List of Syndicators/GPs to AVOID?
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Scott TrenchPro Member
Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votesAs always, it will be a case by case basis.
This thread is about GPs to avoid. Many LPs thanked their sponsors for good returns with millions of dollars in guaranteed fees, and tens of millions in carried interest. To those sponsors, LPs shouldn't say "thank you." They should say, "you're welcome."
GPs solicited investors by promising huge returns and citing their track records. Some did this very publicly. Then those GPs "earned" fees just for buying the buildings... the same buildings that will now result in many cases in total wipeout for their investors. Some of them are now asking for more capital to bail out these buildings and have very real risk of losing that too.
LPs absolutely have a right to be mad, and a total or near total wipeout of invested capital in the last 3-5 years absolutely invalidates a decade of performance in many, but not all, cases, in my view, especially in the 2010s, when almost anyone with a pulse could make money in multifamily.
However, what matters more to me than whether a fund or deal is wiped out, is how the sponsor handles it.
"Good" in the context of losing, to me, looks like this:
Sponsor honestly appraises the situation, and provides a blunt assessment of where they made a bad bet, failed in due diligence, operated poorly, or were totally irresponsible with leverage and timing. Sponsor realistically and honestly susses out this from market challenges, which of course are real.
Sponsor tells investors that they are committed to operating their current business and stewarding investor capital. Sponsor recommits full-time attention to their job, which is to oversee the tens of millions, hundreds of millions, and/or billions of Assets they deploy.
Sponsor is regularly seen on-site at every property in their portfolio, regardless of personal cost.
They raised the big bucks, and things aren't going well. Are they going to be on vacation? Are they going to start up the next fun side project or fund? Or are they going to go to work and do everything they can to make their investors whole on their CURRENT deals?
I'm in a deal that's gone south as an LP. My sponsor is doing "Good" in the context of losing.
We all knew what we were getting into. We knew the bet. He executed it. It's his full-time job. It's all he does. He lives within an easy drive of every property in the portfolio.
Doesn't change that I am getting flushed on the deal. But, I may/will invest with him again. He operated it well. Executed the plan, keeps the units occupied. Just supply and interest rates crushed us. I expect many investors will not be happy, but they also won't publicly roast him for fleecing them.
Other sponsors aren't doing "good" in the context of losing. They will get roasted.
Some deserve it.
134 Replies
- Investor · Newport Beach, CA · Member since 2019 · 190 posts · 176 votes2yI am really sorry that you're having to go through this mess. Perhaps someone in the BP forum can help refer or is a real estate securities attorney, particularly one that helps LPs. Or, for starters, google real estate securities attorney in Houston. I'd recommend counsel in the area that the property is located.
Quote from @Cheryl A.:
It's still difficult for me to tell if you invested in a fund of fund or directly in the investing entity. The entity which you are receiving K1s from looks like a fund of funds entity; however, the Waterford Grove Houston LLC entity looks like possibly a direct ownership entity. Ian Djuric of DFO, Timothy Bratz of Legacy Wealth, Shane Carter of Hampshire Capital are all directors of Waterford Grove Houston LLC and if you did indeed wire funds to this entity, all three should be responding to your inquiries. Source:
https://www.sec.gov/Archives/edgar/data/1853174/000185317421...
- 2yMelanie P.Pro MemberRental Property Investor · Member since 2023 · 1k+ posts · 922 votes
@Cheryl A. Try reaching out to Thomas Melton @ Parr Brown Gee & Loveless. He can point you in the right direction.
Start the conversation with the total value of investment this is regarding so a decision can be made quickly whether expending legal fees is worthwhile.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes2y
Quote from @Bobby Larsen:
I am really sorry that you're having to go through this mess. Perhaps someone in the BP forum can help refer or is a real estate securities attorney, particularly one that helps LPs. Or, for starters, google real estate securities attorney in Houston. I'd recommend counsel in the area that the property is located.Quote from @Cheryl A.:
It's still difficult for me to tell if you invested in a fund of fund or directly in the investing entity. The entity which you are receiving K1s from looks like a fund of funds entity; however, the Waterford Grove Houston LLC entity looks like possibly a direct ownership entity. Ian Djuric of DFO, Timothy Bratz of Legacy Wealth, Shane Carter of Hampshire Capital are all directors of Waterford Grove Houston LLC and if you did indeed wire funds to this entity, all three should be responding to your inquiries. Source:
https://www.sec.gov/Archives/edgar/data/1853174/000185317421...
If your subscription agreement was signed by the LLC that owns the asset, you wired money to that entity and the person who signed it is a member, then you invested directly in the offering is how I see it. Now maybe they were internally trying to break out who raised what $ etc. but for a 506b offering this has nightmare written all over it especially if they were soliciting investors to invest.
7e investments53 Reviews - 2yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
Quote from @Cheryl A.:
Quote from @Forest Wu:
Hi! One of my last posts was asking about syndications/PE opportunities. Unfortunately, I've come across quite a few people who are really upset with how their syndication experience has been. Quite a few people have lost a lot of money. I think it'll be very helpful to increase transparency on those operators who have betrayed their investors trust or simply are poor performers. So let's do the following:
1/ List the GP / syndication that you've had a terrible experience with
2/ At a high level (and as much as you're comfortable sharing), provide a reason for why the GP / Syndication should be avoided from your experience (or an acquaintance's experience)
3/ Any lesson learned to help future investors
Let's help each other avoid future mistakes and bring hold GPs/operators accountable.
I appreciate the context, transparency & honesty shared here.
For the most part, I’m an inexperienced LP investor.
My first two investments with the Djuric Family Office / now Blake Capital Group, started in 2021 and my experience has been awful.
One deal collapsed in Dec 2023, which I found out 4 months after the property was sold back to the bank, by the operator. To date Blake Capital investors have not been formally notified and despite repeated requests I’m not able to get anything of legal value to support the collapse and narrative around it. All I’ve received is bad property managers and rising debt costs are to blame, GPs have lost a lot of money also, this is the first deal failure for the GPs …
The second deal has had two capital calls and is scheduled for foreclosure in August, unless additional funds are raised from the last capital call. My request for the root cause of the failure has yet to be answered.
My frustration comes from the lack of transparency into how the deal was structured with GPs/Operators. Seems like unless you invest directly with the operator, you’re going to be treated as a secondhand investor with lagging communications, investor reporting, tax docs, etc.
Extremely poor communication, most often I’ve had to repeatedly ask for a response.
Inconsistent investor reporting, sometimes monthly, sometimes quarterly, most of which has been received 2-4 months past the reporting period.
Investor portal that appears to be used for show only. I had to push for my investment to be registered and funds to be documented. The accounting has never been added and 8 months later and the portal still shows I’m actively invested in the failed deal.
K-1s received late Q3.
I was naïve and inexperienced, and I accept some degree of blame for this, however I feel I have been very misled and there appears to be no accountability for this.
Are LPs able to file a Suspected Securities Fraud or Wrongdoing report with the SEC? Any other recourse LPs can take?
Appreciate any advice on this.
Thanks, Cheryl
Google their company backgrounds and websites. Reach out to their legal and financial partners.
Also if the property was foreclosed contact that bank. Look up the property tax GIS map and see who is listed as the owner of the property and their address and contact.
Ask someone in here to go to their corporate office in Naples and see what is up.
Looks like you lost your money. Ask the foreclosure bank what is the status of the property and what is the status of anything due prior owners.
Go see the property or ask someone to look at it. If the tenants have been asked to leave, then any of your value has been lost since no NOI, not a going concern. - Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes2y
@Cheryl A., this isn't a direct response as to next steps. I think Melanie's suggestion is a good one to start with.
The thing that is very concerning to me is you signed documents with one name, you wired to a bank account with that same name, but then you K-1 is coming from a slightly different entity, which does not match the legal name of the documents you signed.
I.e. if I sign docs as an investor with ABC Apartments LP, the K-1 received should be from ABC Apartments LP, not DFO ABC Apartments LP, or XYZ ABC Apartments LP or anything else.
Also, here is the current listing for the asset:
https://buildout.com/connect/sharing/3125-crestdale-drive-ho...Based on this property, sounds like maybe the property didn't go into foreclosure, per se, but that the Key Principle stepped in and removed the operating partners due to mismanagement. It does not list in the broker package who the "current owner" is versus the removed "operating partners".
- Investor · Newport Beach, CA · Member since 2019 · 190 posts · 176 votes2y
Quote from @Evan Polaski:
@Cheryl A., this isn't a direct response as to next steps. I think Melanie's suggestion is a good one to start with.
The thing that is very concerning to me is you signed documents with one name, you wired to a bank account with that same name, but then you K-1 is coming from a slightly different entity, which does not match the legal name of the documents you signed.
I.e. if I sign docs as an investor with ABC Apartments LP, the K-1 received should be from ABC Apartments LP, not DFO ABC Apartments LP, or XYZ ABC Apartments LP or anything else.
Also, here is the current listing for the asset:
https://buildout.com/connect/sharing/3125-crestdale-drive-ho...Based on this property, sounds like maybe the property didn't go into foreclosure, per se, but that the Key Principle stepped in and removed the operating partners due to mismanagement. It does not list in the broker package who the "current owner" is versus the removed "operating partners".
Looks like you've received good feedback for at least where to start. I'd also add that don't necessarily let a foreclosure or possibility of one dissuade you. If you did in fact sign and send in funds directly to the direct ownership entity and they then placed you in a feeder fund structure, it would likely trigger GP liability. However, you should factor in the legal cost of pursuing versus the size of your investment because this can be an expensive endeavor alone. Although, it may likely turn out you're not alone. First step that I would take is to have a lawyer send a demand letter requesting the list of LPs and contact information. In every jurisdiction that I've seen, GPs are required to provide this information.
Snippet from the investment brochure that @Evan Polaski linked to:"The Current Owner purchased the property in 2021 as a Co-GP and
provided GP equity and balance sheet support to the Operating GP.
The Property underwent a renovation and unit conversion plan that
increased the number of units to 584 and experienced strong leaseup
post completion. In early 2023, the Owner/Seller discovered Issues
with the existing property management company resulting in tenants
without proper background checks and poor credit which led to higherthan-
expected delinquency. The Current Owner stepped in and took
control of the Property from the Operating GP, replaced the property
management company, cleaned-up the rent roll, and returned the
Property on its path to stabilization." - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes2y
Quote from @Evan Polaski:
@Cheryl A., this isn't a direct response as to next steps. I think Melanie's suggestion is a good one to start with.
The thing that is very concerning to me is you signed documents with one name, you wired to a bank account with that same name, but then you K-1 is coming from a slightly different entity, which does not match the legal name of the documents you signed.
I.e. if I sign docs as an investor with ABC Apartments LP, the K-1 received should be from ABC Apartments LP, not DFO ABC Apartments LP, or XYZ ABC Apartments LP or anything else.
Also, here is the current listing for the asset:
https://buildout.com/connect/sharing/3125-crestdale-drive-ho...Based on this property, sounds like maybe the property didn't go into foreclosure, per se, but that the Key Principle stepped in and removed the operating partners due to mismanagement. It does not list in the broker package who the "current owner" is versus the removed "operating partners".
This gets even more interesting as the property is listed as owned by CIP Legacy Houston and they have owned it since 2016....
Hcad Acct: 04322200001007e investments53 Reviews - Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes2y
@Chris Seveney, I like how this has become a sleuthing thread now...
https://www.linkedin.com/in/shanecarternh/
2004-2021 Shane was CEO of Community Investment Properties (my guess that is CIP).
Clearly none of us know for sure, but my hunch is this effective equates to a syndicated seller financed deal.
- Investor · UT · Member since 2018 · 33 posts · 26 votes2y
Quote from @Evan Polaski:
@Chris Seveney, I like how this has become a sleuthing thread now...
https://www.linkedin.com/in/shanecarternh/
2004-2021 Shane was CEO of Community Investment Properties (my guess that is CIP).
Clearly none of us know for sure, but my hunch is this effective equates to a syndicated seller financed deal.
Thank you everyone for the feedback & advice you have shared!
This is crazy stuff, just looking through emails:
- the loans went into default in December and the asset was sold on December 29th, 2023. All LP capital was lost and all GP contributions were also lost.
- The property was sold via a membership interest purchase agreement and resyndicated on Dec 29th 2023. All original investors lost the entirety of their investment. GPs also lost the entirety of funds that we invested.
---------------------------
Pivoting back to the original intent of the forum post by @Forest Wu:
1/ List the GP / syndication that you've had a terrible experience with
Co-sponsors
- Djuric Family Office (known now as Blake Capital Group)
- Legacy Wealth Holdings
- Community Investment Properties
2/ At a high level (and as much as you're comfortable sharing), provide a reason for why the GP / Syndication should be avoided from your experience (or an acquaintance's experience)
Djuric Family Office / Blake Capital Group:
- Zero transparency on where my funds were being invested. Everything presented indicated I was investing directly in the deal, however now seems I was investing in DFO and DFO invested in the deal.
- Investor reports were either not received unless I asked for them, or they were received 2-3 months late.
- K-1s were not made available until mid Sept every year.
- Communication is poor, I have to repeatedly chase for updates. Several of my questions were intentionally avoided and unanswered.
- Documents were promised week after week, but never delivered.
- The investment portal is not properly managed, kept up to date or actively used to track financial progress of LP investments. Took many months of chasing to have record of my funding recorded in the portal.
- The deal failed and property surrendered in Dec, was not informed until Apr the following year by the operator, in Aug still waiting for official announcement and the MIPA to be provided.
Co-sponsors Legacy Wealth Holdings(operator), Community Investment Properties – refused to help LPs that were not brought in by them.
3/ Any lesson learned to help future investors
My key takeaways from this experience are:
- In addition to doing due diligence on the investment, underwriting, & sponsors.
- Be very cautious of these joint co-sponsor deals, ask for and understand the partnership agreement before deciding to invest.
- Understand that co-sponsors oversee the interest of the LPs they bring in only.
- Avoid fund of fund / feeder fund investments, instead invest directly in the investing entity.
- If you value timely communications & receipt of investor updates, k-1s, etc, invest only with the deal operator.
- Ask for a walkthrough of the investment portal using live data in an actual active investment account to ensure its managed according to your needs. Investor reports added promptly, financials accurately tracked, distributions recorded, investment metrics calculated and up to date, etc.
Best luck to all!
Cheryl
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