1031 Exchange Securities Offerings Due Diligence

Professional liability insurance carriers are demanding better due diligence on commercial real estate private placement offerings and 1031 exchange securities offerings due diligence for Direct Participation Program private placements have become a matter of real concern.  1031-exchange properties investment due diligenceThe pressure from regulators and costs of investment fraud liability claims defense have reached a point where only the larger wirehouses can afford professional liability insurance premiums and carriers are starting to exclude CRE and alternative investments from coverage altogether.  This is the equivalent of the canary singing in the coal mine.  1031 exchange transactions represent a special class of risk because the sell-side broker-dealers and registered investment advisors sell the securities to anyone who meets the investment criteria, so the investors who are seeking shelter from capital gains taxation are in a conflict-of-interest with those who are investing without seeking a shield from capital gains taxation.  This means trouble because of the Treasury requirement that the holding period be 10 years, and that 10-year holding period comes with significant exposure to market disruptions that could end with a bankruptcy petition or foreclosure.  Nobody can win and nobody could fix this.Delaware Statutory Trust DST returns

Now comes INVIZEN and the INVIZEN Real-Time Status (RTS) Asset Care Protection Program that is specifically designed to provide an end-to-end solution that operates in a proactive, real-time environment to address the totality of investment risk issues that occur both before and after the money changes hands.  RTS offers a new way forward because:

  1. INVIZEN provides real-time underwriting – this means we re-underwrite the investment each and every month of the entire asset holding period to maximize investment performance assurance.
  2. INVIZEN focuses on market disruptions – this means up to 24 months of advance notice of competitive market changes that could result in an asset impairment so that an orderly exit, re-positioning or re-development of the CRE asset can take place before the “train wreck” happens and the property has already faced bankruptcy or foreclosure.
  3. business plan of operationsINVIZEN monitors the property operations – this is for the purposes of detecting the most common administrative default events that would otherwise lead to foreclosure.  This includes CRE execution risk and investment fraud risk management and mitigation by definition.
  4. INVIZEN provides proactive analysis of market conditions – this provides the INVIZEN system with information to create alternative use scenarios that have the potential of changing train wrecks into increased profit-taking opportunities.
  5. INVIZEN provides liquidity assurance maintenance – this means we apply a higher underwriting standard at all levels from feasibility analysis, through underwriting review and onward into monitoring to maintain the highest level of safety we can contrive.
  6. INVIZEN is affordably priced – check our pricing and see for yourself.  The cost of subscription monitoring does not even meet the test of being materially-significant relative to the asset value or earnings potential of the property, so there is no reason to not have INVIZEN backing your loan or investment.

FINRA Regulatory Notice 10-22 makes it really clear the government wants the CRE finance industry to clean up the property due diligence processes attending CRE securities private placement offerings pursuant to the Direct Participation Program.  NNN property due diligence requires more of us now than just verifying the lease and making a guess about subjective measures such as “tenant quality”.  Sears, ToysRUs, Caldor – the list goes way back in time and yet the losses have continued.

CRE Investment Loss Severity Risk Prevention Program
Real-Time Status Asset Loss Program Operations Real-Time Phases

INVIZEN offers the only end-to-end solution specifically-designed to help end loan and investment losses in CRE securities private placement offerings by addressing the totality of the underwriting and due diligence issues in a real-time, proactive environment that only gets started with pre-closing due diligence.  The INVIZEN RTS program is designed to help prevent the key risks from becoming future asset impairment problems while also proactively managing and/or deterring investment fraud, management performance and foreclosure default event exposure.

INVIZEN was purposely built to provide underwriting and due diligence reviews with one singular goal in mind: preventing future loss on capital investment made today.

RTAF Summary Report Screen ShotThere is so much more to the INVIZEN Real-Time Status Asset Care Protection Program that INVIZEN was intentionally designed to support:

  • CRE Developers & Sponsors.  Developers and sponsors seeking capital financing have the advantage of a systemic solution that provides the support needed to increase the odds of a successful capital financing outcome that saves time, money and reduces their capital investment risk.
  • Investors & Lenders.  Investors and lenders seeking to participate in commercial real estate securities private placement offerings and other credit instruments have the advantage of a systemic solution that provides the highest practical investment performance assurance we can contrive.  INVIZEN gives investors and lenders the proactive investment loss severity risk prevention and monitoring they really need, but have never been able to obtain in the past.
  • Broker-Dealers & Registered Investment Advisors.  Securities broker-dealers and registered investment advisors on both the buy-side and sell-side of the transaction have the advantage of a reporting system that provides FINRA compliance support, protection from future investment fraud claims, increased transaction velocity and the opportunity to increase their operating margins – all in one package.  If your firm doesn’t have this approach, then you are still operating in an environment that will penalize your opportunity to profit and control costs.

Talk to an INVIZEN representative today for more info

Currently, the asset classes supported by the INVIZEN RTS program include the following commercial real estate specific intended-use scenarios:

  • Multifamily Rental Class “A”
  • Multifamily Rental Class “B”
  • Multifamily Rental Class “C”
  • Multifamily Age-Restricted Rental Senior Housing
  • Multifamily Rental Independent Living Facility Senior Housing
  • Multifamily Rental Assisted Living Facility Senior Housing
  • Multifamily Rental Alzheimer’s Assisted Living Facility Senior Housing
  • Multifamily Rental Congregate Care Senior Housing
  • Multifamily Continuing Care Retirement Community (CCRC) Senior Housing
  • Commercial In-Line Retail
  • Commercial Single-Tenant (Retail/Commercial/Healthcare Sub-Scenarios)
  • Commercial Enclosed Retail
  • Commercial Mixed-Use Retail
  • Commercial Office Class “A”
  • Commercial Office Class “B”
  • Commercial Office Class “C”
  • Commercial Light Industrial Flexspace
  • Commercial Distribution Facility
  • Commercial Mini-Storage
  • Hospitality – Resort Class
  • Hospitality – Full Service Class
  • Hospitality – Limited Service Class
  • Hospitality – Value Class

There is so much more to learn about INVIZEN and you can start by talking to an INVIZEN representative at 832.663.9634.