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:

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@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. 

[Chris Seveney]

Quote from @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.  

 Curious as to the update on this

[Jim Peret]

They created a preferred equity fund instead of doing a capital call. Instead of 3m they said they'd need 1-1.5m for the rest of this year but didn't state whether more will be needed next year. No distributions of course.  

[Tammy Skeath]

I am in ODC Fund 5 and they have paused distributions. I am baffled that ANY investor would still trust ODC/ Brandon Turner with their money. I see they just closed on Fund 11. How? At some point this has to start to affect their reputation right? I mean they were so off on all their projections. I seriously regret investing with them. At this point, I'm just hoping to get my capital back in 5 years without having to invest more with them because I won't throw good money after bad.

[Melanie P.]

Quote from @Tammy Skeath:

I am in ODC Fund 5 and they have paused distributions. I am baffled that ANY investor would still trust ODC/ Brandon Turner with their money. I see they just closed on Fund 11. How? At some point this has to start to affect their reputation right? I mean they were so off on all their projections. I seriously regret investing with them. At this point, I'm just hoping to get my capital back in 5 years without having to invest more with them because I won't throw good money after bad.

 Absolutely insane to lock up your money that long and the best you are hoping for is to break even. These guys made plenty of money during the good years. They can make a loan to the fund to keep distributions current and get paid back when the project sells. That is if they have any faith in their BS. CAN but WON'T. 

RAD Diversified paused distributions, is refusing to honor redemptions but has millions to lend the owners of RAD using below market interest rated promissory notes. People need to go to prison for this conduct. 

PLEASE consider submitting a tip to the SEC with all the details of your transaction, especially how it was sold to you. It may seem pointless but I've had a number of dialogues with an SEC Investigator who promises they ARE interested and all the information accumulates until they get the magic puzzle piece which allows them to take action. 

[Tammy Skeath]

@Melanie P. thank you for the advice. I will look into this. I have a call with ODC on Monday. Will keep you posted. Like I said, I think investors should be warned about all of this before they continue investing with them. 

[Russell Brazil]

Quote from @Tammy Skeath:

I am in ODC Fund 5 and they have paused distributions. I am baffled that ANY investor would still trust ODC/ Brandon Turner with their money. I see they just closed on Fund 11. How? At some point this has to start to affect their reputation right? I mean they were so off on all their projections. I seriously regret investing with them. At this point, I'm just hoping to get my capital back in 5 years without having to invest more with them because I won't throw good money after bad.

 Have they done a capital call yet? Like 80% of funds have done capital calls in the last year. 

These are high risk investments only available to accredited investors who definition in law are the only ones who should be taking on that risk. There's a reason the US government doesn't let the average Joe invest in these types of funds.

Everything you invest in, there is a certain probability that the investment will be wiped out in its entirety. I've lost 100% of my capital in certain investments. They can do everything 100% correct, and you can still come out on the short end. Does it suck? Absolutely. But that's what investing is.....deploying capital to achieve a return based on risk. Sometimes you triple your money, sometimes you lose it all.

[Chris Seveney]

Quote from @Russell Brazil:

Quote from @Tammy Skeath:

I am in ODC Fund 5 and they have paused distributions. I am baffled that ANY investor would still trust ODC/ Brandon Turner with their money. I see they just closed on Fund 11. How? At some point this has to start to affect their reputation right? I mean they were so off on all their projections. I seriously regret investing with them. At this point, I'm just hoping to get my capital back in 5 years without having to invest more with them because I won't throw good money after bad.

 Have they done a capital call yet? Like 80% of funds have done capital calls in the last year. 

These are high risk investments only available to accredited investors who definition in law are the only ones who should be taking on that risk. There's a reason the US government doesn't let the average Joe invest in these types of funds.

Everything you invest in, there is a certain probability that the investment will be wiped out in its entirety. I've lost 100% of my capital in certain investments. They can do everything 100% correct, and you can still come out on the short end. Does it suck? Absolutely. But that's what investing is.....deploying capital to achieve a return based on risk. Sometimes you triple your money, sometimes you lose it all.

 The other component to this is people continue the "contact the SEC with a tip". Do people contact the SEC when Microsoft stock goes down? Just because a real estate deal loses money or pauses does not mean its a ponzi or a scam. 99% of them ARE NOT.

Why are you contacting the SEC? do you contact the police when you think your neighbor is doing something suspect? 

Were people contacting the SEC when these same sponsors were returning 20% returns from 2020-2022?  

As you mention, many do not read or have an attorney explain to them what they are investing in. For a Reg D 506c offering, you do not even need a PPM and the sponsor has complete control over what they can do (as this is typically explained in the subscription agreement you sign). 

Face the fact - if you invested in multifamily after 2021 you are most likely going to lose money and a lot of it.

[Jay Hinrichs]

Quote from @Russell Brazil:

Quote from @Tammy Skeath:

I am in ODC Fund 5 and they have paused distributions. I am baffled that ANY investor would still trust ODC/ Brandon Turner with their money. I see they just closed on Fund 11. How? At some point this has to start to affect their reputation right? I mean they were so off on all their projections. I seriously regret investing with them. At this point, I'm just hoping to get my capital back in 5 years without having to invest more with them because I won't throw good money after bad.

 Have they done a capital call yet? Like 80% of funds have done capital calls in the last year. 

These are high risk investments only available to accredited investors who definition in law are the only ones who should be taking on that risk. There's a reason the US government doesn't let the average Joe invest in these types of funds.

Everything you invest in, there is a certain probability that the investment will be wiped out in its entirety. I've lost 100% of my capital in certain investments. They can do everything 100% correct, and you can still come out on the short end. Does it suck? Absolutely. But that's what investing is.....deploying capital to achieve a return based on risk. Sometimes you triple your money, sometimes you lose it all.

I think the big issue right now for many of these investors.. is that since THEIR project failed or is failing.. they cant understand why the sponsor is promoting NEW projects. Its like the investors expect these sponsors who have a bummer to just close up shop.. This simply is not the real world all companies have deals that don't work or lose money over time.. does not mean they just stop doing new deals.. I think this is the tough part for many of these investors.. U take the Norada situation and the investors in those notes are livid that Norada would be doing a new project when their Notes were rolled to equity.. I certainly understand how the investor who is stuck in the bad one feels.. but life does go on and companies do continue to operate and do new deals..

Its just like Lenders just because one loan goes bad do you then fold up shop ???

Now of course new investors in the new deals of these companies may want to actually read the offering memorandums and understand them before investing.. ( I am 100% convinced that many really never do read them or understand them and then are shocked when the company follows what is allowed in the offering memo).

Of course if laws were broken IE allowing non accredits in that should not have been.. allowing unlicensed 3rd parties to raise money etc etc.. those are separate issues as well.

[Frank Sichelle]

For me, the issue is not that sponsors are raising a new fund or offering but they're not being honest about their past offerings. They are raising new investor capital without being transparent on past performance which may not be a legal violation yet because the outcomes of the past funds/properties have not yet been finalized, but the writing is on the wall so raising a new fund without disclosing what's happening with their existing fund/properties is ethnically wrong.

[Jay Hinrichs]

Quote from @Frank Sichelle:

For me, the issue is not that sponsors are raising a new fund or offering but they're not being honest about their past offerings. They are raising new investor capital without being transparent on past performance which may not be a legal violation yet because the outcomes of the past funds/properties have not yet been finalized, but the writing is on the wall so raising a new fund without disclosing what's happening with their existing fund/properties is ethnically wrong.

I do believe that a Securities attorney would mention past issues in new offerings..

[Chris Seveney]

@Frank Sichelle

They all have the past performance is not indicative of future success and for anyone who shows a history of prior returns without having it third party verified is like saying I went fishing alone and caught 20 fish including the largest bass ever.

This is what investors need to realize is you never believe what a sponsor says if it cannot be verified. I have seen returns be done by gross, exclusive of management fees, and calculated many different ways. Ask a sponsor what gips is and 99% will look at you like you have six heads.

[Frank Sichelle]

Quote from @Chris Seveney:

@Frank Sichelle

They all have the past performance is not indicative of future success and for anyone who shows a history of prior returns without having it third party verified is like saying I went fishing alone and caught 20 fish including the largest bass ever.

This is what investors need to realize is you never believe what a sponsor says if it cannot be verified. I have seen returns be done by gross, exclusive of management fees, and calculated many different ways. Ask a sponsor what gips is and 99% will look at you like you have six heads.

A securities attorney would strongly disagree with you here. Even without disclosing past successes, a sponsor would need to be disclosing present issues.

What you're referencing is when trying to predict future performance is meant to mitigate the risk that a sponsors track record is considered marketing material. What's being ignored is that when a sponsor has a property or properties that are foreclosed on, it can have an impact on their remaining portfolio even if those properties remain solvent. @Jay Hinrichs is correct in that a securities attorney would require the disclosure of past issues but the gray area comes to disclosing highly likely future issues that have not been realized yet. The gray areas are typically hashed out in court. For example, touting that you've never done a capital call or given back keys on a property when in the background, you're having to negotiate with current lenders on loan modifications so that you can delay capital calls and/or giving back keys. 

I don't think most sponsors understand the legal implications and unfortunately it's been 15 years since a cycle has caused the tides to go out, so very few do but once these issues go to court, judges will hold sponsors to a much higher standard.

[Chris Seveney]

@Frank Sichelle

I don’t believe they will hold sponsors to a higher threshold if these are a 506c offerings as there is a difference between ethics and law and being unethical does not equate to being illegal.

There are also multiple layers of protection built in to these offerings that even in most cases if you sue they will use your money to defend the case. Most of these if anything are civil penalties which never goes back to the investor.

I really don’t think people realize a 506c there does not have to be a ppm and the operating and subscription agreement can say they can invest in anything from pigs feet to moonstone and they could have an iq of 4 as a sponsor and do really dumb things but none of that is a scam or a ponzi.

Just like last crash no one went down, same will happen here - regulators are far to busy dealing with the Wall Street crowd which impacts retirement accounts if retail investors - investors in a 506c are accredited = they can lose it all.

Sec isn’t gonna spend $ 1M chasing someone who just had a bad deal.

[Frank Sichelle]

I'm not talking about the SEC or regulators, I'm talking about LP litigation which is very common when deals go bad. There are less protections than you think and a good securities attorney can find something wrong with 99% of offerings. Not disclosing past deals that have resulted in loss of equity and/or foreclosures is an easy case. The only difference between unethical and illegal in that example is whether an attorney can prove it was known or even should have been known at the time of a new offering. We'll see with 506c's but I happen to think they'll come down harder.

[Melanie P.]

Only commenting on recent history here as I'm new to BiggerPockets. Since February about half of the syndations marketed through these forums have serious issues that rise to the level of criminal fraud. These include falsely claiming to have closed dozens of deals when none were ever closed, illegal payment of undisclosed sales commissions to bundlers and independent contractors, advertising the funds as safe and appropriate to investors with obvious near-term needs for their capital, creating fund of funds en masse assembly line fashion with no corresponding SEC filings, unregistered brokers/financial advisors acting in that capacity absent licensure, having customers wire money claim the fund is fully subscribed and putting them into a high yield promissory note, accepting funds from unaccredited investors, misrepresentations about the debt put on the project, lies about experience level of the principals, omissions of material facts, and at least two straight up Ponzi schemes.

While it's true that some legitimate operators are having issues in their portfolios, today's circumstances are a perfect example of the idiom, "you can only discover who is swimming naked when the tide goes out." It is sad that some operators who strove for a legal and honest operation failed anyway. Many of those who are breaking the law do so so brazenly they'll be easy to catch. The more angry syndication investors there are out there the better chance the industry has for serious reforms. The legit sponsors should want the crooks and anyone who cuts corners out of the industry - even if that means the most egregious go to jail.