else more knowledgeable than me can chime in on that.

 So what was the outcome on this?

 As expected, given the deceptiveness of their original email, 96% of investor respondents voted to issue pref equity to dilute us. Unfortunately, I believe that most didn’t understand that we’re being diluted and that it would be better to lose 38% now than continue to hold and still lose that 38% or more in 10 years. They likely also did not understand that ODC’s new business plan is still heavily dependent on significant rate cuts and rising rents; two things I believe are unlikely to occur.

seems to me the play right now is to join in on the syndication that are raising this pref equity and jumping in front of the original investors.. maybe for you its like a stock market straddle play invest in the pref equity fund to offset your loss's you may incur in the original offering ( if in fact there will be any).. But no one knows now since the can has been kicked way down the road. One thing though time can heal poor real estate investments.

I don’t throw good money after bad. But if I believed their projections then, yes, investing in the pref equity raise could mitigate some of my losses. A better strategy… investing that same money elsewhere in a deal that hasn’t already failed.

certainly understand your perspective ..  when i worked for a syndicator back in the late 80s and tax reform hit.. they had all sorts of problems which eventually took the entire company down and they had over 250 different partnerships ( different buildings apartments senior housing MHP shopping centers land development  the land development was what I was employed to work on.).

And this was prime Northern CA real estate Bay Area and Sacramento.. But not only did they have to stop the distributions and go for cash calls.. then you have investor revolts and then the lawyers and then the move to kick them out as GP's and then you had the lawyers making bank trying to run the projects for the investor committee's its was a CLUSTER of epic proportions and the entire portfolio was lost to the senior lenders..

Have had to witness that first hand and work through a half a dozen of my land projects were I was the lead and the GP's stopped communicating leaving it to me.. I was basically scared for life and thats why I would PERSONALLY never take on a GP role. I knew my limitations and I know there are hundreds of super successful syndicators but for me the risk of something not going right was too great so I took a different path.  You’re only as good as your last deal in the eyes of most investors. That is just human nature and I get it.  Not everything i have done has been perfect etc.. WE all have bummers at one time or the other.

That’s valuable experience. One caveat to my current experience though. I’m invested in 3 different deals with ODC, different markets, different asset classes. All performing poorly (though not all capital calls yet) and with even worse communication. My view of ODC is based upon all three investments that I have with them.

Gothca I have no investment in ODC so I cannot speak from personal experience. I am just relating what I lived through personally being on the firing line.. I see this with the crowd funders that grew too quick ( realty shares comes to mind)  and did not have enough support staff to communicate with their investors and that leads to internet chatter most of it not good and it can spiral out of control..

So when you have hundreds of investors communication can really get out of control.. how do you answer direct emials form individual investors ???  each investor will expect replys if not same day next day or so at worse and when that does not happen things can get wild. And especially when you minimum investments are so low IE 25k to 50k those investors will be the most vocal was my experience.

When I was on the firing line of course we did not have internet like today and Investors were generally local so they would walk into the office .  Or we would have investor meetings in the evening that I would give a presentation of the status of the project and I would have 20 to 30 couples but even with that they wanted the GP there.. and the GP left me hanging one night and the investors went bat sheeet crazy.. there I was in the firing line..I know that was then and now is now and its not how business is done anymore.. I do believe though it was a huge mistake to kick out the original GPs and let the investor committee manage through a very high paid lawyer.  Those partnerships were in the toilet very quickly.

I guess the question for you is .. how much did the sponsors reputation etc play in your decision to invest or were you sold on the assets.. I know in the few syndication's I have personal invested in over the last decade the Sponsor was far more important that the asset. And heck I am in the business and create returns for myself that are as good or exceed what any of the syndicators do. But for diversification and end of year tax bene's they served the purpose at the time.. One was just a return of capital no distribution and no tax bene's the project did not work and the syndicator cut almost 1 mil check to make us all whole.. the other two are still trundling along.

[Sean Barber]

Quote from @Jay Hinrichs:

Quote from @Sean Barber:

Quote from @Jay Hinrichs:

Quote from @Sean Barber:

Quote from @Jay Hinrichs:

Quote from @Sean Barber:

Quote from @Chris Seveney:

Quote from @Sean Barber:

Quote from @Chris Seveney:

@Sean Barber

So are you saying if you invested $100,000 you will get back $38,000

Will you also owe taxes for any accelerated depreciation that was taken?

Yes, if they sell now they are projecting that for every $100K you invested you’d get $38K back. I’m not exactly sure how depreciation recapture would work when you lose money but I have heard that you’re still taxed. Hopefully someone else more knowledgeable than me can chime in on that.

 So what was the outcome on this?

 As expected, given the deceptiveness of their original email, 96% of investor respondents voted to issue pref equity to dilute us. Unfortunately, I believe that most didn’t understand that we’re being diluted and that it would be better to lose 38% now than continue to hold and still lose that 38% or more in 10 years. They likely also did not understand that ODC’s new business plan is still heavily dependent on significant rate cuts and rising rents; two things I believe are unlikely to occur.

seems to me the play right now is to join in on the syndication that are raising this pref equity and jumping in front of the original investors.. maybe for you its like a stock market straddle play invest in the pref equity fund to offset your loss's you may incur in the original offering ( if in fact there will be any).. But no one knows now since the can has been kicked way down the road. One thing though time can heal poor real estate investments.

I don’t throw good money after bad. But if I believed their projections then, yes, investing in the pref equity raise could mitigate some of my losses. A better strategy… investing that same money elsewhere in a deal that hasn’t already failed.

certainly understand your perspective ..  when i worked for a syndicator back in the late 80s and tax reform hit.. they had all sorts of problems which eventually took the entire company down and they had over 250 different partnerships ( different buildings apartments senior housing MHP shopping centers land development  the land development was what I was employed to work on.).

And this was prime Northern CA real estate Bay Area and Sacramento.. But not only did they have to stop the distributions and go for cash calls.. then you have investor revolts and then the lawyers and then the move to kick them out as GP's and then you had the lawyers making bank trying to run the projects for the investor committee's its was a CLUSTER of epic proportions and the entire portfolio was lost to the senior lenders..

Have had to witness that first hand and work through a half a dozen of my land projects were I was the lead and the GP's stopped communicating leaving it to me.. I was basically scared for life and thats why I would PERSONALLY never take on a GP role. I knew my limitations and I know there are hundreds of super successful syndicators but for me the risk of something not going right was too great so I took a different path.  You’re only as good as your last deal in the eyes of most investors. That is just human nature and I get it.  Not everything i have done has been perfect etc.. WE all have bummers at one time or the other.

That’s valuable experience. One caveat to my current experience though. I’m invested in 3 different deals with ODC, different markets, different asset classes. All performing poorly (though not all capital calls yet) and with even worse communication. My view of ODC is based upon all three investments that I have with them.

Gothca I have no investment in ODC so I cannot speak from personal experience. I am just relating what I lived through personally being on the firing line.. I see this with the crowd funders that grew too quick ( realty shares comes to mind)  and did not have enough support staff to communicate with their investors and that leads to internet chatter most of it not good and it can spiral out of control..

So when you have hundreds of investors communication can really get out of control.. how do you answer direct emials form individual investors ???  each investor will expect replys if not same day next day or so at worse and when that does not happen things can get wild. And especially when you minimum investments are so low IE 25k to 50k those investors will be the most vocal was my experience.

When I was on the firing line of course we did not have internet like today and Investors were generally local so they would walk into the office .  Or we would have investor meetings in the evening that I would give a presentation of the status of the project and I would have 20 to 30 couples but even with that they wanted the GP there.. and the GP left me hanging one night and the investors went bat sheeet crazy.. there I was in the firing line..I know that was then and now is now and its not how business is done anymore.. I do believe though it was a huge mistake to kick out the original GPs and let the investor committee manage through a very high paid lawyer.  Those partnerships were in the toilet very quickly.

I guess the question for you is .. how much did the sponsors reputation etc play in your decision to invest or were you sold on the assets.. I know in the few syndication's I have personal invested in over the last decade the Sponsor was far more important that the asset. And heck I am in the business and create returns for myself that are as good or exceed what any of the syndicators do. But for diversification and end of year tax bene's they served the purpose at the time.. One was just a return of capital no distribution and no tax bene's the project did not work and the syndicator cut almost 1 mil check to make us all whole.. the other two are still trundling along.

The sponsor’s reputation was most important. However, as of the date of notification, it was evident that a pref equity raise was to protect the GP and their source of income, not the equity of the LPs. They very smartly manipulated the LPs to take ownership of the decision that they wanted. For the next ten years, they will continue to collect extremely high fees (4% property management fee, 2% asset management fee, 2% acquisition fee, 1% capital transaction fee etc…), continue to claim 0 capital calls, and continue to raise more money on new deals. In ten years, if LPs are lucky, we’ll get our original investment back with 0 ROI. They should have been forthright and sold for a 38% loss of equity. In ten years I could have made that back plus more. But they didn’t because it would have gone on their track record. Mark my words, this is the first of multiple pref equity raises for this fund. They’ll do this again once they run out of money because rates don’t drop as they’re counting on and rents don’t increase like they’re counting on.

[Jim Peret]

I agree with Sean Barber 100% and was one of 4% that voted to sell.  How do we even know if the 4% voting to sell is true? Doesn't look like Brandon thinks a couple bad deals will run his reputation or doesn't care. When I'm losing money and he's pushing new funds in my email/text. Or he tries to get me to his save Hawaii cause.  

[Joe S.]

After reading through so many replies, it  seems that with most syndications the GP has it where heads he wins and tails you lose.