boileroomesqe-sounding little operation.........

This is whats so wrong with our present economy. So little true wealth-creation, so much overpriced speculative trading of assets for gains balanced on expected appreciation of said asset.

Ah, the wonders of capitalism and the free market. There seems to be little need for a full set of fingers on the “invisible hand”, as one seems to serve just fine.

Roger, this is capitalism of sorts but why do you call it free market?

Its time to buy forclosures,don’t pay over 50 cents on the dollar and be very carefull.But at least at the end you will have some property.

Consequence free, if you have enough money and power to get away with doing people dirty.

Forgive me my utter lack of sympathy for the wronged investors.  While I concur heartily that Richard Ellis is a deplorable, four-flushing low-life, I would never trust him--or anyone of his ilk--with parking change.  Nothing against him personally, nor am I a savvy investor.  I just happen to have retained the sense I was born with.  My mother raised no fools.

What is the good excuse of those who trusted Ellis?  Couldn’t be that any were out for a fast buck “guaranteed” by artificial government policy, right?

I’m just grateful the villain’s name is Anglo-Saxon and not Irish or John Ball would be throwing a tantrum.

Sometime in the late-’80s/early-’90s, a caveat emptor compact replaced our traditional, conservative, financial commonweal without consumers realizing the full extent of what this meant. With instruments like adjustable interest rates and legalized usury, banks, credit institutions and investment firms were able to compound their profits free of risk. Simply: They ALWAYS make money. For consumers, the American morning has been darkened by debt, limitations on bankruptcy relief and the knowledge that at any moment the burgher kings could decide his or her modest two-bedroom would best avail the community by transmuting into a high-rise party keep for coddled twentysomethings.

The CB investors were still operating on the premise that American business is mostly on the up-and-up. Oh, there have always been scams and frauds – but sheep-shearing has never been the general order of the day, simply because business cannot sustain itself in the long run without a modicum of consumer trust. But these days – who cares? Screw ‘em and forget about tomorrow. Twenty years ago the investment decisions made by the company would have been reasonably sound – with risk, of course. But 20 years ago, banks couldn’t legally charge 100 percent interest; although rarely done, banks can now legally apply such a rate. It’s a different world, and with a huge pool of the best politicians money can buy, it’s likely to grow less kinder/gentler for the New American Peasantry.

I hope the best for the investors. And this country.

Unless the blame can be placed on Jews and/or people of African descent, people around here will remain calm.

If your money is stolen by a WASP, hey, get over it.

If your money is stolen by a Jew or Negro, all Hell breaks loose.

Theft is theft, whether committed by a WASP, Jew, Negro, Mexican, or even a Catholic priest.

Here’s the story:

http://www.azcentral.com/arizonarepublic/business/articles/0727biz-lenatures0729.html

It appears that LNR Property Corp. is the villain here.  Who is LNR Property Corp.?

http://www.lnrproperty.com/management.asp

They just seem to not trust their borrowers.  Why not?  Do they know something about CB Ellis that no one else knows, or do they want their property
because it is worth more than their loans?

In the long run, Americans have bought into the idea that one can get rich(er) without work or risk.  In reality, the incredibly wealthy are that way because
they took risks and got lucky.  Bill Gates isn’t worth tens of billions of dollars because he’s so much smarter and a better computer programmer than
everyone else.  He just got lucky, like winning the lottery.

Besides, making money and getting rich isn’t what life is all about.

Life is about Salvation - the Sacraments.

This is EXTREMELY unfortunate.  CBREI is at fault and the investors can certainly file suit against them- take them to court and get their money back- if due diligence was neglected.  The true question is one of proper due diligence on three parts- CBREI, the broker that introduced his/her client to the deal, and the investors.  Greed is one of the driving forces of the US economy whether we like it or not.  A deal like this has greed written all over it- on the part of the investors (who looked to shelter a 15% tax- the lowest in our lifetime- on gain from their investment sale) and the management company (every business exists to make money).

This blog plainly makes the case that all 1031 TIC investments are bad.  Are they?  What is the actual percentage of these deals that go bad?  Just as due diligence was allegedly neglected in making this investment, how much research was done in writing this blog? 

Also, is anyone aware the advice to abstain from a transaction is advice? This happens to be a matter dealing with securities where law suits can be filed for bad advice or practicing without a license- is Taki Theodoracopulos a licensed Investment Representative of a Registered Investment Advisor? Was anyone aware that these individuals have to be worth over $1million to make these investments?

In the fall out of this, to what was the dividend from this property cut?  Have investors had to make more investment in this deal?  Is CBREI being forced to sell this property at a loss and pay back less to investors than they had originally invested?

There are better questions to ask and there are answers to be sought.  However, anyone who wishes to give advice on investments should do their own due diligence and situations like this would be avoided.

I remember readig a book called ‘Liars Poker’ by Michael Lewis....and thats exactly what the stock market is: heartless souls that, even if its taking grannies last dolllar, is winning.

TIC deals make sense only if there is a credit tenant
or guarantor under a triple net lease.  If you don’t know
what these things mean, hire a good lawyer.  If you want to know
whether you are paying too much, hire an apparaiser or
a mortgage banker.  Never trust a broker to safeguard your
interests.  Investing directly in commercial real estate is not,
repeat, not like
buying a house.  And if you want to sleep at nights, pay the
capital gains tax and put your money in a federally insured
bank account.

Twenty years ago the investment decisions made by the company would have been reasonably sound – with risk, of course. But 20 years ago, banks couldn’t legally charge 100 percent interest; although rarely done, banks can now legally apply such a rate. It’s a different world, and with a huge pool of the best politicians money can buy, it’s likely to grow less kinder/gentler for the New American Peasantry.

SF Curt. Your whole post was great. When it comes to banks, the things they now do are quite unlike the things they used to do.

I happen to know about a bank that will remain nameless (J.P.Morgan). Back in the day they managed money and were VERY conservative. And their customers were old money and not interested in the latest financial gee-gaws.

However, in the last decade they have put-on seminars about such things as impossible-to-understand exotic derivatives that the old money has found seductive.

I could not believe the old money was falling for it.

Wow. What a world we live in.

http://www.zealllc.com/2002/jpmgrows.htm

federally insured bank account.
Posted by RE Lawyer on Nov 14, 2007.

While I agree with your post...I see that Fannie Mae and Freddie Mac were Federally backed GSE [Government sponsored enterprises] and are just ripe for picking by clever folks [Diddlers]. Your thoughts on this?

“Libertarianism” at work...the “deregulation” of the securities markets championed by the advocates of “Laissez Faire” during the Neuter Gingrich era created Citibank, which is falling apart right now.  Enron and Worldcom and the rest of the 1990’s scandals were a direct result of this insane idiocy called “Libertarianism”…it’s turned the stock market---which used to be how middle class folks saved for their old age---into a crap shoot and con game that benefit’s the “insiders”.

Now here’s another “deregulation” in the name of <snicker> “freedom”, cheating more middle class folks.

Libertarianism is a farce, and anyone who claims that label for his/her political beliefs is either a con artist or an idiot. We need to purge “libertarianism” from the ranks of the right-wing, just as the Labor movement purges the commies and Stalinists from the Labor movement.

Let’s hang Alan Greenspan, and the rest of the fucking libertarians from the nearest tree. Traitors, and hate-mongers of the right!

A most interesting article on corporate greed. Unfortunately, my
mom, Anna DiPiazza, is one of the TIC investors that was
mentioned. She literally poured her life savings into this 1031
investment. My mom was a hard working dress maker who slaved and
toiled in the sweat shops of New York all her life. She and my
father owned a very modest four family home that they lived in
with the rest of the family. When my dad passed away, she decided
to sell out and move to Florida. With the money she made, she
figured that she could live the rest of her life out in relative
comfort without having to worry about money. My mom is not an
extravagent person and was only looking for a moderate return on
her money. CBREI promised a return of 7% and a hassel free
investment. That kind of return is what other low risk investment
would be expected to return. If she knew then what she knows now
she would of been far better off investing in a CD. She would of
received a return that would of been close to what CBREI was
offering without the risk.
My mother is a proud woman who won’t let a raw deal like
this get her spirits down. However, that does not mitigate the
fact that she feels that a grave injustice was done to her. The
fat cats who profited so handsomely should not be let off the
hook easily.

San Fernado Kirk wrote: “Sometime in the late-’80s/early-’90s, a caveat emptor compact replaced our traditional, conservative, financial commonweal without consumers realizing the full extent of what this meant.”

No, this is a result of the repeal of depression-era investor protection legislation (Glass-Steagall Act) put in place to prevent stock brokerages and investment banks that are prone to high risk, speculation and collapse from merging with commercial banks that hold deposits earmarked for safety by a frequently gullible public.

The crowning “achievement” of the “libertarian” Neuter Gingrich and the Republican “revolution” of the 1990’s.

The “market’ doesn’t’ govern itself, no matter what “Libertarian“ ideologues say.  Government regulation is necessary for Capitalism to work---for the middle class that is.  Obviously, “freedom” works in this case for the con artists and crooks that stole this money.  And it was simple theft, no doubt about it.

Keep electing “free market” Republicans like Fred Thompson, and you’ll get more of this kind of crapola…the same ones who gave us globalization and outsourcing and unrestrained immigration, and destroyed America’s economic sovereignty are now dismantling the middle class, which is the basis of American democracy! If the middle class goes down, so does American democracy!

Screw Alan Greenspan, and the rest of the“libertarian” movement, which champions the idiocy of discredited 19th Century “Laissez Faire” economics, which is obviously about making it easier for the Wall Street Bankers and the CEO classes to legally steal the wealth of others.

The GSE’s enjoy an “implicit” federal guarantee.  This is not the same thing a bank deposit insured by the FDIC.

The basic problem with TICs is that the owners bear all the risks of being owners but have no effective control of the property.  Unless you are a real estate professional, pay the 15% capital gains tax and re-invest our money in something you understand and control.

“I’m just grateful the villain’s name is Anglo-Saxon and not Irish or John Ball would be throwing a tantrum.”

Yes, or writing another 10,000 word column of insufferably tedious prose about it

“A deal like this has greed written all over it- on the part of the investors (who looked to shelter a 15% tax- the lowest in our lifetime- on gain from their investment sale) and the management company (every business exists to make money).”

The desire to keep one’s own money rather than hand it over to a plundering government doesn’t amount to greed.  Neither does the fact that a company is in business to make a profit.

The greed on display here involves fraud, in which CBREI knowingly misrepresented the risk involved to the investors.

Also, the greed of politicians and bureaucrats is at the root of such fraud since nobody would be having to look for such complicated tax avoidance schemes if the tax had never been levied.

I know a sophisticated, though not big-time, real estate investor
who has used this “loophole” to good advantage over the past
several years, doing private deals.  Leave it to Wall Street
sharks, aided by climbers like this guy, to take any scheme to
wretched excess in search of a fee, however, and woe to the last person
holding the paper.  These are the same people who gave us the
sub prime mess.  Most will still collect their eight figure bonuses
this year, though.

Thanks Re Lawyer for your post.

My name is Bill Harris, and I am President and Chief Operating Officer of CB Richard Ellis Investors (“CBREI”). CBREI co-sponsored the real estate investment opportunity you wrote about on Nov. 14. First, let me say we share the investors’ frustration over the developments at the property in Phoenix, AZ that was the subject of your article.  I want to point out some real problems with your posting because your readers deserve to have the record straight.  First, it is flat out wrong to say that CBREI did not disclose the apparent risk of investing in a property with a single tenant. Every investor received a detailed “Private Placement Memorandum” disclosing the risk factors of the investment. The very first risk factor was that “rental payments to the [investors] will be contingent on the economic success of the tenant.” It really could not have been clearer that the value of the investment was at risk if the single tenant on the property failed.

Incredibly, you leave out that the tenant was LeNature’s Inc., which went bankrupt suddenly about a year ago as the result of a spectacular accounting fraud that is the subject of litigation in the Federal courts. LeNature’s senior executives stand accused of fraud by faking revenues and earnings, misappropriating funds, and filing false financial statements with the SEC. A group of sophisticated financial institutions have sued the executives, as well as LeNatures’ Big Four accounting firm and big name bank lender, alleging complicity in fraud.  (Harbinger Capital Partners v. Wachovia Capital Markets, Case No. 07-Civ-8139, U.S. District Court, Southern District of New York, available on PACER, https://ecf.nysd.uscourts.gov).

None of this came to light until months after the investment was made. There is no question that the investors – and CBREI itself—are victims of the fraud at LeNature’s, but no one reading your posting would ever know this.  You also leave out that the investors have sued the lender on the property for its misconduct in foreclosing on the loan after the LeNature’s bankruptcy. This has been reported publicly, including in the Arizona Republic (http://ww.azcentral.com/arizonarepublic/business/articles/0727biz-lenatures0729.html). 

I have personally spent hours trying to find a solution to the problem precipitated by LeNature’s fraud. Right now it is too soon to tell whether the investors will lose any money.

Your readers should also know that the investment was available only to an “accredited” investor who met minimum income requirements or had at least a seven-figure net worth. By any measure, these requirements put them well beyond the “middle class.” Each investor was told in writing the investment “involved a high degree of risk and was suitable for only persons of substantial financial means who have no need for liquidity.” Each investor, acknowledged, in writing, that he or she had the means to be eligible to invest and fully understood the risks. Also, each investor participated in the LeNatures investment in order to defer the payment of income taxes on profits earned from previous real estate investments as part of a 1031 tax deferred exchange.

All of this information was available to you with a minimum of fact checking. I do not think it is fair to the thousands of people who work at CBREI and its parent and affiliated companies to blame us without doing any fact checking beforehand. We, and your readers, deserve better.

Mr. Harris, you failed to mention an extremely significant fact. The SEC requires full disclosure of the investment in the Private Placement Memorandum (PPM). However, the PPM did not disclose to potential investors that they would not own the cooling system and electrical switch gears which are major components of a building. Can you believe that the largest real estate company in the world would offer such an investment to the public - where the landlord would not own the air conditioning and electrical power in a building in Arizona. What were they thinking?

You also failed to mention that the potential investors were given a six page Tenant Risk Assessment Report which rated the property 3.81, where 4 was no risk and 2.0 was high risk. This would be considered a low risk investment.

Taki, no one’s going to participate in a 1031 TIC unless they have some experience in investment property. I find it hard to believe that any among them would not understand the risks involved, especially given there was only one tenant. Why does the fault lie solely with the guy with the deep pockets?

This is a reply to William Harris’ blog of 16/07. Sir, your response to Taki’s blog was another corporate copout. When are you going to learn? There are a lot of angry people out there. As a West Pointer and former combat officer, I am familiar with taking resonsibility and dealing with reality. And you, sir, with your antiseptic platitudes and questionable if not meaningless dictums, have said NOTHING. These investors, your clients, could be your parents. We are not rich people. We are not the enemy...but seniors providing for their “golden years”. What a mistake we made with CBREI. You must provide us, for if you do not, I am sure your future dealings with our demographic will disappear. Moreover, your less than effective partners in this deal, US Advisors, met this crisis with hysteria, personal venom, and facetious double-talk. Remember Coca Cola ? Sir, you are right. This is not your fault...but, it is definately your resonsibility.

I find Mr. Harris’ blog about CBREI “sharing the investors’ frustration over developments at the property in Phoenix, Arizona” disingenous at best and most likely out right deceptive. If there is a modicum of concern on behalf of CBREI/US Advisors, then the investors are certainly unaware of it. When CBREI/US Advisors were wooing investor capital they certainly had no qualms about portraying the property as a Class A property with a Low Risk Factor (Please refer to the Private Placement Memo). Conveniently, CBREI/US Advisors immediately absolved themselves of blame and took the position that the investor should bear all the risk and suffer all the pain. At no time did CBREI/US Advisors step up to the plate and offer to share in the pain by waving their management fee or forgoing their commission on a future sale/lease. It would of been a token gesture, but a significant one. However, the attitude that CBREI/US Advisors has continually displayed is one of contempt for the investors. They have insisted on running the property as they see fit dispite investor objections: while taking the position that the investor will pay the full freight for any mistake that was made. Well, sorry to say, but the secret is now out in the open and subject to public scrutiny. At least the investors finally have a forum to air their grievances. Sadly, it took a forum like this to even get a response.

Chuck sed: “And you, sir, with your antiseptic platitudes and questionable if not meaningless dictums, have said NOTHING. These investors, your clients, could be your parents. We are not rich people. We are not the enemy...but seniors providing for their “golden years”.”

It was the dismantling of the Glass-Steagall Act in the 1990’s an dother regulation of the financial community that made scams like this legal. It created Citibank, and the entire sham of real estate investment pools that is causing havoc in the financial community.

Rest assured the “libertarians” in the right are scoffing at your discomfortable for their creed is “buyer beware”, and let’s dismantle any protections and regulations that interfere with the “free market”.

It is a dangerous ideology, this “libertarianism"---and real conservatives shouuld be rooting out, humiliating and purging this extremism from their midst just like the Labor movement fought and purged the commies and Stalinists from it’s movement.

We’ve had the S&L;disaster, the dot.con farce, and now the real estate bubble. How long will it take you guys to realize what a terrible disaster “laissez faire” was for this country, and it’s people.