Experience with SuGo Capital (Sarah Sullivan / Theophile Goguely)? Good/Bad/Ugly?

Question

Does anyone have investment experience with SuGo in any sector?

I recently tried an investment with them through their ForEx fund called Steady Eddy.

Proforma: 30% IRR, 70/30 Split, 3x return at 5 year exit.

I think this was their first stab at Forex trading and hence I lost over 60% of my investment within 3-6 months and then they closed down the fund.

Seems like they also do real estate syndications. Sarah has a lot of useful information and seems very honest so I am just looking for any feedback or suggestions.

https://sugocapital.com

https://sugocapital.com/

Greg Scott · Answer

I don't know much about them, but wouldn't touch them with a 10-foot pole.

Looking at their investment returns.  All the ones with a positive ROI were sold before interest rates started higher in mid 2022.  There is a good chance that everything they bought mid 2021 through 2022 is performing poorly or underwater.

The biggest red flag is their story.  A passive investor through 2019 that suddenly becomes an operating investor and takes down 15 properties in 2 years has no idea what they are doing and they do not have the capacity to do it correctly.  I can tell you that being a passive investor provides zero training for operating a property.

Also, I've never seen anyone publish a pro-forma 30% IRR. That, by itself, is a red flag.

Evan Polaski · Answer

@Joseph M.

https://www.multihousingnews.com/ashland-greene-acquires-two...https://www.kxan.com/business/press-releases/ein-presswire/6...

To tag onto Chris's remarks: I may have picked a few of their capital raiser deals to google, but if my 3-4 searches are correct, they are not the primary sponsor, and likely not the operator, in any meaningful way, on the deals they have listed on their website.I am not implying that capital raisers are bad.  A good capital raiser will have a plethora of syndicators they work with and can help direct you to ones that best align with your goals.  Unfortunately, a lot of capital raisers also just hitch their wagon to the operator or two that pays the capital raiser the most, and the capital raiser just becomes a "commission based sales rep".

Chris provides a lot of good questions to ask them to better understand what their roles are, how they are vetting and overseeing projects, etc.

The one question I would add to Chris's list: where is the current raise, and my investment, falling in the overall capital stack on this deal?  Unfortunately, I have seen some recent raises that are effectively hidden pref equity into failing deals.  Not to imply that is always the case, but something to be on the lookout for.

Evan Polaski · Answer

@Jay Hinrichs, in the most conservative definition of capital raiser, yes.  I am using it a bit more colloquially to include co-GPs that have a primary function of capital raising and Fund of Fund operators.

The co-GP role is the very sticky one, because the active participation is very subjective. If I raise money, AND co-sign a loan, and have a quarterly GP meeting and property tour, is that active enough?

Fund of Funds: are a little more clear cut on the surface.  I am raising for my own feeder fund that will be placed into a specific deal. My question with many of these is how these FoF GPs are sharing in the primary GP fees, if they are only an LP.  I feel like there is some legal gymnastics to work through in this structure, that I haven't gone down the rabbit hole of figuring out.Outside of one of those two structures, and the most clean version from a compliance perspective, is having the capital raiser being a licensed Broker Dealer.  Knowing more than a few that transitioned from "grey area" capital raiser to licensed Broker Dealer, it is certainly a process, typically taking these people about 9 months to a year to finish all coursework and testing.

Mark D. · Answer

Thank you both.

Broker-dealer does sound better. Do you have any suggestions?

By starting this first post on SuGo, I am hoping others chime in about their experience.

Mark D. · Answer

great info

Evan Polaski · Answer

@Joseph M., if you are seriously interested in LP investing, I would say PassivePockets membership is likely worthwhile.

For me, some basic DD I do, and what I did with a few properties on SoGu's site, is google the name of the asset listed + apartments + city + acquisition, i.e. "Forty51 Apartments decatur acquisition". Admittedly, this does not always come up with a valid result, particularly for "smaller" deals in Class C/D areas, like the example I mentioned above.

I also search Facebook and Instagram for the same, since you will sometimes uncover multiple groups marketing their new deal webinar for the same deals.  Beyond that, a telltale sign is on their websites, specifically their "team" pages. Capital raisers for hire are often very small teams, i.e. a couple people.  They don't need many people because their role is almost exclusively marketing.  Compare that to groups that are investment managers: acquisitions, asset management, typically Investor Relations, accounting/finance teams, etc.  And compare that to fully integrated management teams, which will have VP of Property Management, HR teams, Head of Maintenance, etc.

A small team that is raising capital is NOT necessarily illegal or unethical.  There are some that are fully transparent about their role in the deal and the value they bring.  There are a lot that overstate their roles in the deal, which is borderline unethical in my book, but still not, necessarily, illegal.

And, if you are ever curious, ask them.  What is your role in this deal?  And then hit them with follow-up questions: I see on your portfolio, that you list "deal x, y and z" on your portfolio, but when I googled those deals, they are shown as "Sponsor ABCs" deal, with press releases stating they were the buyer.  Can you please explain how this deal is different?  Who is the lead sponsor of this deal?  Why should I invest through you versus directly through them?  How many deals have you raised for them?  How are you compensated?  What deals have you turned down from this group or others and why?

Evan Polaski · Answer

@Greg Scott I think you and I align on our views at a high level.  It is like wholesalers in the single family market.  A lot are operating illegally and somewhere on the spectrum of ill-informed to downright unethical.  But, there are some licensed agents with true market knowledge that operate in a similar vein of wholesalers.  The nomenclature lumps them all together and the many bad apples spoil it for the good ones.

Capital raisers are very much the same.  There are some well-informed, smart people that generally maintain the interests of their investors higher than personal interests, even if they aren't licensed broker-dealers and don't officially have a fiduciary duty to their clients.  Some of these people operate under feeder fund/fund of fund structures to maintain a more clear delineation within the sights of the SEC. There is a lot of grey area and some highly unethical, if not fully illegal, happenings in this space.  But, I also can't say 100% of these capital raisers or FoF operators are totally illegal setups.  As has been noted in various conversations here, my challenge with the capital raiser/FoF model is that many of these groups are not offering any better terms to their LPs than the LPs could achieve on their own, given a lot of the groups the FoF raise for have very low minimums, themselves.  But it does add another layer into the equation, which increases the risk of the deal.

Joseph M. · Answer

All great info guys- thank you so much! Seems like I need to be more careful, perform more due diligence, and seek out more recommendations prior to getting sucked into these great marketing webinars.

I’m hoping to post will help me find other investors with SoGo that are also upset with their 60% loss

Can you suggest a firm or even what type of attorney could check into this for me? (Maybe a securities attorney?). After reading your posts- makes me wonder if they’re conducting business in the unethical gray zone or beyond.

Experience with SuGo Capital (Sarah Sullivan / Theophile Goguely)? Good/Bad/Ugly?

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