All Forum Posts by: John Sayers

Required again as of 12/23/24 Appeals Court:

"

In light of a December 23, 2024, federal Court of Appeals decision, reporting companies, except as indicated below, are once again required to file beneficial ownership information with FinCEN.
However, because the Department of the Treasury recognizes that
reporting companies may need additional time to comply given the period
when the preliminary injunction had been in effect, we have extended the
reporting deadline as follows:

• Reporting companies that were created or registered prior to
  January 1, 2024 have until January 13, 2025 to file their initial
  beneficial ownership information reports with FinCEN. (These companies
  would otherwise have been required to report by January 1, 2025.)
• Reporting companies created or registered in the United States on
  or after September 4, 2024 that had a filing deadline between December
  3, 2024 and December 23, 2024 have until January 13, 2025 to file their
  initial beneficial ownership information reports with FinCEN.
• Reporting companies created or registered in the United States on
  or after December 3, 2024 and on or before December 23, 2024 have an
  additional 21 days from their original filing deadline to file their
  initial beneficial ownership information reports with FinCEN.
• Reporting companies that qualify for disaster relief may have
  extended deadlines that fall beyond January 13, 2025. These companies
  should abide by whichever deadline falls later.
• Reporting companies that are created or registered in the United
  States on or after January 1, 2025 have 30 days to file their initial
  beneficial ownership information reports with FinCEN after receiving
  actual or public notice that their creation or registration is
  effective.
• As indicated in the alert titled “Notice Regarding National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.)”, Plaintiffs in National Small Business United v. Yellen,
  No. 5:22-cv-01448 (N.D. Ala.)—namely, Isaac Winkles, reporting
  companies for which Isaac Winkles is the beneficial owner or applicant,
  the National Small Business Association, and members of the National
  Small Business Association (as of March 1, 2024)—are not currently
  required to report their beneficial ownership information to FinCEN at
  this time.

On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al.,
No. 4:24-cv-00478 (E.D. Tex.), the U.S. District Court for the Eastern
District of Texas, Sherman Division, issued an order granting a
nationwide preliminary injunction. On December 23, 2024, the U.S. Court
of Appeals for the Fifth Circuit granted a stay of the district court’s
preliminary injunction enjoining the Corporate Transparency Act (CTA)
entered in the case of Texas Top Cop Shop, Inc. v. Garland, pending the outcome of the Department of the Treasury’s ongoing appeal of the district court’s order. Texas Top Cop Shop
is only one of several cases that have challenged the CTA pending
before courts around the country. Several district courts have denied
requests to enjoin the CTA, ruling in favor of the Department of the
Treasury. The government continues to believe—consistent with the
conclusions of the U.S. District Courts for the Eastern District of
Virginia and the District of Oregon—that the CTA is constitutional. For
that reason, the Department of Justice, on behalf of the Department of
the Treasury, filed a Notice of Appeal on December 5, 2024 and
separately sought of stay of the injunction pending that appeal with the
district court and the U.S. Court of Appeals for the Fifth Circuit.

"

...

It's a flag for sure. What type or level depends some on how much $$ (or % or raise) they still need to raise, AND if the likelihood of achieving that part of the raise is high, or just not very unlikely. If former, all is good. If closer to the latter, the entire business plan can be at risk and it would very likely need immediate adjusting in a way that best protects investor capital. Odds are that the changes needed are not likely to help one get near to the Pro Forma goal/wishes.

As an LP, I'd want to know if we were going into the closing w/o the full raise, and for sure to be kept up to date on the plan to resolve the shortfall asap. Actually, above that I'd love to see an opt-out clause if X of the raise goal is not achieved before closing.

One may try to say it's a bait-and-switch of sorts, on risk levels, to close w/o the full funds IF the chances of quickly closing out the remaining raise are not realistic. Fiduciary responsibility could be in question if a deal closed and the apparent goal is proposed by some legal team that it was mostly done to not lose a large nonrefundable earnest money and/or to get a quick pop of ca$h on an Acquisition Fee. Shields up!

Established brands will generally have the nod over mom/pop as noted. Just don't give them a pass on diligence recon. It's all up to one's risk tolerances.

 The most recent news days ago on Walgreens, for example, now has it looking to close up to 2,150 of its' 8600 stores. The "25%" that are not helping the bottom line. Time will tell how many a "significant portion" is exactly, as they seeks to turn around the struggling business. One can hope they will honor the NNN and not find loopholes as some have done.

Dig into the financials some to see if you can see hints of the pending issues in the filings and reports. Easier said than done of course.

Name brands with solid balance sheets are generally a better bet, still one can't forget the big fall too, so diligence is just as key with big names and cut them zero slack. Think of Sears, Toys"R"Us, Best Buy, CVS, Dollar Stores (600 Family Dollar Stores are set to close; 370 Family Dollar and 30 Dollar Tree), Walmart closed 11 in 2024 so far, Applebee's, Red Lobster, Stop & Shop, Rite Aid, Lehman Brothers (a 158 yr run), Bear Stearns etc.

Some can and will cover the NNN agreements on the closed locations, and some cannot, or will not.
Still, finding a new tenant could be hard and $$$, depending on location etc. I've seen empty locations for years before a new tenant.

With diligence, risk mitigation of portfolio composition etc., one can make NNN quite a good route.

Also , be sure to get a NNN pro to help negotiate the NNN lease structure, term, escalators, concessions, rights, specific responsibilities, tenant improvement allowances, etc. A solid comprehensive contract is worth a lot!

Quote from @Chris Seveney:

Quote from @John Cho:

I am a LP in over 50 deals invested over the years so could name groups that are capital calling or losing capital calling right now.  Some of splashier defaults/foreclosures seems to be tied to Sumrock and his mentees including the Applesway guy but WWC and GVA is pretty much selling large chunks of their portfolio at a loss right now.  There is also a whole ecosystem of capital raisers for these people that have basically misled investors in their involvement in the GP and dont have much to offer as deals go bad.  I could name dozens and that are active in the BP forums.  

Rather than recreating the wheel, I would just go to LP centric forums/groups like 506b or PIC group that dont allow GPs or capital raisers so people can post their bad experiences without intimidation.   Wall street Oasis also but that seems to be geared more toward industry insiders than from the LP perspective. 

 Interesting as I am seeing more "fund of fund" models which are really just people raising money for these sponsors (will not get into legalities of this on whether it is in a gray area or not). 

I am curious to hear what other thoughts are on this compared to working with a broker-dealer / advisor who invests in alternatives? I have found the investment advisors due diligence has been pretty significant because they have the fiduciary duty (while holding FINRA license) compared to FoF manager. Not saying all FoF managers should be avoided, i know a few who I think do a great job on underwriting, but several I have seen are literally just marketing / sales people.

 I avoid them. If I wanted cryptic levels of communications and management where I am even more layers away from the RE asset/deal itself, I could invest in Wallstreet where it seems to be slightly more regulated.

A GP that really needs (vs optional) to rely on FOF players is already a flag for me.

Quote from @Chris Seveney:

This post has 30+ comments, but has anyone actually roasted a GP yet?

Closest may be where Frank Sichelle posted 2 short lists: "Category #1 - Inexperienced Sponsors:" and "Category #2 - Malicious/Greedy sponsors:"

@Don Konipol

" 4. The bank froze my funds because I’m a vegetarian "

Outstanding! Prize worthy really.

Quality over quantity. One lost deal/repossession/bankruptcy and credibility is damaged.

@Evan Polaski is right with: " I think there will be a lot of sponsors that have footnotes on their  track record, stating "representative sample" or they will change track  record to case studies, and only list their good deals, while sliding  some "average" deals that still netted an okay positive return. "

Some sponsors will not "lie"; yet intentionally withhold the full truth.

Non-disclosure of what could be deemed pertinent data to one's financial decisions is potential grounds for legal issues. Some would say it's material data. Transparency is more and more demanded by investors as well as the gov FTC, CFPB types. Business to business non-disclosure is one thing of "buyer beware" that is sadly tolerated; business to consumer games seems less tolerable these days.

Quote from @Jared Friedman:

I’ve invested several times with PPR for their 10% and 12% 3 year funds.  You’ll have a hard time finding a company better than PPR.  I believe it’s sometime like 10+ years or longer that they’ve paid investors like clockwork.  

Sine you are in, are the 2 funds 100% note funds or are the MultiFam items in the funds too?