PEP fund with Lane Kawaoka

Member since 2021 · 11 posts · 13 votes

Has anyone else invested with this guy? I got roped into this PEP fund he was advertising by a friend who had invested with him before. The fund was advertised as a boring "preferred equity" fund that pays 10% a year (or something along those lines). So I took money I was saving for a down payment and went in with this guy. They sent out an email last Friday saying they are stopping distributions. The email was replete with grammatical and spelling mistakes too for added professionalism. Plus they sent out late Friday afternoon which always spells "disaster." Anyone familiar with this? Now they won't respond to my emails or calls of course. Lane sent out a form email which he probably sends out to all his investors. Can't believe I fell for this. The email advertising this deal literally has a "pyramid" drawing in it.

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Scott TrenchPro Member

Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes

@Victor S. I am not aware of Lane's participation on any BiggerPockets podcasts - it is possible, as I have not reviewed all 1,000 of them, that he has appeared on a BiggerPockets show, but I was not able to find one from a simple search. We have no control over whether Lane appears on other shows outside of our network.

Lane has contributed to a "Member blog" at one point, but has not published an article in the last 3 years. This is distinct from the BiggerPockets professionally produced blog content.

Lane is being accused of bad behavior and of losing investor capital by investors in this thread and others. BiggerPockets is not in a place to verify the truth or falsity of these claims. We are, however, providing a forum where this and other types of discussion can happen.

I believe it would be irresponsible to remove Lane's ability to post to the forums, as that would remove his ability to defend himself.

@Lane Kawaoka is surely aware of these posts. Whether he chooses to respond is up to him. We will remove members if they violate our rules or terms of use.

Last, I want to call out that many investors, LP and GP, are losing in today's environment. I have no way of knowing if losses are due to bad luck, fraud, negligence, naivete, or acts of god. I suspect that we will see each of those at play as factors in wins and losses for investors in the coming years.

As an LP myself, who will likely get flushed on a deal with a syndicator, I believe that this industry needs a bright light shined on as many operators and capital raisers as possible. A place where we can review sponsors, provide direct feedback, positive or negative, and practice reviewing deals, now that the tide has gone out and we are starting to see syndicators and sponsors swimming naked.

We are creating PassivePockets.com to drive this accountability and anticipate a Q3 launch.

I take the issue of sponsors acting as fiduciary to their investors very seriously, regardless if they are legally required to or not, and plan to create a platform that calls out those who don't, and celebrates those who do. However, I cannot personally call out specific bad actors.

Even if I am right, I could create risk for the company. Instead, I will let the community discuss who is good, who is bad, and call out their perceptions of the unethical/unprofessional.

I will of course, however, let those accused respond, as long as they abide by our forum rules.

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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
Quote from @Account Closed:

Has anyone else invested with this guy? I got roped into this PEP fund he was advertising by a friend who had invested with him before. The fund was advertised as a boring "preferred equity" fund that pays 10% a year (or something along those lines). So I took money I was saving for a down payment and went in with this guy. They sent out an email last Friday saying they are stopping distributions. The email was replete with grammatical and spelling mistakes too for added professionalism. Plus they sent out late Friday afternoon which always spells "disaster." Anyone familiar with this? Now they won't respond to my emails or calls of course. Lane sent out a form email which he probably sends out to all his investors. Can't believe I fell for this. The email advertising this deal literally has a "pyramid" drawing in it.

To start I have not invested with Lane and I do not know him personally. My comments are to how I would approach this and for you to find more answers.

1. There are other posts on here about the sponsor that you can attempt to reach others who may have invested in this fund.

2. Stopping distributions does not always equal disaster. It depends on several factors which I would have hoped the sponsor would have commented on which would have been:

a. Why did they pause?

b. What are they doing to fix the issue

c. Are they stopping their payment of management fees as well?

If it was just an email (again have not seen it) that says they are pausing with no explanation etc. that would be a very big cause for concern.

3. If they continue to not return phone calls, my recommendation would be to contact your state securities and financial board and file a complaint. This would be last resort

one thing to note is just because a deal goes bad, does not mean it was fraudulent, there are many reasons outside of that. I am not defending either party just stating my opinions.

Last comment I will add is when a deal goes bad, how it is handled by the sponsor will show their true colors.
Oh and Lane is on Biggerpockets and frequently posts so try tagging him as well.
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Evan Polaski
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
2y
@Account Closed, I am sorry you are going through this. I don't know there is much to add beyond Chris's comments. Paused distributions does not mean guaranteed loss. While it isn't a "positive" sign, the overall investment may turn out okay at the end of the day.
I would continue to try calling, maybe throw some texts in there too. I would look at their website and see if there is a calendly (or similar) link where you can schedule a time directly. There are paths you can take with regulators to escalate, but being in the business myself, I generally view this as an option of last resort, and really it can only be done if you were flat out lied to and/or there is legitimate fraud taking place. Unfortunately, if you lose money, that is a risk of all investments. But, let's say the PPM says it is taking pref equity positions in real estate syndications, and you find out the sponsor is investing everything in, say, Bitcoin exchanges, then that is an issue.
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Melanie P.Pro Member
Rental Property Investor · Member since 2023 · 1k+ posts · 922 votes
2y
Quote from @Account Closed:

Has anyone else invested with this guy? I got roped into this PEP fund he was advertising by a friend who had invested with him before. The fund was advertised as a boring "preferred equity" fund that pays 10% a year (or something along those lines). So I took money I was saving for a down payment and went in with this guy. They sent out an email last Friday saying they are stopping distributions. The email was replete with grammatical and spelling mistakes too for added professionalism. Plus they sent out late Friday afternoon which always spells "disaster." Anyone familiar with this? Now they won't respond to my emails or calls of course. Lane sent out a form email which he probably sends out to all his investors. Can't believe I fell for this. The email advertising this deal literally has a "pyramid" drawing in it.

Sorry to hear of yet another investor having these issues. Thank you for sharing your story so others can learn the true risks of these "investments."
Are you an accredited investor? What sort of paperwork did they give you regarding the investment?
2 Reply
Bob Regent
Member since 2019 · 5 posts · 4 votes
2y
I was also disappointed to see that distributions for the PEP fund have stopped. If that was the only investment that wasn't distributing I wouldn't think too much about it, but I have 5 or 6 other investments with Lane and none are distributing. Some have never distributed a dime, even though they were advertised as cash flow investments.
When I initially spoke with Lane I told him that I was retiring and looking for cash flow opportunities and we discussed the best options for that. Now the line he is telling us is that we should not worry about cash flow, and if a little cash flow is what you're after then they don't want you as a customer. His words, not mine. I started investing with him at the beginning of 2020 and so far, my average annual return has been 2.6% with the biggest portion of that coming from the PEP fund. Average annual return from all other investments with him is 1.8%. I now also have an alert about cash calls on some of my investments!
I know that many things in the real estate world are hard to predict and out of the operators control. But his website is a complete mess and hasn't worked correctly in almost 2 years so it's impossible to find the status of your investments. One of the properties sold back in December 2023 and we were told that we would be receiving an update of the profit in January. It's now mid-March and still have not heard anything.
Keeping my fingers crossed that he is able to sell some of these properties at profit.
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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
Quote from @Bob Regent:

I was also disappointed to see that distributions for the PEP fund have stopped. If that was the only investment that wasn't distributing I wouldn't think too much about it, but I have 5 or 6 other investments with Lane and none are distributing. Some have never distributed a dime, even though they were advertised as cash flow investments.
When I initially spoke with Lane I told him that I was retiring and looking for cash flow opportunities and we discussed the best options for that. Now the line he is telling us is that we should not worry about cash flow, and if a little cash flow is what you're after then they don't want you as a customer. His words, not mine. I started investing with him at the beginning of 2020 and so far, my average annual return has been 2.6% with the biggest portion of that coming from the PEP fund. Average annual return from all other investments with him is 1.8%. I now also have an alert about cash calls on some of my investments!
I know that many things in the real estate world are hard to predict and out of the operators control. But his website is a complete mess and hasn't worked correctly in almost 2 years so it's impossible to find the status of your investments. One of the properties sold back in December 2023 and we were told that we would be receiving an update of the profit in January. It's now mid-March and still have not heard anything.
Keeping my fingers crossed that he is able to sell some of these properties at profit.

I believe he is here on BP with- his company is called Wealth Elevator?
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Evan Polaski
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
2y
@Bob Regent, was the investment that sold part of a Fund structure? I only ask because, while it should be communicated, if this is the case, the money may be held back to address other upcoming financial obligations within the Fund.
While there is often a delay from sale to distributing to investors to cover various bills that were incurred during ownership but received post close, typically these are cleared up within a month, maybe two.
The bigger issue is not "doing what you say you will do". Maybe there was an update email sent and overlooked?
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Melanie P.Pro Member
Rental Property Investor · Member since 2023 · 1k+ posts · 922 votes
2y
Quote from @Bob Regent:

I was also disappointed to see that distributions for the PEP fund have stopped. If that was the only investment that wasn't distributing I wouldn't think too much about it, but I have 5 or 6 other investments with Lane and none are distributing. Some have never distributed a dime, even though they were advertised as cash flow investments.
When I initially spoke with Lane I told him that I was retiring and looking for cash flow opportunities and we discussed the best options for that. Now the line he is telling us is that we should not worry about cash flow, and if a little cash flow is what you're after then they don't want you as a customer. His words, not mine. I started investing with him at the beginning of 2020 and so far, my average annual return has been 2.6% with the biggest portion of that coming from the PEP fund. Average annual return from all other investments with him is 1.8%. I now also have an alert about cash calls on some of my investments!
I know that many things in the real estate world are hard to predict and out of the operators control. But his website is a complete mess and hasn't worked correctly in almost 2 years so it's impossible to find the status of your investments. One of the properties sold back in December 2023 and we were told that we would be receiving an update of the profit in January. It's now mid-March and still have not heard anything.
Keeping my fingers crossed that he is able to sell some of these properties at profit.

WOW. 2.6% average "return.' And that's just your rate of cash out. Because at this point there's no guarantee that you'll get your original principal back out - especially on any deal where they are calling for more capital. Would you send in more at this point?
Have you verified whether they even OWN any of the properties they claim to own? Looked at tax assessor roles, verified date of sale matches your documents and transaction amounts fit?
Why would you continue to make additional investments after you were promised distributions and received zero on a couple deals?
It truly sounds to me like you're the victim of a fraud. You should contact the FBI or your local police department, tell them what you're being told and see if they are willing to take an interest.
2 Reply
Bob Regent
Member since 2019 · 5 posts · 4 votes
2y
OK, I do want to be very clear that I am in no way implying that these investments were a scam. I am very confident and have good evidence that these are real properties that are owned by the syndication. I am also confident that in most cases, when market conditions improve, we will see our capital returned and hopefully a small profit.
Seems to me that for a time, everyone was able to make easy $$ from value-add, but many were not prepared for changing market conditions. This is where experience really pays off.
These were just bad investments with overly optimistic pro formas.
1 Reply
Dan Rowley
Investor · Cary, NC · Member since 2012 · 214 posts · 194 votes
2y
@Bob Regent I have seen all kinds of groups suddenly marketing these type of Pref Equity funds. Many of them are savvy marketers but don't have background/experience in pref equity space but lead folks to believe it's just an 'easy button' to make stellar returns. I'm not so sure and I think some are finding out that it's not so easy.
2 Reply
Melanie P.Pro Member
Rental Property Investor · Member since 2023 · 1k+ posts · 922 votes
2y
Quote from @Bob Regent:

OK, I do want to be very clear that I am in no way implying that these investments were a scam. I am very confident and have good evidence that these are real properties that are owned by the syndication. I am also confident that in most cases, when market conditions improve, we will see our capital returned and hopefully a small profit.
Seems to me that for a time, everyone was able to make easy $$ from value-add, but many were not prepared for changing market conditions. This is where experience really pays off.
These were just bad investments with overly optimistic pro formas.

You stated before that you haven't received updates on your investments for two years. That the owner first pitched this as a great income-producing investment for a retiree and now if you want cash flow he doesn't want your business...
Have you EVER received your principal back on any investment with this outfit?
What prompted the series of investments. Do they have a salesperson/advisor that you enjoy talking with?
0 Reply
Bob Regent
Member since 2019 · 5 posts · 4 votes
2y
Hi Melanie,
Regarding updates, it was certainly a poor choice of words on my part. I was trying to explain that we can no longer see the status on the investor portals, however, we do receive (mostly) timely status updates via email. Sorry for the confusion.
And yes, I did receive the capital back on the one asset that has been sold.
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Account Closed
OP
Member since 2021 · 11 posts · 13 votes
2y
Quote from @Dan Rowley:

@Bob Regent I have seen all kinds of groups suddenly marketing these type of Pref Equity funds. Many of them are savvy marketers but don't have background/experience in pref equity space but lead folks to believe it's just an 'easy button' to make stellar returns. I'm not so sure and I think some are finding out that it's not so easy.

Agreed, Lane basically sweet-talked me into this thing saying it was the 'safest play' out there and an easy 10% and I fell for his b.s. Now they won't even return my emails or calls. In the past at least they were promising to provide more details about the properties the funds were in, but they've gone completely dark
2 Reply
Account Closed
OP
Member since 2021 · 11 posts · 13 votes
2y
Quote from @Melanie P.:

Quote from @Account Closed:

Has anyone else invested with this guy? I got roped into this PEP fund he was advertising by a friend who had invested with him before. The fund was advertised as a boring "preferred equity" fund that pays 10% a year (or something along those lines). So I took money I was saving for a down payment and went in with this guy. They sent out an email last Friday saying they are stopping distributions. The email was replete with grammatical and spelling mistakes too for added professionalism. Plus they sent out late Friday afternoon which always spells "disaster." Anyone familiar with this? Now they won't respond to my emails or calls of course. Lane sent out a form email which he probably sends out to all his investors. Can't believe I fell for this. The email advertising this deal literally has a "pyramid" drawing in it.

Sorry to hear of yet another investor having these issues. Thank you for sharing your story so others can learn the true risks of these "investments."
Are you an accredited investor? What sort of paperwork did they give you regarding the investment?
They gave me minimal paperwork, the whole thing reeked of a scam, I was just too stupid to catch it
0 Reply
Paul Azad
Member since 2024 · 162 posts · 232 votes
2y
i just watched a few of his YouTube videos and, please check out at least his recent
Investor Questions in Office Hours - March 2024
video where he answers a number of questions, and at 41 minutes he discusses his syndication structure as strictly 506C, not 506B, which means that he may only take accredited investors and this type of 506C election has a lot of mandated SEC paperwork, too. So if you go to EGDAR online or main SEC site you may be able to find out more details about what's going on with the fund. He mentions also in this video that he is researching seriously venture capital funds, which he then immediately describes as "buying alt-coins and other cryptos with 20x returns" but most investments would also lose money, similar to venture capital investing into tech companies. In another more recent video he mentions that he doesn't own a home and he rents, so it frees up investing capital. This may not be unreasonable for a real estate investor to do but since he lives in Hawaii with the highest long term property value appreciation in the western hemisphere, just something to think about?
He doesn't strike me as having sufficient concern regarding risk mitigation? but i only watched 4-5 videos so please look into it more thoroughly, once he started talking "infinite banking" i was done.
4 Reply
Account Closed
OP
Member since 2021 · 11 posts · 13 votes
2y
Thank you. Yes in hindsight the incompetence was so glaringly obvious, I'm just mad at myself I gambled my life savings with this guy. I took a "tip" from a friend who had had some success with this guy when times were good. Always do your own due diligence is my lesson
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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
@Frank Arjun
What was the outcome on this?
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
2y
Returns that say they pay out 10% pref tend to be very highly speculative. Not all but most times.
Not this topic but in general I have seen offerings from other syndicators where they put in marketing the pref is a high number like a 7 but then say blended return with the asterisk. You have to ask if they are that sleazy to suck an investor in what that then what else are they doing.
Syndicators just need to be real about an investment and what they are estimating it will do. Sometimes a 6 or 7 pref isn't sexy but if it's a strong investment with limited variables to the cash flow stream then might be better than a pie in the sky investment where the odds of not turning out well are higher than doing good.
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Account Closed
OP
Member since 2021 · 11 posts · 13 votes
2y
@Chris Seveney hey sir, no outcome on this, I keep asking them for any records of the fund, what it is invested in, and they keep stonewalling me telling me "oh the accountants are working on it." The whole operations stinks to high heaven. I got a guy on the phone and he basically blanked me saying oh this is a 5 year play now, nobody is seeing their money or any distributions before 4 to 5 years, so yeah, basically we have no options here besides just wait. Can't even seek any legal action because I have no facts - they won't release any information on what's going on with the fund.
1 Reply
Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
@Frank Arjun
You can get an attorney to send a demand letter to get the information. That’s how lawsuits typically start.
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Melanie P.Pro Member
Rental Property Investor · Member since 2023 · 1k+ posts · 922 votes
2y

I agree that you bear personal responsibility for what happened. But under the law the company shouldn't have marketed the investment to you in the first place and certainly not proceeded with you after learning you aren't accredited.
Someone before you was stolen from, did nothing, and you got scammed. If you do nothing it will make them more available and better equipped to scam the next person. I hope you will try to get your money back and am happy to give you some strategies to put pressure on them if you are actually prepared to get aggressive to try and recover your funds.
Sorry again you went through this.
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Account Closed
Investor · Atlanta · Member since 2017 · 5 posts · 1 vote
2y
Quote from @Melanie P.:

I agree that you bear personal responsibility for what happened. But under the law the company shouldn't have marketed the investment to you in the first place and certainly not proceeded with you after learning you aren't accredited.
Someone before you was stolen from, did nothing, and you got scammed. If you do nothing it will make them more available and better equipped to scam the next person. I hope you will try to get your money back and am happy to give you some strategies to put pressure on them if you are actually prepared to get aggressive to try and recover your funds.
Sorry again you went through this.

I am in a similar situation to Frank, just with another investment with the GP, it would be great to have a quick chat and get your perspectives.
0 Reply
Account Closed
Investor · Atlanta · Member since 2017 · 5 posts · 1 vote
2y
Quote from @Bob Regent:

OK, I do want to be very clear that I am in no way implying that these investments were a scam. I am very confident and have good evidence that these are real properties that are owned by the syndication. I am also confident that in most cases, when market conditions improve, we will see our capital returned and hopefully a small profit.
Seems to me that for a time, everyone was able to make easy $$ from value-add, but many were not prepared for changing market conditions. This is where experience really pays off.
These were just bad investments with overly optimistic pro formas.

@Bob Regent it would be great to have a quick call and exchange notes. I am in a similar situation with multiple investments that have gone south.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
2y
Sorry Ron and others are having difficulties. Hopefully your other investments are doing well.
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Account Closed
OP
Member since 2021 · 11 posts · 13 votes
2y
Quote from @Melanie P.: it would be great to connect over DM and get your perspective Melanie. I would really appreciate it. These guys have not provided us with a single official report of what's in the fund and how it's doing besides jsut saying we're stopping distributions and this is a 5 year play now. It's serious negligence. We'd love to find a way to fight back.

I agree that you bear personal responsibility for what happened. But under the law the company shouldn't have marketed the investment to you in the first place and certainly not proceeded with you after learning you aren't accredited.
Someone before you was stolen from, did nothing, and you got scammed. If you do nothing it will make them more available and better equipped to scam the next person. I hope you will try to get your money back and am happy to give you some strategies to put pressure on them if you are actually prepared to get aggressive to try and recover your funds.
Sorry again you went through this.

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Account Closed
OP
Member since 2021 · 11 posts · 13 votes
2y
@Melanie P.: it would be great to connect over DM and get your perspective Melanie. I would really appreciate it. These guys have not provided us with a single official report of what's in the fund and how it's doing besides jsut saying we're stopping distributions and this is a 5 year play now. It's serious negligence. We'd love to find a way to fight back.
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