Why Do a 3rd Party Report and FactRight’s Process

Wallace:
So the due diligence. Almost every product we see out there has a third party report. It’s strange, occasionally one comes through where they haven’t decided to do one. How is someone supposed to due diligence a product if they don’t have a independent objective third party report?

Brandon:
Yeah, that’s a good question. You know, I think it behooves anyone doing business in this space to get as many different perspectives, research inputs as possible. You know, I think our clients, if they have the time and the resources to really underwrite a sponsor in offering a program deeply, they might have the tools to do that on their own, but again, it doesn’t hurt to consult the third party research. We might see some things that they haven’t seen.

Brandon:
I think one of the benefits of working with us or viewing our due diligence is that we see a wide swath of the market so we have, I think, a good perspective on what what’s good and what’s not so good, what’s quality, what is not customary or favorable to investors.

Wallace:
Well, and occasionally you get blindsided, like the whole industry did with COVID and now you’re … Gosh. Think about some of the hospitality industry and in a course of 60 days, it went from 85%, 90% occupancies to 10%. That was difficult to anticipate that, of course, but the due diligence on that, you’re still looking at with the due diligence, is the sponsor doing what they said they were going to do. Are they … I mean, you’re never certifying a projection. You’re never verifying or opining on the quality of a deal, are you?

Brandon:
I mean, we’re not certifying projection. There’s risk and uncertainty in every piece of real estate held for investment, every DST program. Obviously you can’t really anticipate those black swan events.

Wallace:
Oh yeah.

Brandon:
But you can do a lot of things and you should do those things to really put yourself in the best position that you know you’re mitigating every possible thing and you’re proceeding with confidence in your in investment decisions.

Wallace:
With your process, then, do you opine on the documents themselves on, the private placement memorandum at all? Do you ever advise that, well, you should be including risk elements that you’re not disclosing, that sort of thing?

Brandon:
So primarily our advice is to our broker dealer and registered investment advisor clients.

Wallace:
Okay.

Brandon:
We will take positions on particular terms or structures or features of an offering or an asset in our reports. We’ll tell them what we think based on our assessment relative to the rest of the market, so there is that, I guess, form of opinion in the reports themselves. Oftentimes more informally, we do provide feedback to sponsors, especially when the terms aren’t finalized yet. They’re sort of in the program development phase and we see it as sort of a win-win for our clients because we’re helping to improve the deal, at least from our perspective, for our end clients at the end of the day. So, yes, that’s something that we do undertake when we think it’s appropriate