Filed on September 29, 2023, the Form 1-SA submitted to the SEC by Cardone REIT 1 LLC contains a wealth of details for Cardone Scam Watchers. There is nothing 10X in this report.
For example, Cardone REIT 1 LLC has been losing millions of dollars in 2022 and 2023:
The Form 1-SA also states the payoffs the company paid off all the money it had borrowed at 6% from “an affiliate of the Manager” i.e. Grant Cardone. This money was to “pre-fund” the purchase of properties. In essence, Grant Cardone engages in self-dealing in which he purchases properties and then sells them at a higher price to his captive companies. He collects interest on the “pre-fund” loans to his company. He then collects a 1% acquisition fee from his companies for acquiring the properties he purchased for them. The real number looks like 7% upfront for Grant Cardone plus his management and other fees:
The millions of dollars in losses are all the fault of Covid-19. These losses may continue for an extended period of time according to Grant Cardone who signed the report:
Rising interest rates on Cardone’s variable interest rate loans? No worry. Cardone assures his investors that things will probably be okay. We think Cardone uses deliberately confusing language to explain away the real picture:
When he opened Cardone REIT 1 LLC, Grant Cardone (the Manager) made the following disclosures in the 1-K:
Mr. Cardone is also the Managing Member of Cardone Real Estate Acquisitions, LLC, (“CREA”). CREA, under the direction of Mr. Cardone, is responsible for the day-to-day operations of the properties, including overseeing the third-party property managers who supervise the day-to-day operations at each property and the eventual decision regarding each property’s disposal. (See Annual Report Item 3. Directors and Officer for further information.) Further information about the rights and obligations of the Manager, including certain limitations on its liability and rights to indemnification, can be found in our Offering Circular, SUMMARY OF AMENDED OPERATING AGREEMENT beginning on page 85, which is incorporated by reference herein as if fully set forth herein.
Grant Cardone’s sole management of the entire REIT created the conditions for self-dealing, bad faith, and conflicts of interest. This is directly from the Cardone REIT LLC 1 Form 1-K and it is inherent bad faith and self-dealing:
Our Manager and its affiliates experience conflicts of interest in connection with the management of our business. Potential conflicts of interest include, but are not limited to, the following:
· Our Manager and its affiliates originates, offers, and manages other investment opportunities and funds outside of the Company including those that have similar investment objectives as the Company, and also may make investments in real estate assets for their own respective accounts, whether or not competitive with our business.
· The Manager has enlisted the services of a third-party in order to manage the Company’s assets. The compensation for that third-party is at market rates.
· The acquisitions of investments at higher purchase prices would entitle our Manager to higher acquisition fees and asset management fees regardless of the quality or performance of the investment and, in the case of acquisitions of investments from other entities, might also entitle our Manager or its affiliates or assigns to disposition fees in connection with services for the seller.
· We may borrow money from the Manager or affiliates of the Manager at prevailing market rates, or engage the Manager or affiliate of the Manager to perform services at prevailing market rates. Prevailing market rates are determined by the Manager based on industry standards and expectations of what the Manager would be able to negotiate with a third-party on an arm’s length basis.
· The Manager and its affiliates are not required to devote all of their time and efforts to our affairs.
· The terms of our operating agreement (including the Manager’s rights and obligations and the compensation payable to our Manager and its affiliates) were not negotiated at arm’s length.
· The Members may not remove the Manager.
Anyone who would invest in Grant Cardone’s REIT should know this fact: In 2019 Grant Cardone slammed REIT’s as a bad idea. In 2022, however, Cardone opened his own REIT. Below is Cardone’s video on why REIT’s are bad. This video remains posted on YouTube which raises this issue of bad faith. Specifically, Grant Cardone is talking out of both sides of his mouth. He is selling shares in his REIT even as he says REIT’s are unsafe investments that are just a “piece of paper” because they are not backed by real property. We recommend any Cardone investor save and archive this video for future use in any lawsuit should the need arise for such.
Categories: Grant Cardone