Rise48 Preferred Equity Fund / Capital Call?

[Frank Sichelle]

Looks like another bad operator is at it again with an attempt to keep their poor investments alive, this time from Rise48. I received an email last week about the "opportunity" and watched Tyson Cobb's webinar. I've invested in two of the properties going into the fund and two others. I can't even understand how any of this is legal. Rise48 is raising preferred equity at a valuation that is not market, with income growth projections that are unreasonable, and putting $7,000,000 of new investor cash back in their pockets... $7,000,000!! and they're claiming that they are putting the first million into this fund. Math can sometimes be fuzzy for me but when you pay yourself $7 million and send back $1 million, you're not contributing. You're cashing out a net $6 million directly from investors that trust you with their savings.

https://41098383.hs-sites.com/share/hubspotvideo/18605256691...

https://www.wallstreetoasis.com/forum/real-estate/rise48-pos...

I believe this is the second attempt to raise preferred equity as well. First time was from investment companies but no one was interested, so now they're offering a 18% preferred return in hopes of getting more unsuspecting retail capital. I wanted them to sell these properties years ago but I guess I can officially say goodbye to my money. Is this not another form of a capital call? Needless to say, I won't be investing. Based on what I saw of the projections, this preferred equity investment will likely be instantly wiped out as well.

I know that there are a lot of ambitious capital raisers on this platform who have raised for Rise48 and I encourage you to please think about your investors before promoting bad investments again. I worked very hard for my money and I thought I was making sound investments with a trustworthy operator and it turns out to be the opposite, all the while being left in the dark until the last minute. These are a few of their oldest investments, so I'm assuming I'll be seeing similar "opportunities" on my other two investments in the future.

[Frank Sichelle]

Quote from @Jeremy Dyer:

We want to ensure we understand your concerns fully and address them appropriately.  

Um, no thank you, I’ve seen how “concerns” from other investors have been addressed.
Also, thank you for the recent updates on the individual properties that a capital call is likely required. I’m glad Rise48 is finally admitting the need of capital calls and hope that the “we have never and don’t ever expect to issue a capital call” marketing is removed going forward.

Other areas that should be called out:
1) Disclose the distress in your current portfolio to existing investors as well as when marketing new investment opportunities. Even the preferred equity fund makes no reference to current values of the properties from brokers which I know opinions of value have been received.
2) Call out what “pay back working capital loans” for what is really is, putting cash back in Rise48’s pockets.
3) Stop lying about lenders requiring the above referenced GP loans to be paid back. That is just a flat out lie, no lender would have any issue with a GP contributing more capital to a property.
4) Stop highlighting positive financial leverage on your new investment opportunities when all you’re doing is paying massive fees upfront to buy down the rate. That is NOT positive financial leverage, it’s closer to a Ponzi scheme in which you’re raising additional investor capital in order to distribute it right back to them and claim it as operating cashflow.

We’re in a new era, it’s time to start protecting limited partners from deceptive investments.