Interesting! I got involved with the syndicated deal in something like 1980 and that was long before the internet. I was a plumbing, HVAC, general contractor and underground utility contractor with 60 employees. I had projects going on like installing utilities on busy boulevards like city water mains, gas mains, manholes up to 30 feet deep, city sewers, underground utilities for 50-story hotels and I was doing large plumbing and underground utilities for the Los Angeles airport.
In 1972, I worked briefly for a telemarketing company and learned that the most vulnerable, naive, gullible and easiest targets for selling things like limited partnerships to is doctors and dentists because they make a lot of money, they want to invest their money and because they are busy they don't have the time to do research for the things they invest in.
I sold investments to a few doctors and dentists. I seriously believed the investments were a great deal and they would generate the returns we promised, but I also knew for a fact that these deals were not appropriate for doctors and dentists because I knew they did not have enough time to do the management that these investments required.
I invested in the syndicated K-Mart shopping centers in about 1980 and the internet was not born, yet. Even today, I did a lot of research to dig up some dirt on the syndicator who purchase the property next door to me and I can't find one bad review nor any negative information.
I relied on the advice from my CPA, paid an attorney $1,000 and paid a financial advisor $500. For a busy business person like myself, finding, paying and talking to my CPA, an attorney and a financial advisor actually took me a significant amount of time when I had 60 employees to manage and when I have about 30 city inspectors breathing down my neck and about 5,000 safety concerns that have to be addressed every second of the day so a trench does not cave in and to make sure a vehicle doesn't kill one of our employees.
My point is; the average person does not have the ability nor the time to do a significant amount of research and even if they did research the general partners can rig the books and even his current limited partners are not always aware of what is going to go down in the future.
The syndicated deal was for two K-Mart shopping centers. Each center had a K-mart (obviously) a large national-type grocery store and several other stores and restaurants like Payless Shoes, national brand-type clothing stores and maybe a Kentucky Fried Chicken and a Taco Bell (they were just starting to pop up around 1980).
I am a contractor and if I spent 10 years looking at the Placement Memorandum I would not have the ability to analyze the books for something as large as an entire shopping center. That is not my forte and that is what I relied on my CPA, attorney and financial advisor for and all three of them were wrong and changed their tune after the deal went south. I will not take any personal responsibility because I am a contractor and I paid professionals for their advice. I am not supposed to quit my day job to do an investigation and even if I did spend more time doing an investigation it is virtually impossible to dig up any dirt because you can bet the general partners do a great job getting prepared to answer questions and to bury their dirt.
My point to my post is; Tell me how an average investor can prove, for a fact, to himself (or herself) that the syndicator they choose can deliver what he promises, his books are clean, he has the business savvy to manage the properties, he is not hiding any financial distress and prove before you invest your money as a limited partner that the general partner has done adequate due diligence, has not made any mistakes and the properties you are investing in won't go south, FOR ANY REASON.
You cannot do it. When investing in a syndicated deal there are literally thousand of variables and even the best real estate syndicators make mistakes, bad choices and bad decisions. No real estate syndicator was prepared for the moratoriums for COVID-19 and you can bet there are thousands of general partners changing their tune when explaining to their limited partners the reasons their returns are negative because of the loss of rental income and the massive number of vacancies at strip malls, malls and shopping centers that resulted from COVID-19.
Jack, I say this with kindness. Do your best not to say "impossible" or that something "cannot be done". Those words only limit the human spirit and stifle those who dare to dream and strive for more than they are today. It has been my experience that those who become successful do not have these words in their vocabulary. They find a way to make the impossible possible.
Secondly, when I read your posts, it does not strike me that you were very intimately involved in many of the details of the syndication that you invested $1MM into. As you stated, you handed a majority of the research and vetting of this investment to your CPA, lawyer, and financial advisor, since you were so busy with your contracting jobs. So when this deal "went south", you seem to blame not only the syndicator, but several others for not doing their due diligence. But the one thing that I still don't see is the "extreme ownership" on your part that I was talking about in my post.
I say this not to be cruel, but perhaps to propose a different view. In this way, rather than crying out as the victim (which we see way too often in society these days), we can take personal ownership of the part we played (or were absent and should have played) in order to learn and grow, rather than throw our hands up and say "it's impossible". If what you say is true, then no one would be making money in syndications.
Are syndications risky? Absolutely. But people can mitigate that risk by vetting these folks well and not just stop at the fact that "they have good reviews" or what they read on the internet or that my team(lawyer, CPA, financial advisor) gave me the green light. There are lots of other ways to vet them that I won't get into here - BP has great podcasts/articles that cover that. In regards to the lack of the Internet when you invested: Books existed in 1980 just as they do now and I'm confident that you could have found a way to speak with others who invested with this syndication(if not, then you shouldn't have invested in my opinion). I try to live by the mantra that "My ignorance is not an excuse to blame anyone else but myself." Again, this is not to be cruel, but this has helped me grow in my investments, and in my life.
To answer your question: " Tell me how an average investor can prove, for a fact, to himself (or herself) that the syndicator they choose can deliver what he promises, his books are clean, he has the business savvy to manage the properties, he is not hiding any financial distress and prove before you invest your money as a limited partner that the general partner has done adequate due diligence, has not made any mistakes and the properties you are investing in won't go south, FOR ANY REASON."
My answer: What I am hearing from you is that you want a "sure thing" guarantee. An absolute and unbreakable guarantee that your investment will not go south along with proof that a syndicator will always deliver. This simply does not exist. Not in real estate, not in the stock market, not even within marriages. This is called risk, and this is where "extreme accountability" comes into play and we should hold ourselves responsible to it. I always do my best to vet all investments, and when they have not performed well(which they sometimes have done), I hold myself responsible, because ultimately, I chose to invest, no one forced me. I am not a victim.
"To answer your question: " Tell me how an average investor can prove, for a fact, to himself (or herself) that the syndicator they choose can deliver what he promises, his books are clean, he has the business savvy to manage the properties, he is not hiding any financial distress and prove before you invest your money as a limited partner that the general partner has done adequate due diligence, has not made any mistakes and the properties you are investing in won't go south, FOR ANY REASON."
My answer: What I am hearing from you is that you want a "sure thing" guarantee. An absolute and unbreakable guarantee that your investment will not go south along with proof that a syndicator will always deliver. This simply does not exist. Not in real estate, not in the stock market, not even within marriages. This is called risk, and this is where "extreme accountability" comes into play and we should hold ourselves responsible to it. I always do my best to vet all investments, and when they have not performed well(which they sometimes have done), I hold myself responsible, because ultimately, I chose to invest, no one forced me. I am not a victim."
You write very well. Something makes me thing you are a philosopher or preacher. I love the way you have the ability to write.
I can't say that I don't take responsibility for my actions and choices. My posts are not to express my feelings in in regards to my personal accountability. Of course, I hold myself accountable and tell myself and everyone I know that I made a bad decision investing in the syndication, but I will not say that I am responsible in any way for what the syndicator does wrong.
The purpose for the thread and my posts is to discuss the high risks when people invest in syndications and not to discuss my accountability even though I have no problem with discussing that subject, but discussing my accountability make me think of going before a priest to give a confession.
I don't think that you can say you are not a victim because you chose to invest in something. Suppose, you invest your money into a Dean Witter account and an unscrupulous Dean Witter agent (broker, or whatever you call him) screws with your account and you lose 90% of your money. Then, you did not make a bad choice in regards to the company you chose and you cannot hold yourself accountable for what a thief does. The sun was just not shining up your ..... that day and you had a stroke of bad luck.
You cannot hold yourself accountable if a general partner has a gambling problem and decides he needs a lot of cash because Guido is going to break his legs. That is not a bad choice you made and you cannot hold yourself accountable.
I've made a lot of serious mistakes in my life and I also have a philosophy where I tell myself; we humans are the very best that we can be. I can't be any better than what I am. I never look back and regret anything I did because I make the best choice that I could at that time based on the best of my ability at that time".
I brought up my children and did the best that I could. Sometimes, my children complain and say I did not do this and did not do that and I say, "I am the best parent that I can be". Every parent is the best parent they can be even if the parent is a drug addict, or has other serious issues. I never regret anything I did.
Thank you for the kind compliment. No, I am not a philosopher nor a priest, but I did stay at a Holiday Inn last night. 🙂
In an effort to bring things to center: The reason for my input was in an effort to inform others that syndications are still viable options, and not awful investments, provided that they are vetted properly.
The accountability aspect is an aspect that I feel comes with assuming risk. As I stated previously, this is my personal conviction, but of course people are free to disagree. I think that's what makes these forums(and in extension, life) so great. You can observe different viewpoints, and then choose to either incorporate them into life, or not.
I wish you the best.
P.S. I have older kids of my own, and still struggle every day hoping that I did my best, so I totally understand.
