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  • #31
    Originally posted by VagabondMD View Post

    Oh, I am SO relieved now.

    I think that we should take this to a private discussion at this point. I do not what to continue a dialogue in public that one or more of the three of us (me/investors, WCI, CityVest) will regret in the future. In fact, I no longer know how to get in touch with the @WCI anymore.
    I figured most people on here know how to reach me by email given that I email 30,000 once a day or so. It's editor (at) whitecoatinvestor.com. I generally do prefer private discussions as well when we get into specifics.
    Helping those who wear the white coat get a fair shake on Wall Street since 2011

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    • #32
      Originally posted by afan View Post

      3. Low correlation with stocks and bonds. That would be appealing if true. As I asked above, where are the data in support of this assumption?

      I would expect different deals, managed by different teams, with different investments and varying sources of leverage to have widely varying correlation with stock and bonds.
      You're talking through both sides of your mouth. Which is it? Do you expect low correlation or don't you?

      The problem with getting you the data you want is that when you package these up and securitize them into a publicly available ETF, the correlation rises. But even when you do that with something like VNQ, you still see lower correlation, perhaps 0.6 or so, and similar returns. I would expect correlation with non publicly traded real estate to be even lower.
      Helping those who wear the white coat get a fair shake on Wall Street since 2011

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      • #33
        Originally posted by afan View Post

        4. Tax treatment. Depending on the structure of the deal, this is potentially appealing. But there still has to be a desirable set of risk and return characteristics. Once upon a time, one could profit by investing in products created simply to return tax losses. There was no chance of them turning a profit but that was not the point. Eventually the government shut these down as abusive. I am no tax expert but I suspect these deals will not be desirable based on tax treatment alone, even with negative returns or the feds would ban them. If at least part of the appeal of an investment is based expected risk and return, then one must have some expectation of what these will be. How does one get to such an expectation with no data?
        Break it down to an individual property. I am a syndication manager for a property. I know who holds its mortgage. I know the tenants (actually am one of the tenants). I have the contracts in hand. I know how much the rents will go up each year. I know how much it is leveraged. I know when the HVAC and roof were last replaced and when the parking lot was last done. You think it's crazy for me to be able to come up with some sort of expected return on the property? Of course not.

        So why wouldn't another manager of another property not be able to do the same? And likewise, the fund manager who is buying 12 of these properties for the fund. This is where the pro-forma comes from. You make some reasonable assumptions and you run the numbers. I'm not sure why you think you don't have the data you need. Just because you don't have the data for every single property in the country doesn't mean you can't get the data on the ones you're interested in. That data is probably even more useful than past returns on that or other properties. What do you care what the returns were on my property last year when I only had 2 of 3 tenants when I now have 3? My projected return is going to be much more accurate than assuming you'll get the same return the property provided last year.
        Helping those who wear the white coat get a fair shake on Wall Street since 2011

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        • #34
          I don't have an expectation as to the correlation with stocks and bonds. It would be appealing if the correlation were low but I don't see any reason to expect that it would be. If there are no data, then the only thing to assume about the correlations would be that they are unknown. There is no basis for assuming that they are unknown but low.

          Saying that the correlation for a securitized version would be higher is equally unsupported. No one knows the current correlation, so there is no way to know how it would change if the structure of the investment would change.

          Securitizing alone does not lead to higher correlations. Stocks, say VTI and bonds, say BND, are securitized but have very low correlations with each other.

          I did not pull that out of the air. It is not wishful thinking. There are data that show the correlation to be near zero. Fact, not speculation.

          Absent data, there is no reason to assume these deals have low correlations with stocks as a group or that any particular deal with have a low correlation. One simply does not know.

          This hypothetical low correlation, with zero supporting data, is no reason to buy such deals.

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          • #35
            The real problem is that people do not understand what they bought, or thought they had found some loophole in the deal.

            The industry is structured to sell to eligible purchasers and accredited investors. Among other things, these people are presumed to have access to advice to educate them about what they are buying. These people are also presumed to have enough assets to tolerate the illiquidity and the risk of failed investments. Still hazy to me as to why someone might want such investments but at least they are supposed to be able to survive the shortcomings.

            Then someone comes along and makes these high minimum, high networth investor only deals available to the broader public. Available to people who are not eligible purchasers with large amounts on assets beyond their needs. To people for whom low liquidity is a problem. They are allowed in through a very expensive back door. The deals remain as illiquid and opaque as they were before but now more people can buy in. Great news for those who put together these packages.

            But now there is a class of investors for whom those characteristics are problematic. They would have been excluded under the old system and they should not have bought into these new structures. Then they complain that their money is tied up.

            As for expected returns:

            Yes. The people creating the deal can present an estimate of how it will perform. Data would tell us how closely the actual performance matched those estimates. It would tell us that across the industry and it would tell us that for individual sponsors. The government will not let an active manager predict what stock returns they will achieve because the predictions are too unreliable to be meaningful. And because the salespeople would always predict great returns.

            For these RE deals, the sponsors are allowed to make those predictions. Have they proven reliable in the past? Across a large enough sample of deals to draw conclusions? I certainly don't know. Does anyone know?

            If this is unknown, like the correlations and variances, one is left with wishful thinking. "I have no idea of the expected returns, volatility or correlations. Absent data, I will assume high returns, low volatility and low correlations with other assets. Based on those wishes, I find this to be an attractive investment."

            I don't see the appeal but it is a free country.



            ​​​Clearer speculations at the casino or betting on foreign exchange look downright conservative.
            Last edited by afan; 08-16-2021, 05:21 AM.

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            • #36
              Originally posted by afan View Post

              I don't see the appeal but it is a free country.



              ​​​Clearer speculations at the casino or betting on foreign exchange look downright conservative.
              Isn't it wonderful? You get to make your bets and take your chances.

              But I disagree that the risk is somehow more than going to Vegas or FOREX.

              At any rate, every time one of these threads come up, it inevitably turns to a discussion dominated by people who don't invest in these sorts of investments for whatever reason. And they're usually saying, "I told you so, I told you so." Well, when stocks drop 40% and some boring old real estate debt fund keeps paying 10% like it does every year, maybe those who own it should swing by to say, "I told you so, I told you so. Good returns and low correlation."

              If one doesn't want to buy private real estate, if one doesn't see the value proposition in it, then don't buy it. Go buy your FOREX and whole life and roulette or whatever you prefer instead. It truly is a free country.
              Helping those who wear the white coat get a fair shake on Wall Street since 2011

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              • #37
                Investors who are financially sophisticated and have a reduced need for the protection provided by regulatory disclosure filings can evaluate these deals.

                Do income and assets qualify you as financially sophisticated? It is really up to you to judge, yes or no.

                They are entitled to this privileged access by satisfying at least one requirement regarding their income, net worth, asset size.

                Quantity and quality are different. It’s on you as a qualified investor to choose. It’s senseless to debate the investments, it is the investor that qualifies and the criteria have nothing to do with financial sophistication.

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                • #38
                  A drop in stocks while cash flow continued from a fund would not establish a low correlation. It would not even rule out a high correlation. It would be a single data point. Not nearly enough to determine a correlatuon coefficient

                  I am not saying that no one should invest in real estate. I am saying that people should avoid investments that they do not understand or that are too risky or illiquid for them. If you don't know that these deals are illiquid, then you should not invest. If you cannot produce a data-driven estimate of volatility, then you should not invest.

                  There are plenty of people who can do these things. Real estate development and management are huge industries. Many people work in these businesses and evaluate deals all day long. The run the business, raise capital, pick projects, manage them, change financing when appropriate. They know what they are doing.

                  Many endowments and insurance companies have hugh RE portfolios, managed by experts. Those experts choose the deals in which to invest and they don't come here to complain when something fails to work out as expected. They did their own analysis. They were not counting on someone else to tell them the pros and cons. They were not ceding their responsibility to others.

                  If you DON'T have that expertise, and not many doctors do, then you have predictable alternatives. You can invest in REITS. Those businesses are run by people who know far more about RE investing than nearly any doctor. You can invest in a mutual fund that invests in REITS, for another, small, layer of fees. You can put your money in annuity with an insurance company that has a large share of assets invested in RE. Again you have to pay the fees.

                  Just as I don't invest in tech startups because I don't know anything about the field, I don't talk myself into thinking I know enough about RE to invest in it. There are no equivalents to index funds that put you directly into the companies with no middle people taking fees and count on the market to set prices.

                  If you do not have the assets to be a qualified purchaser or the expertise to be an accredited investor, then you probably should not take the back door route to investments that typically require one or the other. If you are not QP or AI and you lack the domain expertise in RE, then you should not invest.

                  That leaves a lot of people who should invest, but not many of them are doctors.

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                  • #39
                    hey, afan we get it, you don't like these deals. maybe they'll do great, maybe they'll do average, maybe they'll do poorly. just a sliver of the portfolio.

                    this thread is about cityvest, specifically. I think it is valuable in showing the problem of access funds.

                    fwiw, my scotch collection is worth more than I invested with cityvest, so don't worry too much on my behalf....

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                    • #40
                      I received my 3rd distribution today of $419.97. I'm not sure if this distribution incorporates both the 3rd and 4th disruptions. Judging by past distributions I'd say that's a fair assumption. Because CityVest doesn't seem to communicate much, I don't expect to find out the answer. I'm pretty far away from presuming this deal won't work out or making any allegations against CityVest (aside from obvious poor communication.). This deal is value add and ground up construction. Distributions for such deals are expected to be low initially as the GP fronts large costs. I'm still hopeful this deal will work out well and I expect much, if not all, of the expected distributions with be caught up as the GP starts selling properties to REITs. I just wish investors would be given communications when things aren't going as smoothly as would have been expected. If a distribution is late and I'm left to wonder what happened one would think CityVest would put for the effort to let investors know what is going on and how they intend to rectify the issue. That is far from an unreasonable expectation as I am paying them fees to manage my account. I should also be informed if distributions 3 and 4 have been lumped together or not. I'm hoping things were resolved with the new bank, however, last time this happened with Chase CityVest couldn't resolve the problem and was having to manually enter in account information hoping not to make entry errors (There will account / routing number entry errors if you have to enter enough of them). As this is the 3rd (combined with 4th???) distribution I have received I'm starting to feel a bit more comfortable. I understand distributions for 2022 are expected to be a fair bit higher.

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                      • #41
                        I know nothing about CityVest or the process but what's different from this and the typical Ponzi scheme. Can one confirm their money was actual invested in the underlying deal?

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                        • #42
                          I had someone from this thread email me. I emailed Alan and got a reply back a few hours later that provides some additional detail:

                          Hey Jim,

                          Yes, we have had our operational hiccups. However, some funds like Trion have not provided a distribution for the initial 9 months and investors have been grumbling that they want a distribution. Similarly, Clairmont has provided one distribution since December, but investors want a distribution. JKV also did not pay a distribution for the first 9 months after closing and we finally are getting gone tomorrow that will go out to investors immediately. Obviously private equity funds have an initial period to deploy capital and start to make distributions. I can’t provide a distribution that I have not received. Unfortunately, the Funds have been less than forthcoming about when distributions are being made. I have communicated this but I find that investors just are not reading my communications and only care about getting their distributions. Several of our funds recently sent us a distribution and 2Q update just last week – 5 weeks after the end of the quarter. These distributions are going out this week with the 2nd Q update.

                          Notwithstanding that, we had three overlapping issues: a change in banks, a dramatic increase in our business and Assure services having operational problems. The result was slow communication and distributions. As a consequence, I have fired Assure and a couple of weeks ago I hired a CFO named Steve Katchur to handle all of our accounting and distributions. Steve was CFO and COO of Land and Buildings Investment Management which has over $600 million in real estate AUM and was CFO of Tiger Management with $36 billion in AUM. He is in the process of bringing all of our distributions up to date. Some distributions that went out Friday, today and tomorrow have not yet been updated in the Investor Dashboard and so investors may not realize that they got the distribution. The issues that we have had are easily fixable and are being fixed.

                          On the positive side, our real estate fund product is fantastic. Across the board, our Access Funds have side letter agreements for significantly enhanced pref returns.
                          And in case it isn't obvious (at least one person was confused because I used the phrase "partner with"), I don't personally or via WCI own any of Cityvest. It's not my company and I have zero control over how it does business. It's just a company I introduced to readers because I liked what it was trying to do: allow access to private funds with lower minimums.
                          Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                          • #43
                            Originally posted by CordMcNally View Post
                            I know nothing about CityVest or the process but what's different from this and the typical Ponzi scheme. Can one confirm their money was actual invested in the underlying deal?
                            You can call up the fund itself and make sure CityVest has money invested with them. That's relatively easy due diligence to do. Also an easy place to ask when distributions have occurred if you want to make sure those are being passed through to you.
                            Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                            • #44
                              Originally posted by The White Coat Investor View Post
                              I had someone from this thread email me. I emailed Alan and got a reply back a few hours later that provides some additional detail:

                              [/FONT][/COLOR]
                              Thank you, @WCI, for doing that.

                              I have also received the same distribution as the OP.

                              Comment


                              • #45
                                Originally posted by CordMcNally View Post
                                I know nothing about CityVest or the process but what's different from this and the typical Ponzi scheme. Can one confirm their money was actual invested in the underlying deal?
                                Within 45 minutes of obtaining the prospectus provided by CityVest for the Pathfinder Access Fund I was able to identify and speak directly over the phone with the director of investor relations for Pathfinder (the underlying fund with a $500,000 minimum). We had a nice chat in which he confirmed he knew Alan Donenfeld and was expecting funds from him, the receipt of which he confirmed for me via text message the following day.

                                I am confidant Alan is running a legitimate firm and I like the concept of allowing diversified real estate investments for the small investor. One of the benefits of investing with CityVest is access to the outstanding educational videos in which the underlying fund managers discuss their real estate investing philosophy. I greatly enjoy these and have learned a lot from them. In my humble opinion they justify roughly half of the management fees involved with CityVest. I plan to maintain at least one access fund investment at all times to allow for access to future direct investment in funds whose managers impress
                                me.

                                This past year’s significant delay in receiving the K-1 was annoying and demonstrated the hassles of dealing with a middleman (the underlying Pathfinders K-1 was issued in a timely manner). I expect the clerical and accounting aspects of CityVest will improve greatly with time as the company matures and improves its execution. I have always had a direct response from Alan when I have called or emailed.
                                Last edited by Bjornsleeper; 08-18-2021, 12:35 PM.

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