Social Media Reports: Scientologist Tycoon Grant Cardone laid off 80 of his 180 employees last Friday with no prior notice. March 19, 2020:
Karma’s a bitch: Many people who have lost their jobs in layoffs won’t be able to pay Cardone the rent on his apartments. In this economy, it’s going to be harder than ever to evict tenants. In some jurisdictions, evictions have been made illegal. Other people may stay in Cardone’s apartments as long as they can, bail out on back rent owed, and then move in with their families or find cheaper rent elsewhere. Cardone arrogantly bragged in a video the other day that the courts aren’t open and so no one is going to sue anyone. He seemed to be alluding to the fact that his laid off employees can’t sue him. According to reports on social media, these employees got a letter from Grant’s attorney along with their walking papers. The letter, and we are working to obtain a copy, apparently stated that these employees had no legal rights to sue Cardone Capital. Grant’s view on the courts may come back to haunt him when he tries to sue current or former tenants for back rent owed and gets court dates three or four years out.
Cardone is basically screwed with his $1.7 billion AUM at what? 85% leverage? With such enormous debt to service in a pandemic, we’ll watch to see how Grant Cardone fares — especially when his investors start calling to get their illiquid cash out of Cardone Capital. Cardone has said his deals are based upon a worst case 15% vacancy rate. Let’s see how the number works in this crisis when the 85% occupancy stays high but 50% of the people aren’t paying rent. As reported by Bloomberg, private equity firms began 2020 with $1.5 trillion in unspent cash looking for deals. These firms watch highly-leveraged firms like Cardone Capital and can smell fear and weakness light years away.
Jet fuel prices have crashed in the past month. We wonder if Grant Cardone’s cash flow follows the jet fuel curve? In any event, given the fact that all large gatherings have been outlawed globally and entire countries shut down, it looks like Cardone won’t be doing much traveling anywhere on his jet to host his 10X rallies.
Cardone can follow the lead of the airlines and park his jet out in the desert while he rides out the crisis.
Cardone’s Scientology Humanitarian response to the pandemic is to offer people 30 days free at Cardone University after which they must pay the $97 per month fee. We saw Scientologist-owned ABC Mouse using a similar strategy last week.
The ultimate #NotACardoneFanBoy Meet Kevin just did this video on Grant Cardone. 203,000+ views and climbing. Kevin offers great insights about the inherent flaws in Cardone’s business model.
Here is Grant Cardone’s video for his side of the story.
Our take: While being the boss can be brutal, being laid off is much worse. Why didn’t Cardone pay his laid off employees three months salary plus pay their COBRA healthcare benefits for six months? That would be much better than acting generous and saying that he paid the people he laid off through the end of the month. That’s only ten days of pay from March 20 – March 31. People know how to count. Cardone also shouldn’t have said that he will be okay and doesn’t have to worry about his bills. Over all, Scientologist or not, we think this was a complete shit PR response on Cardone’s part.
UPDATE: This is Grant Cardone’s view of employees from last month:
2. Management is unwilling to push employees to greatness
Leadership is too soft on their people. They believe that being nice is somehow going to make great people and a great company. Simply being good to your people does not make them happy. Happy employees are winning at work and producing, because production makes people feel good. And as for employees — if you don’t like your $12 an hour job and you complain about it, you’ll never move into a $20 an hour job!
Categories: The Scientology Money Project
In looking through Wall Street, there will certainly be layoffs, but not 50%, at least not for a while. There have already been layoffs due to Brexit and just general end-of-year trimming. But recall that the credit crisis happened in 2008 but the real misery on Wall Street didn’t start until 2010 or so, until the hedge funds who lost money did it for two years in a row, and until trading volumes dried up significantly. So he’s a little early for a financial services layoff wave.
So it’s very reasonable to wonder about the health of a player who has to cut almost half his staff immediately before the full effects of the breaking recession can be felt. If the positions he cut are 100% in sales people to sell the next generation of partnership deals, that’s one thing. And it’s probably a reasonable thing to do, especially if his typical “investor” is borrowing against 401(k)’s or taking cash advances on credit cards to put $10,000 into one of his deals. Speculative unsophisticated “investors” are almost certainly on the sidelines for the next year or two as they try to ride out the storm and then go through a protracted recovery period before they have significant disposable income.
But if he’s cutting operational staff at this point, that’s another thing entirely. If you’re able to figure out what those people who were laid off actually did, that would tell you a fair amount about whether he’s still solvent.
I know it’s supposed to be wicked to mock the afflicted, but I can’t help gloating a little over Cardone’s misfortunes. Maybe there is a God after all…
JPC: We have sources working on this. “Uncle G” as he has decided to style himself, does not exude the same confidence as Captain Miscavige when the latter calls Coronavirus a “Planetary Bullbait.” I have long suspected that Cardone incinerates cash as quickly as it comes in. He has said as much. He has also said in the past that Cardone Capital will borrow as much money as possible. Cardone is highly leveraged. He has also been relying on large celebrity-studded rallies to raise cash from unqualified investors (Reg A), this after he ran out of qualified investors (Reg D). None of the big investors would put a penny into his fee-heavy scheme in which he takes 1% upfront on a deal, fees during the life of the deal, property management fees, and 35% on the back end.
There are also questions in social media if Cardone has paying interest only on his loans and counting on inflation to increase his deals over 7-10 years such that paying down the actual loans is not necessary. If true, this would allow him to pay distributions to his investors rather than paying down his loans. This would also leave him badly exposed on rents not being paid by his tenants in a sharp downturn as we are now experiencing. The bets are that he will stop paying distributions sooner than later. While Cardone is not GPB Capital, he is in the same high risk illiquid investment part of the market.
So typical of a Scientologist. Use others to make yourself look good until the outside world exposes you. Anyone in that much debt has an income more cantilevered that frank lloyd wrights bldg fallingwater. Hopefully his building will collapse.
A con man is always a con man, and the most successful of those con men use religion as their con.
Jeff, I bet you’re right about him being over-leveraged. That’s the Scientology thinking trap that has killed many a dental practice, chiropractic clinic and veterinarian. The arrogance of Scientologists is that that they have some secret sauce that enables them to bring more revenue into being with their OT powers.
The fundamental trap of Scientology is to tell people that everything should be easy for Scientologists, and when it’s not, the cure is more Scientology. Hear that enough times and you’ll take imprudent business shortcuts, and some Scientologists will veer into the out-and-out criminal. While it’s possible that Cardone is a criminal, I think it’s far more likely that he’s just a sleazebag who does shady but perfectly legal deals. The Reg D deal you asked me to look over last year is exactly that: a shady deal I’d never touch, but one that’s fully compliant with the law. In Cardone’s case, he probably believes that the rapid growth in his business to date is due to his personal brilliance as well as his Scientology powers.
But what I think he’s done in the real estate business is to find a pretty clever model for customer acquisition: run events where people pay to be there to hear your words of wisdom. Typical attendee is probably 25-35, male, junior college or degree from a low-end college, annual income $65,000, not a homeowner, probably single. Some disposable income and dreams of “hitting the big time” but no actual clue how to get there. The end of the event is a mass pitch for investing in the company.
Let’s say you have 4,000 people in the audience. Each pays $150 for the day (I don’t know what Cardone charges but that’s probably much lower than what he actually charges). That’s $600,000 gross, probably half that net after expenses. Then you get 400 investors out of that event at, say, $15,000 apiece. That’s $6 million. Do two of those events a month and you’re raising $150 million a year, and you can leverage that 5-to-1 at least. And your fundraising costs are less than zero, versus 5% or 10% to a placement agent if you’re selling high-quality slices of billion-dollar real-estate LP’s to insurance companies.
The only problem with this model is that when the curve flattens out and there are no more suckers in that demographic profile, there are never going to be any more suckers, and the well runs permanently dry. When you’re overleveraged on the presumption that you’ll keep being able to run this game for capital acquisition, you’re really sensitive to anything going “boom” in the economy, and you’re going to get hosed.
What does a picture from April 2019 have to do with a layoff in March 2020? I feel bad for the less than 50% people laid off, and they should have gotten a bigger payout. It would be nice if the 80 people got a bigger payout, though there seems to be a bigger cash crunch for the company that makes it not possible to do.
It seems to me that no matter what happens Cardone will be fairly well insulated from the fallout.
First off, he’s been collecting his piece all along. Worst case, the well runs dry and even if his business collapses he has gotten plenty out of it while the getting was good.
Second, typical management contracts allow the manager to still get their take in full even in the event of vacancies and tenant defaults. In other words, the manager collect on what a building SHOULD be bringing in, NOT on what is actually DOES yield. After all, they are busting their hump (or so they say) trying to re-rent, evict, etc. In fact, they will most likely take in additional fees for these additional efforts.
Finally, even if some of “his” buildings go to fire-sale, he still gets his 35% of the back-end even if these sales turn out to be at a significant loss to the investors.
Legally, he is most likely untouchable. While his scheme may be considered predatory and unacceptable by sophisticated investors, no one held a gun to the heads of those who did invest (most likely intoxicated by his “I’m rich, you can be too” act at his rallies).
My take: He has already gotten “his” and will continue to milk these assets for quite a bit longer as his creditors go through the slow process of figuring what to do with him and eventually pursuing the drawn out legal remedies which can be further prolonged by Cardone’s lawyers and their feints and jives.
Other than the loss of opportunity and reputation Cardone will do just fine. It’s his investors that will be holding that bag. They took the gamble on him, and the house always wins.
When you right stuff like 85% leverage it means that you don’t m ow anything about the multi family industry. You never getting 85% leverage. Your average deal is 75% loan to value.
Sure Grant is in a jam. But your article could be a lot better because you don’t know what you’re writing about
What did the 80 people do that were laid off? Were they tasked with raising funds for deals? If so, given that has likely ceased for the foreseeable future, why wouldn’t he lay them off? It seems everyone is ignoring the fact that he’s right sizing his business and shedding payroll temporarily. My company did the same thing last week when the economy slammed on the brakes: issue temporarily layoffs and gradually build back up in the coming months. Finally, what planet is the writer of this article living on, thinking an employee would get three months salary and six months insurance during mass layoffs? Welcome to the real world.
never trust person who shows off his/her money to the world. All the so fake self claimed “guru”, in front of rented Lambos, Ferraris, private jets, I met The Gates, Bezos, never show off their wealth, saw Melinda Gates drove a Blue BMW X5 only. They r true billionaires