Investment Committee Memo · Waterfalls
RAD Diversified Land REIT, Inc.
RAD Diversified · Unknown · Debt · Vintage 2017
18
Waterfalls composite LP-favorability score (0–100)
—
LP take (absolute)
5
Pref quality
50
Fee drag
10
GP alignment
8
Timing risk
Key economics
- Preferred return
- —
- Hurdle rate
- —
- LP / GP split
- —
- GP catch-up
- —
- GP clawback
- —
- GP commitment
- —
Diligence findings (18 · 5 high/critical)
- highDDQ 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.
- highDDQ 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.
- highDDQ 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.
- highDDQ 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.
- highNumeric inconsistency — authorized shares of common stockAudited balance sheet states 7,500,000 shares authorized, but Note 5 and the offering body both state 200,000,000 shares authorized.
- mediumDDQ 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.
- mediumDDQ 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.
- mediumDDQ 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.
- mediumDDQ 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.
- mediumDocument-quality defect — entity type (corporation vs. limited liability company)Independent auditor's report describes the issuer as a limited liability company, contradicting the corporation form used throughout the offering.
- mediumDocument-quality defect — RADD Capital Management, LLC promissory-note roleFor the same Dec 30, 2022 $450,000 note, one related-party note calls RADD Capital Management the 'lender' while another calls it the 'debtor', reversing creditor/debtor roles.
- mediumPerformance Fee (20%) is taken above the waterfallA performance- or transaction-linked fee paid above the waterfall reaches the GP before the LP's distribution priorities run, eroding the pool the pref + return-of-capital draw from. Routine asset-management fees above the line are normal; a disposition/promote-flavored fee there is a leak worth pricing.
- lowBroken cross-reference — Statement of Changes in Members' Capital (F-6)The financial-statement index lists a 'Statement of Changes in Members' Capital' but the actual statement is titled 'Statement of Shareholders' Deficit' (members vs. shareholders for a corporation).
- lowDocument-quality defect — principal telephone numberThe cover page lists telephone (833) 723-2637 while the body lists 1-833-723-7348 for the same principal office.
- lowNumeric inconsistency — FASB ASC citation for uncertainty in income taxesThe income-tax uncertainty policy cites FASB ASC 740 in the audited statements but FASB ASC 470 (Debt) in the unaudited statements for the same accounting guidance.
- lowNumeric inconsistency — REIT real-estate investment requirementGarbled percentage: 'seventy 75%' states two conflicting figures (spelled-out 'seventy' and numeric '75%') for the required real-estate allocation.
- infoSpelling / typo — recourcesMisspelling of 'resources' in the going-concern note.
- infoSpelling / typo — so / doWord substitution breaks the sentence: 'so not expressly' should read 'do not expressly' in the broker-disclaimer text.
DDQ readiness — 38% covered
5 answered · 0 partial · 8 gaps of 13 standard questions.