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.

[John Thedford]

@Joel Owens any knowledge of these operators?

The two principals are Anthony Grosso and Christopher Palermo.

[Joel Owens]

We have them in our database. We might have talked to them some over the years. Do not know them that well.

Literally in our database we have many thousands of commercial companies across the U.S. so some we have done deals with, others we have talked to before, etc.

Key is if in the private offering their projections are reasonable and realistic.  

[Ana Monty]

Any update of first national? I am looking at them. Thanks! 

[Joel Owens]

Ana they have done multiple offerings over time. I do not know them personally so can't really say anything good or bad. They do pretty heavy marketing. Larger deals tend to trade in retail at higher cap rates.

What you need to decide is how long you want your money tied up into a deal (their exit strategy), and how much you want to place, and if you get cash flow right away, partial, or none until certain metrics are hit.

As an example you might get 8% preferred return but upside might be more marginal than a small retail turn around deal where exit is in 2 to 3 years and equity multiple is likely much higher for overall return. So all depends on your goals.

Syndicators like to syndicate bigger deals because points and fees are more. 30 million at 2 upfront fees charged is 600,000 dollars to a syndicator for one deal. Some are glorified fee takers and any cash flow or equity return on the property is icing on the cake.

I like it more when the fee is just a small component of the deal and the syndicator wins more when their passive investors do on the back end. If the syndicator gets paid more when they exit successfully then so does the passive investors.

No legal advice given. Talking in generalities and not this specific company. I like smaller retail deals with faster turn arounds to realize the upside. I focus as a syndicator on smaller deals because of this. The larger retail centers are more management intensive. Not as much as multifamily but still more than STNL single tenant or 2 to 4 tenant type retail center properties.

The larger centers they live or die by the anchor tenant so really have to know if that tenant owns or lease the space, when it was last re-imaged inside and out, and what sales they do per sq ft year over year and how they have been trending.

Larger retail centers have defaults from smaller tenants with covid right now to work through so offering should have reserves built in for some not making it so buy in cap rate on existing NOI might go down in the short term as tenants are lost and tenant replaced. Have to make sure in place rents with NOI are not over market for the area.

[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!!!

[John Thedford]

I never did any deals with them. I did not investigate further. I have no recommendation positive or negative. As in ANY real estate deal, always do your research. 

[Joel Owens]

They send me offerings. They seem to syndicate larger retail center deals with 7 to 10 year exits. Syndicators often do that so that the fee going in can be substantial.

My syndications I like doing are more small ball where I get immediate upside. If I have a single tenant reposition deal that I get leased up I usually realize the full value right away. With large retail center you could lease up 2 spaces to have 1 go vacant. It's a more heavy intensive property management syndicate model that I have no interest in.  

[Chris Gallagher]

How does one actually perform adequate due diligence on these types of deals? 

[Luis Herrera]

False advertising.  FNRP don’t pay quarterly distributions as they claim.  I sold my house to invest in Summerdale Plaza , as they promised me to receive quarterly distributions, and so far I have not received a single dollar since 2021.  The worst mistake of my life.  

[Kent Parks]

FNRP purchased two good size retail strip centers in my local area and put up signs saying it is under their management. I remember seeing those properties advertised as being an open deal. The thing is those two centers are kind of sleepy. They aren't as busy as some other shopping centers in the area. Don't misunderstand me, they are not bad shopping centers and they have a decent amount of traffic but they aren't getting the lion share of the traffic either.

[Kent Parks]

Quote from @Luis Herrera:

False advertising.  FNRP don’t pay quarterly distributions as they claim.  I sold my house to invest in Summerdale Plaza , as they promised me to receive quarterly distributions, and so far I have not received a single dollar since 2021.  The worst mistake of my life.  

 Hey Luis, did they not have a contract with you stating what you were supposed to get?

[Ned J.]

Anybody else deal with this company?

[Joseph Verderrosa]

Quote from @Luis Herrera:

False advertising.  FNRP don’t pay quarterly distributions as they claim.  I sold my house to invest in Summerdale Plaza , as they promised me to receive quarterly distributions, and so far I have not received a single dollar since 2021.  The worst mistake of my life.  

[Joseph Verderrosa]

I've been skipped over on 2 investments as well.You have to constantly be on backs to get a answer why u don't receive your quarterly deposits.Now its last week of March still no tax paperwork received so I can file.I would look elsewhere for decent returns.I think they didn't plan on higher rates going into this market

[Ry Curtis]

Quote from @Ned J.:

Anybody else deal with this company?

I am currently invested with them, and I have no complaints. I have received my dividends quarterly, and their communication is great. I recommend them. 

[Abba Kader]

Quote from @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.

[Abba Kader]

DO NOT INVEST A PENNY WITH FNRP.

I have plenty of experience with FNRP. I have invested in 2 deals @ $400,000 each. I read the same claims. 8% & IRR of 16%. It's a complete scam that they consistently advertise that. The first investment I receive $ 1037.37 on $ 400,000 which is 1.037 % . On the second investment I receive $ 4637.50 which is 4.6%. as you can see both are a far cry from the numbers they advertise. Additionally, the payments are always late which makes the returns even worse. I have money market accounts that pay 5%. After months of trying, I did speak to the President and was informed that there is a strong possibility of a "Capital Call". They sent me a document .. trying to appease me. I have called to discuss their ridiculous offer. No one returns the calls. After 2 months I got a call back only to inform me that they would work something out and call me. I have lost $ 200,00 on the 3rd deal because they pulled the plug on that deal at the last minute without ever inform the investor to pivot to another deal. 1031 exchange rules are very strict so I had to pay the capital gains tax. OH .. they were really sorry for the inconvenience it caused me.

BTW .. I have posed this question to them “Are you people going broke ?” “Is there a possibility that I will lose my entire investment?” No word yet.

[Abba Kader]

Quote from @Ned J.:

Anybody else deal with this company?

DO NOT INVEST A PENNY WITH FNRP.

I have plenty of experience with FNRP. I have invested in 2 deals @ $400,000 each. I read the same claims. 8% & IRR of 16%. It's a complete scam that they consistently advertise that. The first investment I receive $ 1037.37 on $ 400,000 which is 1.037 % . On the second investment I receive $ 4637.50 which is 4.6%. as you can see both are a far cry from the numbers they advertise. Additionally, the payments are always late which makes the returns even worse. I have money market accounts that pay 5%. After months of trying, I did speak to the President and was informed that there is a strong possibility of a "Capital Call". They sent me a document .. trying to appease me. I have called to discuss their ridiculous offer. No one returns the calls. After 2 months I got a call back only to inform me that they would work something out and call me. I have lost $ 200,00 on the 3rd deal because they pulled the plug on that deal at the last minute without ever inform the investor to pivot to another deal. 1031 exchange rules are very strict so I had to pay the capital gains tax. OH .. they were really sorry for the inconvenience it caused me.

BTW .. I have posed this question to them “Are you people going broke ?” “Is there a possibility that I will lose my entire investment?” No word yet.

[Abba Kader]

Quote from @Joel Owens:

They send me offerings. They seem to syndicate larger retail center deals with 7 to 10 year exits. Syndicators often do that so that the fee going in can be substantial.

My syndications I like doing are more small ball where I get immediate upside. If I have a single tenant reposition deal that I get leased up I usually realize the full value right away. With large retail center you could lease up 2 spaces to have 1 go vacant. It's a more heavy intensive property management syndicate model that I have no interest in.  

[Abba Kader]

DO NOT INVEST A PENNY WITH FNRP.

I have plenty of experience with FNRP. I have invested in 2 deals @ $400,000 each. I read the same claims. 8% & IRR of 16%. It's a complete scam that they consistently advertise that. The first investment I receive $ 1037.37 on $ 400,000 which is 1.037 % . On the second investment I receive $ 4637.50 which is 4.6%. as you can see both are a far cry from the numbers they advertise. Additionally, the payments are always late which makes the returns even worse. I have money market accounts that pay 5%. After months of trying, I did speak to the President and was informed that there is a strong possibility of a "Capital Call". They sent me a document .. trying to appease me. I have called to discuss their ridiculous offer. No one returns the calls. After 2 months I got a call back only to inform me that they would work something out and call me. I have lost $ 200,00 on the 3rd deal because they pulled the plug on that deal at the last minute without ever inform the investor to pivot to another deal. 1031 exchange rules are very strict so I had to pay the capital gains tax. OH .. they were really sorry for the inconvenience it caused me.

BTW .. I have posed this question to them “Are you people going broke ?” “Is there a possibility that I will lose my entire investment?” No word yet.

[Joel Owens]

I can't speak to FNRP what they pay etc. as I have not invested with them.

I CAN tell you that I have heard from some of our accredited investors that have invested with us that they have other investments into multifamily and other syndications with different GP's where those deals are going south and the operators are asking for capital calls and restructures.

This is why I like small ball properties where we buy for CASH. I do not want to be a slave to the interest rate market and debt cycles when trying to reposition a property for upside.

WHY do syndicators use debt then? They mainly do it because they need big syndication aquisition fees going in to keep making payroll. By making equity raise small and max leverage they try to pump returns with tax savings because the cash distribution is so poor so tout overall returns ( think of Wal-mart touting overall pay for employees at 30 an hour when most of that is covering some insurance and other benefits type fluff versus what someone would take home on a check). By making a big fee going in on a larger property they manipulate smaller pref and split to themselves hoping the investment pans out over 7 to 10 year plus holds.

Some larger deals can be great but on value-add stuff I am typically debt adverse. 

We are usually in an out in under 3 years on our deals. Long term deals that take 7 to 10 years plus you are more at risk for economic cycle shock and interest rate shocks to exit and the right time. Our smaller properties tend to always have buyers for passive NNN single tenant properties and most pay cash so are not really debt cycle affected. Small blips in market but not massive shifts like other asset classes.

[John McKee]

I wouldn't invest in any deal these days that promises an IRR. Way to risky in this high interest rate market. Stick with Mortgage note syndication returns of 9-12 range out of the gate and enjoy the annuity. No capital calls, no defaults, strong demand, etc. I think it's the less risky of the syndication types.

[GREGG ROOD]

I am not sure why anyone would invest with these guys. You don't have to be a real estate expert to see that they have no industry experience.

[Evan Polaski]

@John McKee, to be certain: IRR is a standard financial metric that is generally universally utilized. Maybe your comment is meant to highlight the word "promise", which should always be viewed as a red flag. In the investment space, whether it be syndications, SFR, Airbnb, or hedge funds or stock market: anyone that is "promising" or "guarantees" any type of return should be viewed very skeptically. Every investment is a guess into the future, and nothing can be guaranteed. Even US treasuries and savings accounts offer no guarantees.

As for FNRP, specifically.  I was on their list for a while, but never pulled the trigger.  I have a long time friend that managers their leasing for a part of their portfolio.  I have known him for 16 yrs and he has spent his entire career in retail leasing, primarily on grocery anchored strips, like FNRP's product.  I will also note, that having loosely followed them over the last few years, their team listed on their website has grown fairly significantly.  So while I can't speak to Gregg's comment about the founders experience, it appears the founders have stepped back and brought in a full executive team.  As such, I would argue that the founder's experiences are of less importance for investments being considered today versus 4 years ago when the founders were seemingly still running day to day operations.

[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.