Asked a sponsor for four past investor updates, got two

Here's the pattern I see after five years running a service business: the update stops being detailed at exactly the point the numbers stop being good. Q3 becomes a short email. Q4 gets folded into the annual. Then the annual is late. It doesn't always mean disaster but it's a rhythm.

Ask for the Q3 short email as sent. Not a summary of it, the actual thing with the date on it. If it exists, that takes one minute to forward. The response time tells you as much as the content.

Also, strong leasing momentum with no occupancy figure is a sentence that costs nothing to write. I've read updates where the same phrase appeared four quarters running and occupancy went from 91 to 84 across those four quarters. It was in the financials attached at the back, which almost nobody opens.

Wait, financials get attached to these? I thought the update was the update. Genuinely didn't know there was a back section.

@vellum depends entirely on the sponsor. Some send a two page letter with a T-12 and a rent roll behind it, some send three paragraphs and a photo of a parking lot resurface. There's no standard, which is exactly why sable's question is a good one to ask before wiring rather than after.

The pretty design is what I'd flag. I've watched land deals go the same way. When the reporting budget goes into a designer instead of a person who can answer a question, you find out during the first bad quarter.

Different angle. Go read what the operating agreement actually obligates them to send and when. A lot of them say something like annual financial statements within 120 days and quarterly reports at the manager's discretion. If it says at the discretion of the manager, then the two missing updates are not a breach of anything, they're just a preference, and you've learned the preference. That's useful either way. I'd rather know a sponsor reports the bare minimum than assume they report generously.

@warrant that's the part I never think to do. I read the projections and skip the reporting clause every time.

I'm nowhere near this stage, first rental hasn't even closed, but the thing that got me in sable's post is feeling worse after reading them and not knowing why. That's happened to me with a property manager's monthly statement. Everything looked fine and something was off, and it turned out to be that nothing on it had changed in three months, including the vacancy line.

Occupancy, collections as a percent of billed, and current debt service coverage. If an update has none of those it isn't a report, it's a newsletter. I've asked sponsors point blank for those three and about half send them back same day without complaint. The half that push back tell you something.

sable, one more thing worth doing since you're already asking. Ask a current investor in a different deal from the same sponsor, not one they hand you. Sponsors keep a list of investors who give good references.

@ledger how do you find one who isn't on the friendly list? That's the part I've never managed.

@arbor local meetups, mostly. People will tell you things standing up with a drink that they'd never put in an email.

On the original thing, I sit on the management side and I'll defend small shops slightly. A four person sponsor genuinely does fall behind on Q3 when a roof fails. What separates them is whether they told you they were behind. A one line email saying the Q3 update is late and here's why costs nothing and buys a lot. Silence for two quarters is the choice, and it's a choice they made.