Diligence and the Promoter
When evaluating a promoter , several things need to be investigated , as follows :
1 ) What is the promoter ’ s background , education , and experience with similar projects ?
2 ) Who are the promoter ’ s teamaccountant , property manager , attorney , etc ., and what are their qualifications ?
3 ) How much is the promoter investing ? Is it CASH , or is it “ equity ”, which could be anything . Beware of noncash promoter contributions !
4 ) What other projects and assets does the promoter have ? Is the promoter spread too thin ?
5 ) Does the promoter put together serial syndications , leaving the older ones to neglect ?
6 ) What provision is there for removing the promoter if they are not working out ? Is there any ?
Under Enhanced Diligence a “ background search ” should be performed on every decisionmaker involved in the syndication . Certainly , this is the promoter , but it also includes anyone else in authority . This involves ordering a report from LexusNexus , TransUnion , or another data base firm . The report will usually include any liens , judgments , and bankruptcies , along with addresses , professional licenses ( including any revocations ), relatives , phone numbers , and email addresses . Costs of reports are only a few dollars for those with subscriptions to these companies . Otherwise , call three to five private investigators for quotations . The Social Security number of the promoter is not needed , and neither is their permission needed because this is a public records search . They will not know the search is being done .
C ’ mon , is this really necessary ? It depends . If you are comfortable wiring $ 50,000 – $ 250,000 to a promoter outofstate who you don ’ t know very well , then go for it . The author has discovered syndicators in bankruptcy , with federal tax liens , and civil judgments . Would you trust them with your money ? You can ’ t know your promoter too well .
" Under Enhanced Diligence a “ background search ” should be performed on every decisionmaker involved in the syndication . Certainly , this is the promoter , but it also includes anyone else in authority . "
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