- Hey guys, Blake Templeton here.
I've got an exciting interview for you
with the number one syndication
attorney in the country.
We're going to be talking through
how to protect your investments in 2020
from a legal perspective.
Look, this is something
no one's talking about
and so what you're going
to have to know in 2020
if you're going to be investing.
We're about to begin, but
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With no further ado, let's roll.
(upbeat music)
This is a "Solomon Investor" podcast.
I am your host Blake Templeton
here to help you protect your money,
but I've got a special guest
who's going to help
you protect it legally.
Mauricio Rauld, founder and
CEO of Premier Law Group
is actually my attorney.
20 years of securities experience
and he actually is the one who I would say
is the premier syndication
attorney in the country.
Mauricio, welcome to the show.
- Thanks really Blake.
I really appreciate it
and looking forward to talking to you.
- I love talking about
the syndication side.
A lot of our investors
don't get to see that side,
they don't get to see behind the scenes.
And you and I have been
working together what,
three, four years, something like that.
- For sure.
- We've done lots of deals together.
And one thing that I
can always say about you
is that you're always
consistent in what you do.
Not only do you love what you do,
but you know your stuff
and I can't say that about
all the syndication attorneys.
- That's actually a lot of fun.
I've gotten to the point now in my career,
doing this 20 years now,
is that, I know the stuff, I
know the rules, I know the law,
it's in the back of my mind here,
a little bag where I've got it.
So, I don't have to worry about
knowing what the answer is,
which is, if you don't do this full time
and you just kind of dabble
in it, that's what happened.
You got to go and look it
up or you're not quite sure.
I've gotten past that,
and what's cool about that
is that now I get to
really kind of be creative
and really work with the
clients on structuring
and if the client has an
idea that they want to do,
I don't have to go look it up
and we can literally have a
conversation about strategy,
which is the fun part of all this.
The fun part is putting
these deals together
and can we do this?
Can we do that?
And as I usually say,
as long as we're disclosing
everything to our investors
or this 'cause your investors,
we can be pretty creative
because at the end of the day,
our job is to make sure
that we put together the best
package for our investors
because at the end of the day,
that's really who we're trying to help
is we're trying to get those investors
to invest with us so we
can all gain together
in this wonderful world of real estate.
- I love that.
And the majority of people nationwide,
they were thinking about investments.
They call it the public
market, a stock market,
stocks bonds, mutual funds, ETFs
and what we're seeing is a massive influx
of people moving into the private market
into commercial real estate.
And I'm sure you're seeing
from the investor side
of individuals, the people.
The people who are creating
paperwork just like us,
we're seeing that,
specifically, people don't
understand how regulated
and how tight and how black and white
the actual behind the scenes processes.
I mean, I had a guy the
other day just tell me,
"Isn't the private
market, isn't real estate,
"isn't going in that world,
"isn't kind of like the "Wild Wild West."
"Like you're just going to shake
hand, the actual paperwork?"
What we do is,
my goal is to help
people better understand
how we protect their investments.
And this is a kind of a
fun podcast show for us
because now kind of flipping the script
and I would love to show them
how you help protect their investments.
And so, we protect their investments
as you guys know through
collateralizing your principal
So you put your money into the tangible
and it collateralize as your principal.
We protect your investments
by controlling the assets.
On the public market, you
can't control the stock market,
but we control the actual asset.
So we drive traffic,
we can lower expenses, we can raise rents,
we actually can control the vehicle.
And so on that, now we're going to flip it
and Mauricio, share a little bit about
how you, behind the scenes,
all the stuff we do before
we even have the investment,
how that helps protect their investment.
- I mean, one of the things
we do to protect investors,
just start to the beginning
with the structure, right?
I mean, the way we put
these investments together,
typically using entity structuring
and really segregating the liability.
So just from an exposure standpoint,
to the extent something were to happen,
let's say you're buying a building
and something were to
happen that building.
Well, you're not going
to be personally liable,
or personally responsible
for anything that happened
in that particular investment.
Similarly, I guess if
you if you own a stock,
if you own Apple stock or Microsoft
and something were to happen to Microsoft,
they're not going to be coming after you.
So we do the same thing
in the private market
where we structure things in such a way
that we make the investors,
as you probably heard the
term, a limited partner.
And that essentially when it says limited,
it means two things.
Number one, yes, they are limited
in the sort of the decision making
and sort of day to day activity,
but more importantly,
the reason they're limited there
is because they're also
limited on the exposure,
they have limited liability.
Essentially the maximum exposure they have
is really the amount
of investment they make
versus the sponsor like yourself.
Many times, you're the
ones that are really
kind of absorbing all that risk
because you're signing the loan
or you're the general partner
and then you're responsible.
So just from a structural standpoint,
we help out the passive
investors that way.
And then of course from
a regulatory standpoint,
what I really do, my job,
let's just boil it down to its essence,
my job is to make sure
that we create documents,
disclosure documents that disclose
all of the potential risks
and benefits obviously,
but primarily on my end,
what are the potential
risks of the investment
that Blake is putting together
so that the investor can review those
and make an intelligent decision,
whether this is a good investment
for their particular scenario or not.
It's not like where, here's an investment,
just give us 50 grand or
a 100 grand, 200 grand,
and we won't tell you all
the skeletons in the closet,
we disclose everything
so that you go in there
with an open mind and you
can make your own decision,
whether this is an appropriate investment
and in your portfolio or not.
- Yeah, that's a really good distinction.
As a Solomon Investor,
we process through mental frameworks
and three of them to be
exact, being God directed,
you've got to have wisdom
and Mauricio, from the behind the scenes,
you actually help us have wisdom,
ensuring compliance on all the federal
and state security laws
and actually making sure
we know what's the upside.
You do actually look at that,
but what's the downside and
can we live with the downside?
How, if there's a downside,
if there could be a downside,
what is it and how do we
actually protect the investors?
I really appreciate that.
'cause that that's not our wheelhouse,
our wheelhouse is to actually,
the collateral, the
property, actual tangible.
If there's cash,
so how do you make it have revenue?
How do we actually create ROI?
And so you really help
us from behind the scenes
actually create something that actually
is safe on all sides and
I really appreciate that.
- 'cause one of the issues that popped up
and I literally had this.
I'll share maybe a little
bit of a personal story.
But I had a cousin,
one of my cousins who owns a business
and he was going out to raise
capital for his business.
Nothing with real estate,
but he's looking for some seed money,
I think it was like a million dollars,
I think it was or
something around that mark.
And he just put together or
hired a regular attorney,
he was going to just put
together an operating agreement
and let's go do this,
and somehow it came on my radar
'cause he wanted me to take a look at it.
Just kind of whatever, given him once over
and long story short,
they're selling securities.
They're supposed to be complying
with all these federal
rules and state rules
and they didn't have the foggiest idea
and the attorney, which isn't uncommon,
the attorney was a business lawyer
they're not a securities lawyer.
And it's no different than
when you go to the doctor
and you go see your general practitioner.
Well, that person's not a cardiologist
and your cardiologist
is not a gastroenterologist or whatever.
Everybody has their specialty.
So the attorney didn't know,
and so that happens a lot.
And so what the problem
there is that the investors,
the passive investors will
simply receive a little package,
usually a very glossy brochure
that basically focuses on the good stuff
from the investment.
Hey, you give us a 100 grand,
you're going to own X
percentage of the company.
Here are all the numbers,
here's all the money we're
going to make next year,
and the next year and the next,
these are all your returns,
but there was nothing in there
that first of all provided
all the information
about how the returns were being generated
and the fact that really,
they were kind of making it up,
'cause they were just
kind of wild guessing
but more appalling,
none of the risks were disclosed
in those documentation.
And that tends to happen a lot,
which is usually a good red
flag for any passive investor.
When they start receiving
investment materials
that don't contain the
property disclosure documents.
And the key document is this PPM,
this private placement memorandum.
If you come across investments
that don't have a PPM,
you start asking questions
and they come up with like,
"Oh, we don't need one
"or I don't know what you're
talking about or whatever."
That's usually a red flag
that they're not working with an attorney
and they really don't
know what they're doing.
Or maybe they're just cutting corners,
which is not a good thing,
'cause if they're cutting corners here,
well, also they're cutting
corners on the investment.
- That's a great point,
that's a really, really great point
because everything in the
private market is not equal.
And that's why you've got to actually have
what we call three
dimensional investments.
Got to be God directed,
it's got to actually
have the wisdom behind it
to set it up correctly,
it's got to have collateral to,
who's ever running, who's
ever the Solomon general,
you've got to actually control the domain
and then it's got to
actually create the cashflow,
it's got to create the actual appreciation
and that's all got to be done.
Now with the structure of the foundation
of the right paperwork.
And so let's walk through
that a little bit.
You can talk about the PPM,
that private placement memorandum.
For our investors who are listeners,
you guys know it's the
stuff that you guys sign.
For our listeners who
are not quite there yet,
and you're ready to jump in,
let's break down.
What are those pieces of the PPM
and what are they actually signing?
- So the PPM is the disclosure document.
It's a document that shows you
all the ways your investment can go wrong,
all the good things, all the bad things.
I always like to analogize
it to the medical,
again, I like the medical
field for some reason,
the medical consent form, right?
If you guys ever have surgery,
I just literally a couple months ago,
maybe more than a couple months out,
I always have to get teeth
removed for some reason,
I have horrible teeth.
I have my oral surgery, I go to a surgeon,
they put me under and they
take the wisdom teeth out,
they pull this, whatever they do.
And even when I've had the surgery,
they give you that yellow piece of paper,
that medical consent form.
I know all the ways your
surgery can go wrong
and even though they're
just pulling out teeth,
I could have some bleeding, an infection,
I could die from this
three minute procedure.
It's obviously very unlikely,
but all those risks are disclosed
in a medical consent form,
it's the exact same thing.
That's what the PPM is for,
it goes through all the
worst case scenarios
that I, the attorney can even think of,
I'm like, "Blake, what
are all the possible ways
"you could lose?
"What crazy stuff could happen,
"including like a COVID-19 type thing?"
I mean, most people wouldn't have thought
of a global pandemic as a potential way,
but now if you look at documentation,
I guarantee you you're
going to see disclosures
about the global pandemic of COVID.
But even if it's unlikely,
we want to make sure that
the investor understands
all the potential, no matter
how small that risk is,
if the risks exists, we want
to make sure it's there.
We also want to make sure
that we're explaining certain things.
If we make certain representations
of things that could happen
or we expect to happen,
we need to make sure that
we're fully explaining
all the assumptions and all that stuff.
So that's in general what the PPM is.
And it typically has several parts
and so the PPM typically includes
that main disclosure document
and then it has a bunch of
exhibits or attachments.
One of them being the operating
agreement, for example,
which is the operating agreement,
which is the governing document
over the actual entity.
So you're most likely investing in,
you're not investing in the stock
like you would at
Microsoft, a corporation,
you're likely investing
in a limited liability company, an LLC
and that has an operating agreement
that shows you how the company
is going to be governed.
Who has the voting rights?
What are the percentage returns?
Who owns what?
Are there any special allocations?
Are you getting a preferred return?
All the waterfalls, all the information,
if there's ever a question about,
well, what do we do in this situation?
You're going to go to
this particular document
that's going to show you,
give you the answer to the question
that you have about
this particular entity.
There's subscription agreements,
which is actually a document
that officially subscribes you
to the offering.
That's where you're going to actually say,
I want to invest X amount of dollars,
buy a certain amount of units
and here's my Social
Security number, my EIN,
and all my information.
And then there's a questionnaire,
an investor questionnaire,
because depending on the investment,
there might be some limitations
as to the type of investors
that can be participating,
or even if everybody's
allowed in the deal,
you may be limited to the amount
of people that can come in.
So for example,
you may have a deal that allows you
to have non-accredited
investors for example,
but you're limited to 35.
So we've got to make sure
we're keeping track of that.
So that's what the questionnaire is for.
And then usually your business plan
is part of that PPM as well.
So the business plan is
kind of the nice marketing,
the pitch deck,
or the brochure or whatever
you want to call it.
The prospectives that has
all the pretty pictures
and the graphs and the story
and all that pretty stuff,
that's usually the last exhibit.
So you end up with a PPM that's, well,
we don't print them out anymore,
but they're quite lengthy
and surely cure insomnia
if you have to go read the 100 pages or so
that this PPM is at the end of the day.
- Hey, thank you for sharing that.
But it's important.
It's kind of tongue-in-cheek, it's big,
but that's what we're
missing in the public market.
I mean, that's what people are missing.
You go on Robinhood app
and you just sign up
and just put your money in.
The average mutual fund
has 17 different fees
that literally are hidden in prospectives
that are actually given to the person
and that you might as
well find on the stock
in some back behind hidden
page on their domain.
- That's a great point Blake,
'cause one of the major
things that we focus on
is the compensation piece.
So we, of all the disclosures we make,
the one I tend to focus on the most
is that compensation model,
and we want to make sure we're disclosing
not only all the fees, which look,
everybody's entitled to fees,
everybody working hard
and generating the return for everyone,
but we disclose all the direct fees,
but more importantly, also
any of the indirect fees,
which are fine.
It doesn't mean that they're not earned,
but they may not be easily seen.
For example, I'll give you a great example
and there's nothing wrong with,
if you're buying a piece of property
and you also happen to be a
broker, a real estate broker,
and you want to take your
usual real estate commission
on that transaction,
nothing wrong with that,
but that's something you
would have to disclose.
When you look at these prospectives
of a lot of these mutual funds,
they'll disclose the fees
that you typically understand,
where it's a 2% fee or
whatever the load is,
but a lot of those fees are hidden
and they're kind of siphoned
off from your return.
It's like the gambling rules,
like they actually make the
money when you make money,
because instead of, you
should be making 10%,
but because of all these
kinds of hidden fees
in the background, you end up making 7%
and you may think, hey, 7%, not too bad,
but you should've made 10,
or maybe you should've
made 20 and you got 15.
You're thinking things are going well,
but those hidden fees that
aren't explicitly disclosed
or articulated as they are in a private,
like in a private placement memorandum,
where we be crystal clear, all
the direct and indirect fees.
- And that's why people
in the public market
are actually losing money no matter what.
You're always losing.
If the market's making
money, you're losing money.
If the market's making
money, you're losing money.
But if the market's losing money,
you're losing money.
And so that is such a valuable piece
because that's why people
in the private market
can exponentially grow their actual return
'cause they've set a
hedge in the beginning,
they know exactly what
they're getting into,
they know exactly what's
happening in investment
and they literally can
multiply their investments
because they know what the fees are
and there's no fees that
are just being siphoned
out of the actual return.
- Blake, another, man,
I never share this many personal stories,
but I got my mother out
of the stock market.
Where her retirement funds,
I think 10 years ago
now, or eight years ago.
But at some point I realized
that was when,
right after the big crash,
the great recession,
they had really high numbers.
I think the S & P one year was up 20%.
I mean, there was like some major gains
because it had collapsed down to nothing.
But I was looking at my mom's statements,
well, the market just went up 20%.
I would expect them,
there's going to be some
fees, I understand that,
but her returns were like 8%.
So when the stock market was
doing 20, she was making eight.
She thought that she was doing okay,
'cause, hey, I got 8% return,
I'm like the market just hit 20,
where's that other 12.
And that's all part
of those hidden insurance
fees and everything.
So I got her out of there
and now I've got her in the
private markets as well.
- That's awesome.
And I guess let's talk a little bit more
about kind of massaging why it's safe.
We've got some people who
they know they're losing money
in the public market.
They actually know they're losing,
I was talking to a person the other day,
I've never gone back
and looked at my return,
and I actually went back and looked at it,
in the last 10 years,
I've actually made 7%,
after '08 and COVID put together,
only 7% broken between 10 years,
but they don't know there's another way.
And then you have another group of people
who would call Solomon Investors to say,
"There's got to be another way.
"I mean, there's, there's
just got to be another way."
Where there are examples,
maybe some history or some other stories
of why the private market is
safe and this is your world,
this is your wheelhouse.
And so 20 years, ensuring the
federal and state securities
are actually withheld, seeing investors,
having people invest over
and over and over again
in the private market,
what are the stories
or thoughts do you have on how it's safe?
- Look, I mean, look, first
of all, I want to be clear.
I mean, all investments have
some degree of risks, right?
So we're really more comparing,
what are the risks of the public
markets versus the private?
Even though the perception I think
is that the private
sometimes are somehow riskier
or what have you.
But I think personally,
that's just because everybody
with a financial interest,
like your stock broker
or the financial advisor,
they don't get paid when
you go buy a private deal,
they only get paid when you
invest in their mutual fund.
One of the nice things,
one of the big advantages
of the private market
is you actually have access
to the sponsors, to the team.
Whoever's putting this deal together,
especially when you're making
the decision to invest them,
you can pick up the phone,
in fact, you're encouraged to,
and it's up to your requirement
that you make yourself available
to answer questions about
the particular investment.
You don't get that when
you buy Microsoft or Apple,
you don't get to call up Steve Jobs,
well, he's not around anymore,
but Tim Cook and be like,
"Hey Tim, what's going on here?
"I was looking at your financials
"and it seems like this at the other,
"like what happened here?
"What happened there?"
We don't get that.
So it's nice to have access
to the sponsor team on
a particular investment.
And so I think the understanding
of what the particular investment is
is much clearer in the
types of deals that we do.
And really for the passive investor,
the main thing they need
to do in my opinion,
to minimize the risk for them
is really just the due on
the sponsor team, right?
I mean, because that's
at the end of the day,
what you're investing in,
you're investing in the team,
you just want to make sure
they're able to execute
on this plan, because it's one thing
to put all these pretty
brochures together,
but somebody is got to
have to have the experience
to actually go out there and execute it.
But that's really,
once you figure out what the team is
and again, you can have
conversations with them,
you can have, you can go
out and have a cup of coffee
with some of the team members
and get comfortable with
them and really vet them.
And then obviously you can
look at their experience
and the track record, you can see,
look, they specialize in this,
I met with them,
again, you don't get that
in the public market,
you're not going to have
access to the fund managers
and picking up the phone
and figuring out what their criteria is
or why they're doing certain things.
And just that type of environment,
I think makes things a lot easier,
that ability for you to pick up the phone
and talk to somebody about the investment
prior to making it,
and then getting updated
throughout the life cycles,
I think it mitigates a lot of the risks
because you have a better idea
if you're asked the right questions
of what you actually are getting into.
- I's a really great point.
It's the mindset of looking
at people as people,
versus a number on a screen
and just processing those numbers.
Before I forget, guys,
if you have not received
access to our back end
of all of our deals and
seeing how the deals work
and seeing how to actually activate
and protect and cashflow your investments,
pull out your cell phone right now,
and text 31996 and the word Solomon.
So you're going to actually
text the word Solomon
in the actual number, 31996
and that'll begin that conversation.
And I've got also got a book coming out
called the "Solomon Way",
and then I want to give
you that book for free
and have you just pay shipping.
And so this will begin this relationship.
We've got so many more items to give you.
So again, 31996 and text the word Solomon.
I really enjoy this time
because this is really
what some investors need.
We've got some people who are just like,
"Man, I just need to know,
"like my i's dotted, my t's crossed.
"I just got to see a little
bit deeper behind the curtain."
And so, you know, this is really good.
- Can I borrow that one real quick thing?
'cause when you just said that,
another thing to keep in mind.
These are really regulated
industries, right?
So the SSC is involved
and also your state regulator's involved
and depending on what you pick,
you can talk about
these things on podcasts
and you on social media
and sometimes you can't.
And so just to be clear here,
you and I having these conversations
because we rely on these regulations
that do allow us to actually
talk about them openly
and not sort of really
on the private thing.
So that's another thing to keep in mind
is that not all syndications
are created equally
and you just want to be aware
when you're approached by someone
that they're doing it in compliance
with federal and state rules.
- It's a great point.
And I see that right
now, all over the place,
people just doing their thing,
thinking they can just do their thing
and that would literally
be like in the stock world
before you're publicly traded,
if you just start selling
shares of something
and just start publicizing
that everywhere.
We go in Mauricio together sometimes six,
sometimes eight, 12 months
sometimes before an investor...
You and I are building a structure,
and that's why it's so
important that you actually,
whoever that Solomon general is,
whoever that is who's actually
managing your investments
in actually helping you build wealth,
you've got to actually have one,
you've got to have someone who
actually knows the securities,
who's actually working
with the Solomon general,
and then that general actually
following those securities
like he's saying.
So that as Mauricio mentioned,
we actually can set up a structure
so that we can talk about it freely.
And then if it's an
investment that we've set up
where we can talk about it freely,
then we know which direction
we need to go with that.
The private market for some,
we truly talk about this new ecosystem,
'cause it's this epiphany.
I've been in the public
market for so long,
I didn't know it existed,
but the truth is,
I mean, this has been around
for as long as you and I added
together have been around
and it is a normal way of business.
And it's really something
that was only available
to the uber wealthy.
It was something that the
institutional investors,
the large offices,
family offices could invest into
and the documents in which you provide,
you actually put together for us,
allow us to engage the masses
to allow them to invest into big deals
and make larger returns.
- Yeah, you're right.
This has always been out there.
I think what's happened recently,
in 2013, there was a
JOBS Act that was passed
after the last great recession
and there was a lot of,
if you can imagine after
the last recession,
there's a lot of capital constraints,
so the Congress wanted
to sort of expand this private market
and so they came out with
this JOBS Act in 2012,
and in 2013, these new rules came out
and what happened after these new rules
is that a lot of people
started to be able to,
were allowed to advertise
or talk freely about the
investments they made.
So that's one of the reasons
you're starting most likely
over the past seven years,
you've been hearing more and
more about these investors.
Now, interestingly enough,
a lot of those investments
technically aren't eligible
for all of this advertising,
'cause they're still relying on old rules,
but it kind of all got swept in
and I think that's the perception is that,
oh, this is a relatively
new type of investment,
it's only been happening for
the last five or 10 years
when in reality it's been
going on for a long, long time.
And actually these Securities
Act are from 1933 and 1934.
So they've been around for awhile
and that on there they're
heavily regulated.
And that's why, fortunately for me,
and unfortunately for my clients,
there's a high compliance cost
'cause they got to hire an attorney
just like when you're
doing your tax returns
and you're trying to navigate
the complex world of taxes,
it's so complicated now
that you've got to hire a
really good tax professional,
who can do some tax planning for you
and save you some tax money,
the same thing happens
in this regulatory world,
you're kind of forced to
hire a securities lawyer
to make sure you're
navigating the rules legally
and avoiding all the landmines,
not only at the federal level,
but also at the state levels.
- It's so true.
If you want to play in
the actual private market,
you just got to know what you're doing
and this type of podcast
with someone like Mauricio,
again, 20 years of security experience.
Truly a premier syndication
attorney in the country.
You're not going to get any
better meat off the bone
than this right here.
So Mauricio, I really
enjoyed this time with you.
Anything else that you'd like
to share with the investors,
maybe something motivational
in the private market,
something along those lines?
- I'm glad you're bringing
this to everybody's attention
because it is something that
isn't necessarily talked about
in the mainstream necessarily,
but it's been there for a long time
and it's just something
that I think everybody should
at least take a look at it.
And if you've been around long
enough, you start realizing
that you're just kind
of entirely playing the private market
'cause you just look at the public
and you see how volatile
and how manipulated and
how kind of crazy it is
looking at it right now
that the private market just
seems to make better sense.
And now it's being opened
up to more and more people.
And so it's become more
accessible than ever before.
- Hey guys, if you want
more podcasts like this,
like the channel, hit the bell icon,
hit subscribe and the more you do that,
it helps in the algorithm,
it helps me get this
message out to other people,
just like you who truly know
there's got to be another way.
You truly know that you can
actually make way more money
if you actually do it the right way.
Mauricio, I've enjoyed it my man,
I'd love to do it again soon.
Blessings on you guys,
this is a "Solomon Investor"
podcast signing off
to your success.
(upbeat music)
