A second capital call that ended a $50,000 LP position in a ground up medical office

I'd point somewhere earlier than the reserve. That deal was funded before it was entitled. Nine months of delay happened before a shovel moved, and a sewer moratorium review plus a turn lane requirement is a normal outcome, not bad luck. Every month of pre-permit delay is a month of land carry and a month of cost escalation on a budget priced at a moment in time. The safer rule is not to put money into anything until the site plan is approved and the utility letters are in hand. That costs entitlement upside, and plenty of investors have made good money accepting that risk. Plenty have also lost everything on a wetland determination. The capital call and the dilution clause are how this investor got hurt. The pre-entitlement funding is where the exposure started.

A common near miss runs much smaller and the same shape. Small town, a 6,000 sf building on the main street, a sponsor asking for $25k from a first time investor. Requesting the schedule assumptions and getting back a one page timeline with no dates on the utility work is a fair reason to pass on the grounds of not understanding it. Not because the investor was smart, sometimes it's just an inability to follow the plan. In cases like this the electric service upgrade for that block turns out to be a two year project. Sometimes not understanding something is the whole defense.

One thing I still want to check. When the second capital call came and you skipped it, was that allowed? I assumed a capital call was something you had to pay. So you can decline and the penalty is dilution?

Juniper, it depends entirely on what the operating agreement says. Some make additional funding mandatory with real remedies, most make it optional with dilution as the consequence, and that dilution can be pro rata or heavily weighted against the non-funder. The switchgear issue is worth naming for anyone reading. On projects where the electrical distribution equipment slips from an early to a much later delivery date, everything downstream stops, because a temporary certificate of occupancy is impossible without permanent power, and inspections queue behind it. On well run jobs, gear gets ordered before the foundation permit is even in hand. If a sponsor says gear is ordering on the normal sequence, ask exactly when. That single date moves a schedule more than framing does.

The anchor cutting from 9,000 to 5,500 square feet is the part that deserves the full story, because in medical office that usually means the group's own numbers changed and it rarely reverses. What it does to the pro forma is worse than the lost square footage. Two small suites replace one anchor, so two TI packages get paid at medical rates, two commissions, two rounds of free rent, and rent commencement dates slide 6 to 12 months each. That lease-up budget rarely gets written down in advance. An 81 percent lease-up at month 38 on a building built to stabilize at 22 is not a disaster on its own. Most of the capital likely comes back eventually. What does not come back is the time value, and that line rarely shows up in a deck.