First National Realty Partners: Any Experience Or Knowledge

[John Thedford]

I found this company on FB. They are offering a part ownership in two large grocery store anchored strips in the NE. They are claiming a projected first year cash return of 8% with an IRR of 16%. The project is 36.5M and buy-in is 50K or more. This would be my first time buying into a deal like this. It is a DE corporation and ownership of the strips will be held in an LLC. I know NOTHING about these types of transactions and I am hesitant to just give someone 50K without a good understanding of what I may be getting myself into.

[GREGG ROOD]

I just came across these folks through an unsolicited banner advertisement. Their website is fancy, presentation professional, and history of "past deals" and activity looks compelling. However, I tried to conduct some research on the two firm founders - Anthony Grosso and Christopher Palermo - to find out where they worked before, what expertise they had managing CRE, who they were associated with, etc. - typical due diligence items to gain confidence and assess credibility before turning over any of my hard earned money. I was unable to find any information on either of them from before 2016 when they self-published a book on CRE. One partner was the author of the book and the other partner wrote the forward. On the company's website, they do not publish ANY information on any of their past deals historical performance, actual to pro-forma results, or full cycle results. Way too many Red Flags and lack of transparency. I would be EXTREMELY CAUTIOUS!!!

[Joel Owens]

Abba sorry to hear that. 1.5 to 2% return is very low for a retail center. I have been in NNN 20 years investor and principal broker and owner of my company. I specialize in in single tenant and multi-tenant nationally.

My friend owns about 15 million sq ft of retail centers who has been owning over 40 years. Typically pref can be from 6 to 8 depending on variables with the center. Super high quality and all national tenants with long leases maybe 6%. Center with more mix of mom and pop versus national more 8 pref as volatility with small tenants. It's important to know if existing in place rent on the purchase is at, above, or below market for those inline retail box sizes.

Some more inexperienced think retail centers are absolutely better than single tenant because you have multiple tenants paying but it comes down to lease, location, tenant strength, market in place rents for risk factors. Some of my clients buy retail centers but I just do not want to own them. I like high quality single tenant for myself with less management. Our pref is typically 6% and up to accredited LP's. Single tenant has risk too if area is bad, tenant too weak, rent above market tenant is paying due to high tenant improvement credits from owner to get them in their and opening,etc.

Hope things turn around for your investments soon.

[Cory TerEick]

I have one investment with FNRP and I don't recommend them at all based on this experience.  I invested $500k with them on a 1031 almost 2 years ago.  They actually did have some initially good payouts the first year; however, looking back at the financial reports, these first payouts seem to have been programmed into their acquisition model and financed via debt as opposed to the actual earnings of the property.  In year 2, I am looking at 2% in annual distributions.  They will have to refinance their debt soon, so I anticipate these returns going to 0 or negative in Year 3.  

Looking at the reporting I do get, their fees are very high for what you get in terms of them managing the asset.  They tout their leasing team, but to me they do a very pedestrian job and charge high fees for it.   In terms of accounting, they absolutely suck at getting out timely reports.  Last year I didn't receive their accounting file (a trial balance report) for my taxes (due in April) until July.  Lots of BS excuses and finger-pointing at their hired out Accounting Team for this.

My biggest concern now in terms of this one investment is that they are way over-leveraged and are in a position where they will need to refinance soon which will likely result in negative cashflow with interest rates where they are at.   They are not reporting this to investors or highlighting it as a major risk as of yet, but I see it coming in the next 6 months or so.

Before investing with them, I encourage you to look at their reviews.  The positive reviews are very short and look to be posted by employees, affiliates, or brand new investors without much experience with them.  Dig deep into the negative reviews that provide some context on actual experience.  

[Kent Parks]

Quote from @Cory TerEick:

I have one investment with FNRP and I don't recommend them at all based on this experience.  I invested $500k with them on a 1031 almost 2 years ago.  They actually did have some initially good payouts the first year; however, looking back at the financial reports, these first payouts seem to have been programmed into their acquisition model and financed via debt as opposed to the actual earnings of the property.  In year 2, I am looking at 2% in annual distributions.  They will have to refinance their debt soon, so I anticipate these returns going to 0 or negative in Year 3.  

Looking at the reporting I do get, their fees are very high for what you get in terms of them managing the asset.  They tout their leasing team, but to me they do a very pedestrian job and charge high fees for it.   In terms of accounting, they absolutely suck at getting out timely reports.  Last year I didn't receive their accounting file (a trial balance report) for my taxes (due in April) until July.  Lots of BS excuses and finger-pointing at their hired out Accounting Team for this.

My biggest concern now in terms of this one investment is that they are way over-leveraged and are in a position where they will need to refinance soon which will likely result in negative cashflow with interest rates where they are at.   They are not reporting this to investors or highlighting it as a major risk as of yet, but I see it coming in the next 6 months or so.

Before investing with them, I encourage you to look at their reviews.  The positive reviews are very short and look to be posted by employees, affiliates, or brand new investors without much experience with them.  Dig deep into the negative reviews that provide some context on actual experience.  

 Thanks for your feedback Cory. Did you do any due diligence before you invested with them?

[Kent Parks]

Quote from @Abba Kader:

I have a lengthy post on FNRP. All I can tell you is that they are a joke. Don't do it.

I am a seasoned investor and did 2 deals $400K each. my returns are no where close to what was promised and I don't see any hope. at the present time after 2 + years I am at about 1.5 - 2% return. I have discussed this with them and there was mention of a "Capital call". So instead of them giving me the returns or just returning my initial investment, they want more money to stay afloat.  

Thanks for your report on them Abba. Did you do any due diligence before you invested with them?

[Cory TerEick]

Quote from @Kent Parks:

Quote from @Cory TerEick:

I have one investment with FNRP and I don't recommend them at all based on this experience.  I invested $500k with them on a 1031 almost 2 years ago.  They actually did have some initially good payouts the first year; however, looking back at the financial reports, these first payouts seem to have been programmed into their acquisition model and financed via debt as opposed to the actual earnings of the property.  In year 2, I am looking at 2% in annual distributions.  They will have to refinance their debt soon, so I anticipate these returns going to 0 or negative in Year 3.  

Looking at the reporting I do get, their fees are very high for what you get in terms of them managing the asset.  They tout their leasing team, but to me they do a very pedestrian job and charge high fees for it.   In terms of accounting, they absolutely suck at getting out timely reports.  Last year I didn't receive their accounting file (a trial balance report) for my taxes (due in April) until July.  Lots of BS excuses and finger-pointing at their hired out Accounting Team for this.

My biggest concern now in terms of this one investment is that they are way over-leveraged and are in a position where they will need to refinance soon which will likely result in negative cashflow with interest rates where they are at.   They are not reporting this to investors or highlighting it as a major risk as of yet, but I see it coming in the next 6 months or so.

Before investing with them, I encourage you to look at their reviews.  The positive reviews are very short and look to be posted by employees, affiliates, or brand new investors without much experience with them.  Dig deep into the negative reviews that provide some context on actual experience.  

 Thanks for your feedback Cory. Did you do any due diligence before you invested with them?

I did, but I wish I would have done a lot more.  The sales rep that sold it to me quit just a few months after close.  I would have dug a lot more into their fees, their legal contracts, and their actual capital investment into the project.  They seem to have it structured so they make money no matter how the asset performs.  This lack of alignment with the investor's interest and their own is problematic.

[Kent Parks]

Quote from @Cory TerEick:

Quote from @Kent Parks:

Quote from @Cory TerEick:

I have one investment with FNRP and I don't recommend them at all based on this experience.  I invested $500k with them on a 1031 almost 2 years ago.  They actually did have some initially good payouts the first year; however, looking back at the financial reports, these first payouts seem to have been programmed into their acquisition model and financed via debt as opposed to the actual earnings of the property.  In year 2, I am looking at 2% in annual distributions.  They will have to refinance their debt soon, so I anticipate these returns going to 0 or negative in Year 3.  

Looking at the reporting I do get, their fees are very high for what you get in terms of them managing the asset.  They tout their leasing team, but to me they do a very pedestrian job and charge high fees for it.   In terms of accounting, they absolutely suck at getting out timely reports.  Last year I didn't receive their accounting file (a trial balance report) for my taxes (due in April) until July.  Lots of BS excuses and finger-pointing at their hired out Accounting Team for this.

My biggest concern now in terms of this one investment is that they are way over-leveraged and are in a position where they will need to refinance soon which will likely result in negative cashflow with interest rates where they are at.   They are not reporting this to investors or highlighting it as a major risk as of yet, but I see it coming in the next 6 months or so.

Before investing with them, I encourage you to look at their reviews.  The positive reviews are very short and look to be posted by employees, affiliates, or brand new investors without much experience with them.  Dig deep into the negative reviews that provide some context on actual experience.  

 Thanks for your feedback Cory. Did you do any due diligence before you invested with them?

I did, but I wish I would have done a lot more.  The sales rep that sold it to me quit just a few months after close.  I would have dug a lot more into their fees, their legal contracts, and their actual capital investment into the project.  They seem to have it structured so they make money no matter how the asset performs.  This lack of alignment with the investor's interest and their own is problematic.

What kind of returns were they promising you during the sales phase?

[Feroz Talyarkhan]

Four years ago, I invested a total of $400,000 in two CRE properties promoted by FNRP. The accompanying promotional material to these investments proffered returns of approximately 15% over the expected 5-6 year life of both transactions. To date, after 4-years, the combined dividends paid on both properties equal $44,402, or an average annual return on investment of 2.77%. In my opinion, including exchanging emails with FNRP's senior management (CEO< CFO, etc.), I can't say I have a high regard for the company's management. Moreover, I think they greatly exaggerate the expected returns investors can expect on the CRE properties they promote. In hindsight, I would never want to invest with them.

[Joel Owens]

Feroz,

I used to own and sell retail centers. I only do single tenant now. Easier to make projections with less gotcha's in underwriting. Maybe 15% you are saying is IRR number. No way in the Universe someone pays a 15% pref. They would need to buy something at like 18 cap rate. When they use debt from purchase cap rate cash on cash is only boosted maybe 1 or 2% further than paying all cash depending on the debt structure used.

I can't speak to FNRP or how they run things as I am talking in generalities with retail center deals. 

Companies often like to suck investors in with rosy pro-forma's.

My model is different typically I pay out about 9% or higher buying 10 cap rate plus blend and extend single tenant deals for cash to reposition. The goal is between the cash flow to LP's and equity upside to double the return in 3 years or less. At 51 years of age I have zero interest owning or syndicating retail centers. While typically more stable than apartment buildings and not having to deal with residential tenants the centers rarely make equity upside on the back end. As soon as you fill a space then a mom and pop tenant goes out from before and spinning your wheels. You literally have to buy the center at 50% below market rent so when a tenant rolls out and you have to pay for leasing commissions, attorney fees, lost downtime with no rent, tenant improvement credits that you most times still have upside bringing rents closer to market. The spread when interest rates were 3.5% many years back was greater between retail centers and single tenant. Now the spread is almost identical within 100 basis points so having investment grade credit single tenant over time tends to model out better with the rental increases and being hands off with absolute NNN or ground lease. If the return is that low maybe sell your interest to someone else and go into a better investment.

[Colin Hampton]

Coming from the retail world I know FNRP. When interest rates went up in 2022- 2023 they fired a lot of the investor relations staff. 

Seemed like the main goal was to raise capital and charge fees to sustain the machine but they were buying at very aggressive cap rates in markets that don't offer a lot of liquidity. 

I think they've stablized the ship somewhat but I would definitely look at the fees charged before making an investment. 
 

[Nyron Isaac]

Investing in grocery-anchored retail syndications like those offered by First National Realty Partners (FNRP) is an exceptional, defensive way to capture institutional cash flow, but you must completely look past the marketing deck and audit the Private Placement Memorandum (PPM) before parting with $50,000.

Grocery-anchored retail is highly resilient against digital headwinds, and the projected 8% cash-on-cash yield and 16% IRR are standard for this asset class. The primary value-add here is tax architecture; the sponsor will run a Cost Segregation Study on day one, passing down massive accelerated depreciation losses to you via a Schedule K-1, which legally shelters your monthly cash distributions from income tax.

However, understand the trade-offs: your $50k buy-in is 100% illiquid and locked up for a strict 5-to-7-year holding window with no early exit path. Open the PPM and perform a forensic check on two structural variables: The Fee Load (ensure management and acquisition fees aren't choking the yield) and The Waterfall Split (verify there is a minimum 7% to 8% Preferred Return ensuring you get paid completely before the General Partners can touch the backend promotion). If the capital stack relies on long-term, fixed-rate institutional commercial debt clearing a safe 1.25x DSCR matrix, this is a solid entry point into passive commercial real estate, but never deploy capital you might need liquid over the next decade.