I would avoid working with Leslie Pappas / Archer Investors at all costs. If you are inclined to go down the DST route, I would highly recommend going with a RIA who can help save you on fees and provide true due diligence analysis. I originally didn't plan on writing a review on her, but after reading a recent post (shown below), I wanted to warn others about her "due diligence", handling of investor concerns and follow-up communication. Keep in mind that her commission on DST deals falls within the high single-digit percentage range, so the quality of service should reflect the premium fee being paid.
There are many qualified Sponsors to consider. In my firm, we underwrite the Sponsor as a company in addition to their individual offerings. It is entirely possible that a Sponsor can be approved, but an individual offering may not.
This industry, like all real estate, has its ups and downs. Those that tend to have a bad experience, is typically tied to poor Sponsor selection or offering selection. It's vitally important to know who you are working with, and have the history of the players involved. I see former players from the 2000's coming back to the industry under different business names, and some of their prior work was less than stellar. It's important to have the advice and perspective of an industry old-timer, in my opinion.
The sponsor and specific deal she highly recommended to me back in 2017 should have never passed any due diligence check both from a sponsor point of view and deal point of view.
Specifically, the sponsor, Nelson Brothers Professional Real Estate (NBPRE), and later Nelson Partners Student Housing, NB Private Capital (NBPC), Versity, Versity Invest, Versity Investments, and Crew Enterprises (constant rebranding/renaming to hide past issues) had yellow/red flags about them before I invested in 2017. After attending industry meet-ups and conferences, I learned that the fighting/disagreements between the Nelson Brothers (Patrick and Brian) had been ongoing for years. There were even some companies that refused to do business with them out of an abundance of caution. Leslie seemed completely unaware of any of this even though she mentioned she had a great relationship with Brian and has worked with him for years. She even continued to promote NB Private Capital Student Housing until the end of 2020, which was astonishing, especially given that this was during the height of Covid. At that time, there were public records showing missed payments and multiple distressed properties, not to mention the overall struggles of the student housing market.
Even the underlying investment showed major red flags in the PPM which she never disclosed or mentioned to me. For example, the pro forma projected that the property tax expense for Year 2 and Year 3 to actually be LOWER than what was paid by the seller the year before the sale. The seller paid $492k in property tax in 2016 and the pro forma showed a tax expense of $472k in 2018 and $484k in 2019. The actual 2018 property tax ended up being $797k and $822k for 2019. This was almost 70% higher than what the pro forma had stated. It’s inconceivable to me how someone with a RE broker license, a CCIM, and a plethora of Series Securities Registrations can think that the property tax valuation would be reassessed at a LOWER value after knowing that the subject property and neighbor properties were being sold for record prices with each recent sale. When I asked for her due diligence analysis on the property tax expense component of the deal later on, she simply responded she didn’t remember. Other RIAs who sell DSTs will provide documentation with their full analysis of each deal they recommend. I would have expected something similar when I asked about it, not a recollection from memory.
Another yellow flag in the PPM was regarding the Sales Commission under the property disposition stage. Instead of stating an actual % or not to exceed number (typically used in PPMs), only the term “market rate” was used. You can guess what kind of commission % was deducted from the sales disposition proceeds. Of course, the broker was “Nelson Brothers Professional RE” who is currently involved in many lawsuits and has judgements piling up against him.
If the lack or incompetent due diligence on the sponsor or underlying investment wasn't bad enough, her follow-up and handling of my concerns was even more infuriating. She did nothing more than just forward my e-mails with my questions and concerns and set up a few calls without adding any value to the communication chain. Many meaningless emails such as "thanks" or "let me know if you need anything else" were sent to the sponsor after receiving non-answer responses from Versity/Crew. I would have expected her to push for full answers to my questions or add further clarifying comments/questions based on her own experience with other sponsors. Even when the sponsor admitted to numbers (close to $1M) not adding up or false statements being made, she made no attempt further push the issue. There were only 2 times she was proactive with any sort of communication with me. The first was after our introductory phone conversation when she was aggressive in asking me to fill out all the financial documents and forms in order to complete the purchase of the DST. The second was when the DST was about the go full cycle and she wanted to know what my plans were with the proceeds and whether I was interested in rolling it into another DST.
The investment she highly recommended ended up performing poorly and many questions about previously non disclosed expenses/fees and escrow prorations remain unanswered. After reading about the ongoing litigation against Versity/Crew, I have suspicions of potential fraud.
Anyone who is invested in any Nelson Brother/Versity/Crew deals should perform a google search on “brain nelson lawsuit”, “patrick nelson lawsuit”, “nelson brothers lawsuit”, and “versity invest lawsuit”. It’s quite eye opening.
I hope this post helps at least one investor avoid the same path I took and saves them from the nearly 8 years of frustration I've endured.
