Syndication deals gone sour and the GP is now radio silent! What can I do?

[Giles D.]

Good morning everyone,

I invested in a syndication deal back in late 2021 through Simple Passive Cashflow and Truepoint Capital, with Lane Kawaoka and Kyle Jones respectively as GP's. The deal has produced 1 single distribution in that time and now they have both stopped updating the LP's on the deal and have not had an updates this year. They have now stopped responding and corresponding to emails and the only phone numbers they provide go to a medical facility in Florida and a full VM box that never gets responded to.

Am I just f'd out of my money here with no recourse or do I have any leg to stand on to try and sue them for poor due diligence and not fulfilling the promises made? I've received 2 K1's so if this is fraud then i'd imagine they've committed a federal offence by issuing false documents to the federal authorities. Yes, I am getting desperate but I'm throwing myself to this crowd to see if any one else has gone through something similar or can give me some advice or even to laugh at me and say what an idiot I was, which I know already so save yourself the time!

Regards

Giles Dalrymple

[Brian Burke]

@Giles D. I hate to be the one to tell you this, but your money is gone.  

I don't know anything about the deal but after reading your post I googled the company and found a press release from Nov 2021 announcing that they had purchased The Aubrey.  

I then went to CoStar and looked it up.  They bought the property in Oct 2021 for $47 million and borrowed $39.4 million from Bancorp Bank, who is a bridge lender.  Knowing what I know about Bankcorp, the loan would have had a floating rate, likely somewhere in the range of SOFR + 3-5% and would mature in October of this year.  CoStar reports the property to be 52.7% vacant, but keep in mind that this data is often inaccurate (but not enough to make a difference with vacancy that high).

Figuring this set of facts spelled trouble, I went to the Harris County Recorder's grantor/grantee index and found a foreclosure deed.  Your property was sold back to Bancorp Bank in a foreclosure sale on April 2, 2024 at 10:19AM.  There were no bidders at the foreclosure sale so the property reverted to the beneficiary (meaning the lender now owns it).  I also found a dozen mechanic's liens dating back to 2022 (meaning they didn't pay contractors that did work on the property).

I'd like to say I'm shocked that you had no idea this was coming, but I'm really not shocked.  My Google search revealed the principal of TruePoint started investing in 2020, and if that's true, this sponsor lacked all of the things that I consistently preach to look for--experience, track record, full-cycle experience, market cycle experience, and so on.  

This probably wasn't a scam (but I do not know one way or the other).  More likely, it is an inexperienced sponsor raising money from inexperienced passive investors (and experienced ones that opted to take the risk on an inexperienced sponsor) who got in way over his head and had no idea how to right this ship.  Not knowing what to do, they probably didn't even know what to say, so they buried their head in the sand.

I'm not justifying this behavior, I find it repulsive, but I've seen it so many times in the decades I've been in this industry that I'm just reporting what history has taught me has likely happened here.

It sickens me to be the one to deliver this news--the sponsor should have kept you informed every step of the way and failed in their most basic duty--to communicate with investors.