Multifamily Property Management Firm in Phoenix- Fraud in play

Is anyone else seeing this? It’s clear to me there is fraud happening there. A clear commingling of funds and a super inexperienced and unsophisticated team at the helm. Also heard of controllers leaving due to questionable activities.

They also have been leading with a statement that they have not and will not be calling for capital from investors on any deals in the next few years. This actually doesn’t seem mathematically possible if you know how rate caps work.

Either money is required to be set aside monthly to buy the next rate cap upon expiration, or a huge Capital call will be necessary to purchase a new cap at expiration. Either way… capital call.

But they are still buying deals with large reserves for capex and they launched a fund. I would have to think those funds are getting diverted in lieu of capital calls.

What’s worse is the investors are thinly capitalized and have little to no understanding of the business and don’t know what questions to ask. It’s somewhat sad to see because those folks are investing some hard earned money. They also will not be able to answer a capital call.

So if it hits the fan, it will cascade through their portfolio quickly.

It wreaks of commingling.

Tides bought bad deals with poor structures but had prior experience and deep pocketed investors. This multifamily property management firm in Phoenix has no experience- literally only a few years worth and have shallow pocketed equity.

It will be much worse there in my opinion.