Advice needed in investing in private real estate firm

[BA]

I am a retired person in early 50’s and thinking about investing in private real estate firm.
The investment firm that I am talking about does sell shares to “selected investors” and does have a good to ok track record so far.

Would you please shed some lights/advice on to what I might get into? Pros, cons?

I appreciate any feedback….
The firm that I am talking about is called ”The Connor Group”

 

[brewer12345]

Run.

 

[BA]

Run.

Brewer, I do appreciate your one word of advice, that speaks volume
You don’t have to respond to this but if you do, would you please tell me whether you had a business with them in the past?

Thanks a lot,

 

[brewer12345]

Brewer, I do appreciate your one word of advice, that speaks volume
You don’t have to respond to this but if you do, would you please tell me whether you had a business with them in the past?

Thanks a lot,

I have never even heard of the firm. However, you are considering investing in a non-registered vehicle which has none of the protections offered by SEC oversight and you are here on a chat board asking how to figure out if this is a good idea. I would think that the Madoff scandal would have taught us something.

 

[traineeinvestor]

Investments in a private company/fund carry different risks compared to investing in listed securities or open end funds. A few issues for consideration:

1.The lack of liquidity - you could be locked in for a very long period of time - 4-6 years is common and it could be longer. Make sure they have a sensible exit strategy and that you are happy to be locked in for the expected time period or longer

2. They typcially carry higher costs than most other collective investment schemes, and are not always as transparent as one would like. If you cant get a clear picture on the costs involved, I would decline the "opportunity"

3. Commerical risk. They often carry higher commercial risk than a REIT, either because they are doing development work or because they have a less diversified portfolio or they use a lot of leverage. Make sure you understand and are comfortable with the commercial risks

4. Fraud and incompetence. Sadly there is no shortage of people willing to separate you from your money. Because these schemes are generally unregulated (at least where I am - I have no idea about the US), it is easy for people with inadequate experience (however honest) or who are simply
dishonest to set them up. Two things you should be looking for are (i) track record and (ii) the identity of the auditors and (where relevant) the property valuers

Generally you need to have an expected return (net of fees etc) which compensates you for these (and other risks). However, if the "expected" or "target" return is too high, it suggests that there is a problem somewhere.

Needless to say, you need to do proper due diligence. I've put small amounts of money with one land banker and am happy with the results so far. It took a 30 year track record backed by a letter from a big 4 audit firm and discussions with two independent investors who had invested in earlier projects to get me to sign up. I've walked away from a lot more proposals.

As a side note, the thing about your post which struck me was the reference to "selected investors" - the more hyperbole you get about the select nature of the investors or the limited and unique nature of the investments etc etc the more worried I would become.

 

[calmloki]

My gal and i have loaned money on a number of properties, we've bought and sold and continue to rent a fair number of units - property pays our way. We have lost money on 1 (ONE) deal - that was us putting about a fat year's worth of living expenses, including the fun budget, with a group of real estate professionals in Portland Oregon. For about a year it was ok - we got our nice fat interest only payment.

Then the company dissolved and our cash went.....somewhere. and it never came home. Want to do real estate? do it yourself. YMMV, but that's my story.

 

[BA]

Appreciate all the replies that you provided. As for the “selected investor”, it means that you have to have a certain income (i.e. $200k-250k per year to qualify or more than a million dollars!).
Again, appreciate your comments..

 

[REWahoo]

BA, I agree with those above who express serious concerns about this investment. Way too risky I would think.

 

[saluki9]

you are here on a chat board asking how to figure out if this is a good idea.

This is what seals it for me.

Personally, one real estate investment I made (through a small private unregulated firm) in the mid 2000's had made more money for me than everything else I've ever invested in times 2. However, unless you have the skill set to understand what you're looking at I would think long and hard.

 

[FinanceDude]

I am a retired person in early 50’s and thinking about investing in private real estate firm.
The investment firm that I am talking about does sell shares to “selected investors” and does have a good to ok track record so far.

Would you please shed some lights/advice on to what I might get into? Pros, cons?

I appreciate any feedback….
The firm that I am talking about is called ”The Connor Group”

What was that old SNL skit with the guy who impersonated senior Bush: "Wouldn't be prudent....at this juncture"!!!!

 

[DblDoc]

Here's a tale you should read:Business & Technology | Bankrupt real-estate magnate Michael R. Mastro still living large | Seattle Times Newspaper

A year ago this month, three of Mastro's bank lenders filed a court petition to force him into bankruptcy. Mastro resisted at first, then agreed to liquidate.
He reported liabilities exceeding $570 million. Among his unsecured creditors: about 200 investors Mastro called "Friends & Family," mostly Western Washington residents who had invested a total of more than $100 million with him in return for pledges of interest payments of 8 percent or more.

DD

 

[Nords]

I am a retired person in early 50’s and thinking about investing in private real estate firm.
The investment firm that I am talking about does sell shares to “selected investors” and does have a good to ok track record so far.

Would you please shed some lights/advice on to what I might get into? Pros, cons?

I appreciate any feedback….
The firm that I am talking about is called ”The Connor Group”

First, why are you thinking of investing with them? Have you been looking for a good real estate asset allocation like a REIT and you found them as part of your search? Or did someone from Connor Group find you first? Are you thinking of buying into this firm or are you being sold on it?

Second, instead of comparing their track record to all the other companies like them, are they somehow better than all the other publicly-traded REITs? You're putting your money in a very illiquid transaction with not much of a market for its shares. You'll be paying pretty much whatever their management wants to charge for expenses. You'll have little or no securities oversight on how they do business, and not much publicly-available information to confirm what you're being told.

Third, why are they being so nice to you? If they're really such a good firm then why aren't the partners and venture capitalists and other private-equity firms snapping up the shares?

"Accredited investor" dollar limits used to be much more significant when they were established decades ago. All those years of inflation have brought down the barrier to within the reach of a lot more people. However while the term can be used to mean "sophisticated investors like you should be part of the Connor Group", what it really means is "because you're assumed to know what you're doing and you lose a lot of the protections that would enable you to sue us for what everyone thinks is our misbehavior".

While you may be an accredited investor, you do not appear to be an educated one. You haven't provided any links to the firm nor offered any other reasons why you'd want to invest with this particular group more than others.

We've had other board members over the years ask questions about privately-traded REITS. One of them was quite adamant about how good a deal they are, he argued for a while, and presumably invested in one. We haven't heard much from him lately. You could try to find MathJak and ask about his experiences.

And finally, if you do a Google search for "the connor group" and follow the links to "the connor group scam" then I doubt you'd have asked your question in the first place. You can also search through the links for "the connor group complaints" and "the connor group lawsuit"...

 

[Culture]

And finally, if you do a Google search for "the connor group" and follow the links to "the connor group scam" then I doubt you'd have asked your question in the first place. You can also search through the links for "the connor group complaints" and "the connor group lawsuit"...

In all fairness, you will find that anyone managing large numbers of apartments will have lots of complaints. Some will be valid, and some will not. This really does not have anything to do with an investment in the underlying ownership of the properties, unless the complaints are off-the-scale.

I would also assume that the property management company is a separate entity from the property ownership company, with a common parent company. This isolates property ownership from management problems. If would be very strange if it were set up otherwise.

However, I concur that investment in "private REITs" are dangerous unless you know what you are doing and are an insider in the company. Too many opportunities to get ripped off otherwise. Yes, you can make a lot of money, but you are more likely to loose it all.

 

[Culture]

The investment firm that I am talking about does sell shares to “selected investors” and does have a good to ok track record so far.

Just curious, how long is the record and what is it? I would especially be interested in the year-by-year returns for the past 20 years.

 

[BA]

First, why are you thinking of investing with them? Have you been looking for a good real estate asset allocation like a REIT and you found them as part of your search? Or did someone from Connor Group find you first? Are you thinking of buying into this firm or are you being sold on it?

Second, instead of comparing their track record to all the other companies like them, are they somehow better than all the other publicly-traded REITs? You're putting your money in a very illiquid transaction with not much of a market for its shares. You'll be paying pretty much whatever their management wants to charge for expenses. You'll have little or no securities oversight on how they do business, and not much publicly-available information to confirm what you're being told.

Third, why are they being so nice to you? If they're really such a good firm then why aren't the partners and venture capitalists and other private-equity firms snapping up the shares?

"Accredited investor" dollar limits used to be much more significant when they were established decades ago. All those years of inflation have brought down the barrier to within the reach of a lot more people. However while the term can be used to mean "sophisticated investors like you should be part of the Connor Group", what it really means is "because you're assumed to know what you're doing and you lose a lot of the protections that would enable you to sue us for what everyone thinks is our misbehavior".

While you may be an accredited investor, you do not appear to be an educated one. You haven't provided any links to the firm nor offered any other reasons why you'd want to invest with this particular group more than others.

We've had other board members over the years ask questions about privately-traded REITS. One of them was quite adamant about how good a deal they are, he argued for a while, and presumably invested in one. We haven't heard much from him lately. You could try to find MathJak and ask about his experiences.

And finally, if you do a Google search for "the connor group" and follow the links to "the connor group scam" then I doubt you'd have asked your question in the first place. You can also search through the links for "the connor group complaints" and "the connor group lawsuit"...

This is the company’s web site:

The Connor Group Historical Performance

Here are some of the complaints that I found in the Net:

SCAM ALERT!!!!! ..., Not Recommended, Apr 24, 2009, apartment review of Stone Ridge at Vinings Apartments in Atlanta, GA

And this is from the Better Business Bureau, which gave an A+ rating:

BBB Review of The Connor Group in Centerville, OH

I contacted them first a couple years or so ago and from that time, they start sending me brochures when they have new offerings.
No, nobody has recommended them to me and I don’t recall how I found them but I think through Google search or magazine?

Thanks for your comment, Nords

 

[Westernskies]

If you really want to passively invest in Real Estate, here's one option:

SUSIX
+44.21% 1-year
+25.5% YTD
10.17% since inception

I'd pass on the exciting investment opportunity offered to you by the Connor Group, however their slick brochure makes an excellent glue spreader for craft projects.

Too much risk, IMHO.

 

[BA]

Thanks guys, I think the more I research the Connor Group, the more nervous I get.

 

[chinaco]

+1 on Brewer's comment.

No way!!!

If you want to invest in real estate operations... consider a REIT mutual fund. You will have better diversification.... since it will be hold many Investment Trusts.

 

[brewer12345]

Not that this dead horse needsany more beatings, but this article showed up on Bloomberg today:

Investors With `Nowhere to Go' Lured by Private-Placement Yield - Bloomberg

 

[utrecht]

If you really want to passively invest in Real Estate, here's one option:

SUSIX
+44.21% 1-year
+25.5% YTD
10.17% since inception

I'd pass on the exciting investment opportunity offered to you by the Connor Group, however their slick brochure makes an excellent glue spreader for craft projects.

Too much risk, IMHO.

SUSIX is a Load fund. I have 13% of my portfolio in Vanguard REIT no load index fund (VGSIX)

As of today:

SUSIX
+29.14% 1-Yr
+23.1% YTD
-4.44% 3-Yr
+1.14% 5 Yr
+9.85% 10 Yr

VGSIX
+27.2% 1-Yr
+21.38% YTD
-2.32% 3 Yr
+2.44% 5 Yr
+10.85% 10 Yr

 

[jIMOh]

I live in Cincinnati and could pass on the name of the firm to two different brokers I know. It is possible this is a DPP or similar which has tax benefits a normal REIT does not give an investor.

If you need info, contact me off the forum (use the messaging function).