GROUNDFLOOR REAL ESTATE 1, LLC

Key economics

Preferred return

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Hurdle rate

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LP / GP split

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GP catch-up

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GP clawback

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GP commitment

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Diligence findings (17 · 6 high/critical)

• high
  DDQ gap: Does the fund engage an independent auditor?The offering documents don't answer a standard institutional DDQ question (Governance). An allocator will ask this directly — the GP should be ready with an answer.
• high
  DDQ gap: Does the fund have a GP clawback provision?The offering documents don't answer a standard institutional DDQ question (Economics). An allocator will ask this directly — the GP should be ready with an answer.
• high
  DDQ gap: What is the LP/GP carried-interest split above the preferred return?The offering documents don't answer a standard institutional DDQ question (Economics). An allocator will ask this directly — the GP should be ready with an answer.
• high
  DDQ gap: What is the preferred return (hurdle) rate offered to LPs?The offering documents don't answer a standard institutional DDQ question (Economics). An allocator will ask this directly — the GP should be ready with an answer.
• high
  Numeric inconsistency — Annual aggregate LRO cap from the January 2018 Tier 2 qualification ($75 million vs $50 million)The same January 2018 Tier 2 Reg A qualification is described as raising the annual aggregate amount Groundfloor may offer and sell to '$75 million' in two places but to '$50 million' in the MD&A Plan of Operation, conflicting figures for the same cap.
• high
  Numeric inconsistency — Grading Algorithm per-grade interest rates (two conflicting tables on the same page)Two grade-by-grade interest-rate tables on the same page give different rates: the 'in general' minimum table lists A 5.5% / B 7.0% / C 8.5% / D 10% / E 13% / F 14.5% / G 17%, while the 'standard annual fixed interest rates' table lists A 5.0% / B 6.0% / C 8.0% / D 9.0% / E 12.0% / F 14.0% / G 15.0% — the 'standard' rates sit below the stated minimum floors.
• medium
  DDQ gap: Does the fund use a third-party fund administrator?The offering documents don't answer a standard institutional DDQ question (Governance). An allocator will ask this directly — the GP should be ready with an answer.
• medium
  DDQ gap: Is there a GP catch-up, and at what rate?The offering documents don't answer a standard institutional DDQ question (Economics). An allocator will ask this directly — the GP should be ready with an answer.
• medium
  DDQ gap: What distribution-waterfall structure does the fund use?The offering documents don't answer a standard institutional DDQ question (Structure). An allocator will ask this directly — the GP should be ready with an answer.
• medium
  DDQ gap: What is the GP's capital commitment (skin in the game)?The offering documents don't answer a standard institutional DDQ question (Economics). An allocator will ask this directly — the GP should be ready with an answer.
• medium
  Unfilled placeholder text — Exhibit [__]Unfilled bracketed template token where the exhibit letter for the Management and Services Agreement should appear, indicating the document was not finalized.
• low
  Broken cross-reference — Risk Factors page pointer (page 10 vs Table of Contents page 11)The cover/summary directs readers to the 'Risk Factors' section 'on page 10', but the Table of Contents lists Risk Factors beginning on page 11 — the in-text page cross-reference does not match the TOC.
• low
  Document-quality defect — SEC File No. 024-024-10753The SEC file number for the LRO Offering Circular is written with a duplicated '024-' prefix ('024-024-10753') in both occurrences; Reg A file numbers take the form 024-NNNNN, so the prefix is doubled in error.
• info
  Spelling / typo — dqysMisspelling of 'days' as 'dqys' in the grade-B average-duration cell of the lifetime repayment performance table.
• info
  Spelling / typo — Mary 2014 / Mary 2015The month 'May' is misspelled as 'Mary' twice in Mr. Donoghue's biography ('from Mary 2014 until Mary 2015').
• info
  Spelling / typo — processionalMisspelling of 'professional' as 'processional' in the LRO Agreement investor representations.
• info
  Spelling / typo — thesesMisspelling of 'these' as 'theses' in the underwriting/background-check discussion.

DDQ readiness — 38% covered

5 answered · 0 partial · 8 gaps of 13 standard questions.