Real Estate Underground

Unlocking Real Estate Syndications: Legal Insights with Richard Crouch

• Ed Mathews • Season 4 • Episode 131

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Discover the secrets of real estate syndications with Richard Crouch, a distinguished attorney whose legal expertise spans 19 states. Richard sheds light on the intricate world of real estate law, offering insights into topics like historic tax credits and opportunity zones that can reshape your investment strategies. Learn why "time kills deals" and the importance of transparency and honesty in legal advising. Richard's journey into law is filled with lessons from mentors who emphasized the value of admitting when you don't have all the answers but committing to finding them.

Explore the complexities of distinguishing between accredited and sophisticated investors under Rule 506(b) of Regulation D and the strategic considerations between joint ventures and syndications. Richard explains how deal size and complexity influence investment structure choices and delves into unique arrangements like tenants in common, especially in 1031 tax-deferred exchanges. Understand the legal and financial frameworks that guide real estate investments, ensuring you're equipped to make informed decisions in a challenging market.

Navigate the compliance maze of the Corporate Transparency Act with insights on FinCEN reporting requirements and the repercussions of non-compliance. Richard shares his personal and professional purpose, emphasizing the value of mentorship and the meaningful connections that drive success beyond mere financial achievements. Embrace honesty and transparency as vital tools for maintaining a stellar reputation, and find inspiration in Richard's personal passions, including his commitment to running races with Team Hoyt. Get ready to enrich your understanding of real estate law and the drive to achieve client success.

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Speaker 1:

Greetings and salutations. Real Estate Undergrounders. It is Ed Matthews with the Real Estate Underground. Thank you so much for joining us today. With me today is attorney Richard Crouch. Richard is a syndication commercial attorney and today we're going to be talking a lot about syndications as well as some of the laws that have changed over the last 12, 18 months that if you own an LLC and or run a syndication, you certainly need to pay attention to. Richard, welcome to the show and thank you for your time today.

Speaker 2:

Thank you, I appreciate it. Happy to be here.

Speaker 1:

All right, so you're based in Virginia, if I'm not mistaken right.

Speaker 2:

That's right. We recently in the last two years merged with a firm on the Western side of the state. So we're the East coast, the west coast, not the west coast, but the western portion of Virginia up through Richmond. So that's primarily where we're headquartered, but we have basically 19 different states in which our attorneys are licensed.

Speaker 1:

Excellent, excellent.

Speaker 2:

And so for those folks who are not familiar with you or your practice, why don't we talk a little bit about who you are and what you actually do for a living, specifically, certainly, I've been practicing for about two dozen years and always had a business background or an interest in that, and I was very blessed that when I started at my firm and it's actually the only firm I've ever been at since I was a young buck had two excellent mentors. One was very good at teaching me the technical skills in terms of what to be fearful of and afraid of missing, and so on, and then the mentor that I probably think of the most often taught me everything else all the things they don't teach you in law school in terms of how to attract clients, retain clients, communicate with clients, and definitely imparted the mindset that time kills deals and to always be direct with a client. If you don't know the answer, let the client know that, but tell them that you'll get the answer and it was a remarkable resource for me. And if I don't think of him every couple days, I certainly use every day things that he taught me.

Speaker 2:

And so what? We end up spending most of our time practicing. Basically, if it touches on real estate, we handle it Acquisitions, dispositions, commercial leasing, and I think you mentioned indications, private placements and we do some of the more nuanced areas as well, like historic tax credits and LIHTC and qualified opportunity zones. I've had a wonderful experience. I've had wonderful tutoring and training from mentors and really enjoy what.

Speaker 1:

I do, and when we get into one of the things that I'm always looking to understand, first off I have to appreciate something that you touched on. One is, specifically, that I don't know is a perfectly valid answer to a question, right, and having advisors and partners who always tell you the truth, even if they don't know, but they will find out, is. My answer is I don't know, but I probably know a person that does. So let me get back to you and having that trusted partner, be that straightforward with you is invaluable, because having people tell you the truth if they tell you what you want to hear it may feel good, the dopamine hit is wonderful, but you're going to get in trouble.

Speaker 2:

Right, it's true. Yeah, in terms of some of the advice I always give is to know what you don't know, and and also there's such a mindset that we cannot make mistakes too, but that is a key way that you learn, and if you're forthright about that, and honestly, having a mentor helps with that too, because it'll help lessen the learning curve for you, because it's a very valuable tuition or tutelage in terms of how you can avoid mistakes and what some of their pitfalls have been as well.

Speaker 2:

Now I definitely agree with being forthright in that respect.

Speaker 1:

Yeah, one of my favorite people in the world, who was also a mentor of mine, mike, just celebrated his 82nd birthday, if I'm not mistaken. Wow, so if you're out there, mike, happy birthday. I used to buy him breakfast at the Newtown the Newton Marriott, just outside of Boston basically once a month, and I would spend about 15 minutes talking about how I was going to conquer the world, and then he'd spend the next 45 minutes telling me exactly how I was screwing up and how to fix as many of those things that were fixable.

Speaker 1:

And so someone to shoot you straight. That is absolutely invaluable because, sometimes at least, I'm prone to becoming my own cheerleader. Right and confirmation bias is very dangerous. So how did you get into? What drew you to the law? Let's start there.

Speaker 2:

A lot of that had to do with the typical things you would do in college as you're finding your way, finding yourself and pursuing what your interests are. A lot of it was through career services and a couple family friends had pointed me into that direction in terms of skills they thought I had in terms of analysis and some natural skills in terms of being organized and so on and doing a lot of the testing through just career services and groups like that. They all pointed to law school and, although I didn't necessarily picture myself in a courtroom as a litigator all the time, they're very quick to point out that, with the business background, the type of work that transactional attorneys do and the benefits of working towards a deal and feeling like you've completed something, rather than necessarily the emotional drain that can be associated with litigation where you're basically oftentimes tearing something apart. So I think the analytical side, as well as the ability to actually complete deals and come up with solutions, I think really appeal to me.

Speaker 1:

Yeah, and it being a problem solver is also invaluable to at least to guys like me, because I am always. There's always a way right and most of the time they're legal when we're able to have conversations around. Okay, we're here, we're trying to get there. What's the most efficient and risk mitigated way to get there? Having those types of conversations with our attorneys is invaluable. So you become an attorney and you gravitate towards real estate. So what about real estate was so interesting?

Speaker 2:

It actually at that point in time was more, and it's interesting.

Speaker 2:

You go to law school and a lot of law school training is more in theory, so they teach you how to write a great brief, but there are a lot of technical skills where you it's pretty much baptism by fire in terms of how you learn it.

Speaker 2:

And I knew I had an interest in business, and actually this was the early 2000s, so this was 2001. Business, and actually this was the early 2000s, so this was 2001. And the one mentor that I was mentioning was a real rainmaker and that happened to be his area of expertise, and so that's where they had the most need, because he needed to leverage his practice to the next level and he needed resources to do that and he needed somebody that would pay attention to the details while he focused on the big picture. So this was early 2000s and things were gangbusters. Of course, this was all before the Great Recession, but pretty much as a 25-year-old was working on syndications from day one, and so that's really where the need was, and so they allocated me there right away and actually, although it's oftentimes the norm to try to give associates exposure to a lot of different areas, I seem to fit pretty well there, and so they kept me there, and that's where I practice to this day.

Speaker 1:

So tell me about, like the, a recent deal that you did that you're particularly proud of. Obviously, you talk specific client, but I'm just curious about the high level.

Speaker 2:

Yeah, yeah, there there's some deals that are very similar from deal to deal.

Speaker 2:

But it is nice when a client has a problem that they need you to solve and you can think, oh, five years ago we did a deal that was similar in these respects and I think it would work on your deal if we tailor it in this particular way. The deal that always comes to mind because I think it was a very good example of just coming up with creative solutions for a client that didn't have a ton of experience. He maybe had one or two years of experience. He wasn't very financeable so he didn't really have a rock-solid balance sheet, but he had very good people skills and he was a very good salesman. He had found aamily project. It was just shy of 300 units, obviously didn't have the equity and really honestly probably couldn't locate the debt to purchase it. But he had incredible rapport with the existing seller. They were looking to get this off of their portfolio and through walking him through basically how you structure the capital stack, we made the deal basically doable for him because it basically involved a wraparound deed of trust and some seller financing as well. But it took a lot of trust with the other party. So I think it was one of those where we could very easily help him document what he needed to do. But we needed to be clear with him that if he didn't perform, his seller, who basically was staying in the deal by virtue of the seller financing, really was going to have power to foreclose upon him and levy its remedies and so on. He knew that he had some exposure there, but this was going to be a life-changing deal for him.

Speaker 2:

Yeah, so basically, once he had structured everything with the seller financing as well as the senior debt, and we had introduced him I think this was very key too he didn't have as many contacts with equity, and I think that's really what made him, because that provided the several million dollars of equity that he needed to get the deal done.

Speaker 2:

So basically, cobbling all that together, he was able to complete the deal closed on the acquisition, and it was about $13.5 million is what he bought it for and then, two years later, they were able to lease it up so well, and I do think probably the money from COVID and so on helped with that in terms of the helicopter money from the government, in terms of people basically being current on their leases and so on.

Speaker 2:

That probably didn't hurt, but they were very diligent in terms of making sure leases were signed, renewals were signed and so on, and so in less than two years they were able to refinance for $50 million. And it was life-changing for him because all of a sudden he had equity to do additional deals and this was a guy who could barely pay his credit cards every couple months and all of a sudden he was a legitimate player in town and basically had the capital that he needed to basically continue that plan with other projects. So that's something I'm very proud of the work he did, the work we did and how it all came together.

Speaker 1:

Okay, so let's break that apart. So when you say a deed in trust, I may have butchered that, but or deed of trust, excuse me. So what exactly is that? Butchered that, but deed of trust, excuse me. So what exactly is that?

Speaker 2:

So in Virginia, actually North Carolina as well, that is basically your mortgage instrument, that's basically what they call it and you're basically saying pledging to the trustee title to your property in the way that you would with a mortgage, basically saying, if I don't no-transcript, but I think, although you have plenty of deed of trust jurisdictions in the US, I think mortgage is probably the more common vernacular mortgage up here in Connecticut, all right.

Speaker 1:

So capital stack looked like seller financing, equity seller financing. Was there any bank financing at all?

Speaker 2:

There was an existing loan on the property that they were taking subject to, so that also was something where we really had to advise the client of the risk of that, because obviously, if they don't perform, that lender is going to foreclose and it's going to cause a problem for them and they may not be able to talk their way out of that one too. So, yes, that was also part of the mix.

Speaker 1:

Okay, fairly complex. So I assume syndication with a project that large.

Speaker 2:

Yes, yes. So we helped them with the operating agreement, the private placement memorandum and, most importantly, the various the investor questionnaires that they send out with their subscription agreements. Because he was new at it, raising equity for him was not typical. We had to caution him against mass solicitations, particularly to folks that he doesn't know. But also talked to him about the benefits of accredited investors versus sophisticated investors and that it's a lot easier to pass the litmus test of whether they're accredited or not in terms of how many assets, how much they have in assets and so on, and they also can have an almost unlimited number of accredited investors, whereas they're going to be limited if they're using sophisticated investors that might not have the same financial wherewithal. So a lot of that was documenting that those folks actually did have the assets that they said, so that he could basically check the box that they were accredited and he could complete any filings that he needed to do in terms of exemption filings and his own due diligence on his investors.

Speaker 1:

So, yes, we helped him with all that. So for those folks out there that are wondering what the heck Richard and I are talking about, some of the terms you may have heard in the past in your other travels is 506B, 506c. Right, that's right. Richard's describing is a 506C transaction where the client was simply focused on accredited investors. So, richard, for the benefit of the audience, why don't you define and I'm not worried about the entities and licensing components, but in terms of the basics of an accredited investor, why don't you?

Speaker 2:

Yeah, and that is an important thing to stay on top of, because over time the measurements of wealth are going to change because of inflation and other factors like that. But traditionally, if the person had over a million dollars in assets and or they made at least $250,000 a year, they usually would pass that particular test as being accredited. Basically, can this person afford to lose their investment and not be complete financial peril if this project doesn't work? So that's a lot of the rationale behind that, whereas with the sophisticated investors they may not meet that financial threshold. But are they, for example, a financial analyst or somebody that has enough knowledge or an acquisitions director? Do they have enough financial acumen in that area to understand the investment? And that's a little bit more of a totality of the circumstances sort of test, whereas the accredited threshold is a bit more cut and dry in terms of the criteria.

Speaker 1:

And so the sophisticated is the 506B version of syndications. You also mentioned that there's a limit to the number of investors you can have in a 506B. Want to tell us a little bit about that? Yes, and that's 35 should be the number of investors you can have in a 506B. Want to tell us a little bit about that?

Speaker 2:

Yes, and that's 35 should be the number. That's the limitation if you're dealing with sophisticated investors, Whereas if you have accredited investors it's virtually unlimited in terms of the number that you can have for that, but sophisticated because they're not as financially off as a lot of the accredited investors. You just have a smaller limitation on how many you can have as investors.

Speaker 1:

Right, okay, and so one of the things that I'm always curious about is and it varies from investor to investor, but I'm still trying I draw my own line and we can talk about that in a second. But I'm curious where you draw the line in terms of looking at a project from a joint venture perspective versus a syndicate, from a joint venture perspective versus a syndicate. In your opinion, where does it make sense to draw that line? Is it deal size? Is it complexity? Is it number of investors?

Speaker 2:

Yeah, yeah, I think that you will find the syndicate's a pretty common model. Some of the exceptions to that that we see is if somebody wants to do a 1031 tax deferred exchange, you're probably going to see the structure mirror much more of a co-ownership structure, of having a limited liability company that has investors housed within that for their membership interest. You're going to have more of a pro rata allocation in terms of ownership and this particular investor. Let's say they sold a property for a million dollars, they didn't touch the proceeds, they put it with a qualified intermediary so they could basically defer taxes on that. The one nuance that's a little bit unusual with that is the IRS requires that you actually own the property in fee, simple, or basically be a true co-owner of the property with the sponsor entity. So you can't simply be an investor in the sponsor's entity and that can be a little bit cumbersome because you're supposed to basically make joint decisions on the direction and the operation of the property. There are certain ways to do that. You can have consents or asset management agreements ahead of time that basically say okay, you're not going to have to get my approval every time if the lease meets this particular criteria Certain things that just make it a little bit more manageable. But the whole reason that you see that structure is because the internal revenue code requires that you have tenants in common. That's basically the vernacular. Or if you ever hear ticks, that's the vernacular.

Speaker 2:

And the key with that is, if the irs were ever to audit that structure, they're going to want to make sure it does not look like a traditional partnership where you have waterfall distributions and preferred returns. They want it to basically look very pro rata, like joe owns 50 and nancy owns 50, through their separate entities and in order to basically do the 1031 tax deferred exchange. So it's a little quirky, it's a little odd, but there are ways to structure that even after the initial acquisition, although you have to be a little bit careful about that in terms of drop and swaps and things like that. But that would be one where you don't see the traditional syndication model.

Speaker 2:

One other area where you might see it and this would be more for a development and this is going to be an example a development project where maybe you have one investor that's basically contributing land to the project and then you have a developer that has construction knowledge and knows how to deal with permitting with the city and basically how to develop the project, and basically the land will be treated as that particular investor's capital contribution, and so basically they'll form an LLC and then usually the two members of that LLC will be the investor LLC and then the developer LLC, and so that's just another hybrid structure that you sometimes see. So it's not a tick scenario. It's not really the traditional partnership, it's somewhat of its own animal, but it borrows a little bit from both in terms of how that's structured.

Speaker 1:

Okay. So thinking about this in terms of my fifth grade brain tenants in common means that you both share ownership of the particular entity being the property. Right, that's the property. Yes, in a syndication, you are a member of a partnership who either is the general partner, who owns decision making, or a limited partner who is contributing capital or some other thing like land maybe, but the limited partners don't have any necessarily any say in the day to day operations of the business.

Speaker 2:

Yes, that's generally true. Usually there will be a provision that the promoter or syndicator whatever term you want to use for the manager usually is going to have absolute authority with respect to the business affairs of the company. Sometimes you can structure it so that certain key decisions limited partners do have a vote. But I would say for most syndications you're going to see almost absolute authority in the GP.

Speaker 1:

But I would say for most syndications you're going to see almost absolute authority in the GP. Okay, all right, fair enough, okay. And then, in terms of the process, let's say, for instance, I have an apartment building, say 300 units, and I'm looking to capitalize that and ultimately to acquire it. What is the syndication process? What exactly are the documents you're putting in place and, specifically, what's the timeline to put that deal in place? Typically, yeah.

Speaker 2:

So typically most of our clients don't necessarily reach out to potential investors until they basically have a purchase and sale agreement to buy the property, because otherwise obviously you'd have egg on your face if that part didn't work out and so on. So basically they'll do a letter of intent to memorialize the deal, they'll get it under contract with what I call the PSA the purchase and sale agreement and usually that point in time they start to approach investors, particularly the further along they are in their due diligence process. So if they're pretty much coming upon the expiration of due diligence, everything looks relatively clean in terms of title and physical condition and so on. At that point in time they're definitely going to be approaching investors a lot more aggressively, just because they're usually going to have a limited time after the due diligence expires to actually get the deal closed. Sometimes it's 15 days, sometimes it's 30 days, which tends to fly by, particularly if you don't have the equity lined up. But usually they will send some preliminary materials, usually to people that are in their network or people with whom they've been recently introduced. Some of those think of that the friends and family start that a lot of these syndicators have in terms of how they approach people and usually, if there's some interest, they will send a private placement memorandum that's going to describe the deal and a lot of the benefits of the deal, a lot of their forecasts, a lot of what they send, whether it's in the PPM or the subscription agreement, and I'll explain what that is in a little bit. It will have a lot of disclosures as well and a lot of disclaimers. So the disclaimers are going to say things like we are relying on you to do your own due diligence. This is a general summary of the project and our best estimate as to how it will perform, but you're going to have your own independent advisors look at this and, oh, by the way, you could lose your entire investment. So it's very important to have those sorts of disclaimers in there.

Speaker 2:

Usually, there will also be disclosures. So, particularly when it comes to things like fees and that's one of the biggest pieces of advice that I can give syndicators is be as forthright and as transparent as possible about any fees you plan on collecting in connection with the project. So if that's an acquisition fee, a disposition fee, maybe you have an asset management fee or maybe you have an affiliate that's going to be the property manager and getting a fee from that. Make sure that's all disclosed, because the best test for that is if you would feel uncomfortable explaining it later, having not disclosed it. It's probably best to disclose that on the front end so that oftentimes will be in the PPM as well.

Speaker 2:

The subscription agreement is usually a shorter agreement that's just going to generally say how much they're contributing, how much the investor is contributing and how much of a membership interest they're getting in exchange for that, and also you'll have an investor questionnaire that's usually sent out with that as well. That will have them confirm some of the things that I mentioned before in terms of their financial wherewithal and their background and experience as well. And then one of the last things that you'll see will be an operating agreement, and that's usually for the limited liability company that's being formed to basically own the asset, and you can think of that as being analogous to buy loss and maybe a little bit like a shareholder's agreement too, if that's a more common concept. But basically the operating agreement is more consolidated for LLCs and it does cover things like corporate governance how are decisions made, who's in charge, what are the distributions going to be Basically, what are the hierarchy in terms of how those are paid, if you have a preferred return and then a subordinate return and then some sort of pro rata allocation after that, and how are the parties, how is their initial capital contribution going to be returned?

Speaker 2:

And what happens if the deal is not doing well? What are some of your exit strategies for getting out of the deal and selling your membership interest or buying the membership interest of other members as well? So that's a lot of things that the operating agreement covers, and the key with the operating agreement is if nothing goes wrong. People don't tend to check it, but it is definitely one of those documents that, if things do go wrong, you want it to be very clear as to how things are supposed to be handled. That's definitely a very critical document to put in place at the beginning of the deal and to have each member sign that as well. It's a prenup. Yeah, if we break up, how are things going to go? That's a good way to put it.

Speaker 1:

Hopefully we live happily ever after, but if we don't, here's how we're going to handle it Exactly, exactly. So one of the things that we've touched on and I know it's something that you've been paying particular attention to is LLCs and disclosures, and the laws have changed around that, and one of the reasons that I was eager to have you on the show is the recording of this is towards the end of October in 2024. And time is a running out to do your first disclosures for this new law, so can you tell us a little bit about that?

Speaker 2:

Certainly, I was actually talking to somebody at lunch about this. I was surprised that once it was enacted, that it actually stayed in place. So the Corporate Transparency Act actually was effective January 1st of 2024, and it was designed to basically combat money laundering. And a lot of this comes from the Treasury Department, specifically the Financial Crimes Enforcement Network, or FinCEN for short, and it basically requires a lot of individuals to report information on a federal database about limited liability companies and other entities as well. So it's particularly significant in the commercial real estate world because it affects almost every syndication that our clients have done. So basically I'll just call it the CTA for short basically requires the following individuals to basically report information like not just tax ID numbers but a little bit about the asset itself, their addresses, photo IDs, things like that, similar to what you would have to provide for a bank, maybe for a know your customer form or a certificate of beneficial ownership. So it's similar information in terms of substance. But basically any owner we'll just call it, say, a company or an entity of more than 25% actually has to complete one of these filings for the CTA. That's particularly going to be more relevant in LLCs that have just obviously less investors may not come up as much in some of the LLCs that maybe have 35 investors. However, even in those latter ones, there still are some individuals that are going to have to report. So even if you don't have a shareholder or a member that has 25% or more, the principals or the sponsor of the entity are going to have to do the filing as well. So that could be your manager, sponsor, syndicator they're still going to have to fill that out for pretty much every LLC they have. Now, one thing that's nice is you can actually get a it's called a FinCEN ID so that you basically put in the required information and if you're one of these investors that has dozens, if not hundreds, of entities, you're not going to have to populate every single one of those every time the information changes. So if you have a FinCEN ID and you change the information related to that FinCEN ID, it should cross-pollinate and populate all these other entities, which will be a much more efficient exercise than doing it a hundred times. So a lot of our sponsors are going to be glad to hear that. So it's definitely worthwhile to look into getting that ID.

Speaker 2:

And then the other folks that have to report are folks like myself. So I'm a company applicant and it's basically anybody that forms the entity or directs that the entity be formed, so that could even be my paralegal that sets it up. So I have to do that and I myself have a FinCEN ID as well because I'm, as you can imagine, my name is on so many entities, particularly in Virginia and North Carolina, so that's attorneys are obviously not absolved from year to do that. Obviously, much of that year is already gone. So those particular companies and those individuals have to report by December 31st 2024. If the entity was formed after January 1st 2024, basically same rules apply, except they have 90 days to comply, so less than the year in the previous example. And then if an entity is formed after January 1st 2025, companies, individuals, are only going to have 30 days to make sure that they comply with the CTA filings filings. So a lot of relevant dates and it's not really something people can ignore. There are civil and criminal penalties for not complying. Oh, go ahead.

Speaker 1:

Yeah, if I don't fill out the form, what bad things happen.

Speaker 2:

So the civil penalties can be $500 per day for each day that it continues, and the criminal penalties can be up to two years in prison and or a $10,000 fine as well. So it's a simple enough filing, although it's a bit tedious, and obviously your attorneys can help you with that. Probably even your accountants could even help you with it. I know a lot of them are also sending out literature about the CTA, but it's one of those things where it's not worth the penalties that you might incur to not comply, because it will catch up with you.

Speaker 1:

Yeah, they will find you.

Speaker 2:

Certainly true.

Speaker 1:

Thank you for that. I appreciate it because it's something that I get asked all the time and I always defer to their own attorney. I say look, I'm not an expert on it, you need to go talk to your attorney about that. So thank you, even though you're not my attorney, but maybe someday I'm happy to help. All right, one of the things that I'm always looking to do in these interviews is to get to know you a little bit, and I'd like to take you through what I affectionately refer to as the final five. The final five questions is a bit of a lightning round to uncover who Richard really is. Okay, not too invasive. It's more fun than invasive. Okay, got it, let's talk about. Let's talk about your purpose. So finish this sentence.

Speaker 2:

For me, my purpose is uh, professionally, it's to help clients basically realize their goals and dreams and to do it in a way that leaves all of us feeling very satisfied at the end that we accomplished what we set out to do. And personally, it's to help others in any way that I can and to be a good model for my children as well, to basically give them a model of the type of person that I would want them to become.

Speaker 1:

All right. So I'm always curious and you had mentioned earlier mentors, right? Everybody who I know that's been successful has had one or more mentors it's usually more. So I'm curious about the advice that they've given you. What's the best advice you ever got, and who gave it to you?

Speaker 2:

the one that taught me everything outside of law school and so on.

Speaker 2:

I think a lot of it was just about being honest and I remember I think it's Mark Twain that has the quote and he would quote it oftentimes where an honest person doesn't have to remember what he said, and I think it's very true and I've seen it.

Speaker 2:

I haven't had to deal with this specifically myself, but I have noticed it with some syndicators that are struggling to make returns and things like that is being honest really keeps them out of a lot of trouble, even if they're not necessarily making the returns that they need to, because if they play ostrich and go on radio silence, the damage they do is far more significant than if they speak plainly with their investors. They describe what the plan is to try to turn the asset around, and I think honestly just realizing that it's never worth burning bridges, it's never worth shortchanging people, because behavior like that does come around and your reputation is your currency and if you're in it for the long game, it just makes sense to be as transparent and honest as possible and you'll certainly live a life of no regret, both professionally and personally.

Speaker 1:

It's certainly less stressful too.

Speaker 2:

That's for certain.

Speaker 1:

So, speaking of stress, I'm also curious about mistakes. I'm of the opinion that mistakes are not a bad thing. They're actually learning opportunities. So I'm curious about the biggest mistake you ever made, let's say professionally and how'd you recover? How'd you turn it?

Speaker 2:

around trying to think of a good example of that. There may have been something where, in our industry, the pace of transactional activity precludes any sort of deliberation. Time kills deals. Everything needs to be done.

Speaker 2:

Yesterday, and it was probably something where there might have just been one edit. That didn't happen and it didn't end up necessarily being catastrophic or anything like that, but maybe it would have been a little embarrassing or something like that, that maybe the client saw it or the client's lender saw it or something, and it was still fixable. But you still had egg on your face and, rather than trying to be concealing in any way about it, just being honest and apologetic and fixing it and obviously not charging them to fix your own mistake, I think was the best, and I think it is one of those things where it does pay dividends in terms of credibility later too, because they know that you weren't trying to cover anything up, you weren't trying to explain anything away, you were just focused on solutions and making it right, and so I think that would probably be it, and it was probably something relatively minor again, not catastrophic but that's how I would have handled it.

Speaker 1:

All right. The other thing that I've noticed about leaders such as yourself is that they tend to be readers, and so I'm curious about the book that's on your either physical or virtual nightstand. What are you reading these days, and who are you paying attention to?

Speaker 2:

Yeah, I actually. There are a couple of good resources and I'm entrepreneurial as well, so I've taken the red pill in that. Yes, if you've read Cashflow Quadrant by Robert Kiyosaki during the daytime, I'm what he describes as an S in terms of that type of professional and how their business is run, but I do invest on the side too, so I do like things out of the rich dad advisors, so in some of those folks like Garrett Sutton who's written loopholes in commercial real estate. That's a very comprehensive book but it definitely teaches you a lot and I think it's in pretty digestible, easy to read language too, even if people don't understand all the legal nuances associated with it.

Speaker 2:

And one other book that I was talking to a client about this and he laughed because I think the title of the book sounded so boring to him he couldn't believe anybody was reading it. But it's actually a fascinating book and it's called Tax-Free Wealth. And Tom Wheelwright is a CPA and he has a different explanation for the whole concept of paying taxes and how to look at taxes, by basically saying that the Internal Revenue Code can be a playbook for what the government wants you to invest in, what they want to incentivize, and if you do that, you shouldn't necessarily feel guilty about paying less in taxes, because you're doing what the government wants you to do and you're being rewarded for it through taxes. You're doing what the government wants you to do and you're being rewarded for it through taxes, so it's a very interesting approach. But he also goes into a lot of the potential tax strategies, particularly in commercial real estate, that people can do.

Speaker 1:

So those are some of my favorite ones that have resonated with me. Okay, last question of the final five. Finish this sentence for me, please. Success means.

Speaker 2:

Success means, I would say, being able to look in the mirror and be satisfied with how you've handled life's most difficult situations. I think we are shaped by adversity and our challenges and it's how you deal with those situations. I think that really makes you a better person, and how you'll be remembered and measured than necessarily every single success you've had. So I know that was a long-winded answer, but that's pretty much what I think.

Speaker 1:

All right. So when not saving the world from bad syndications? What do you like to do? How do you spend your time?

Speaker 2:

My wife and I have developed and honestly I've developed it through her introduction of it. But we run a lot of races, 5ks up through marathons, and there's a group called Team Voight where we push special needs children in these specially designed racing chairs and it's just, it's all about inclusion, being a duo team and giving them an opportunity where they're usually not ambulatory themselves or able to do so themselves ambulatory themselves, are able to do so themselves. But both giving them that opportunity and giving their family that opportunity has been really incredible. It definitely adds a layer of meaning to every race that we do. And more recently I had a special situation where one of my partners in the Western portion of the state has a niece in her early 40s who has cerebral palsy and we had described to him Team Hoy, what it does and he said, oh, my niece would love that. And we said we'll push her anytime, not knowing when we're going to be in Dayton Ohio where she lives.

Speaker 2:

And it turned out that another one of my friends that I've been a guide for, this particular friend is ambulatory. He's able to run a race but he needs a guide to get through the marathons and so on. He wanted to do all the military marathons and it just happened to be that the Air Force Marathon was in Dayton Ohio and so it was meant to be, and so I traveled to Dayton Ohio with a chair and I got to push her in the Air Force Marathon. And it's just little things like that where we've gotten to travel all over the world doing this type of thing and just making connections and having these amazing experiences and all we do is run, but we just make these friendships that last the rest of our lives, and so we do that just about every weekend, except when the weather gets too extreme. But yeah, it's more joy than I can describe and people describe it as community service, but it's so enjoyable it doesn't feel like that at all because we get so much out of it.

Speaker 1:

It's amazing. Yeah, I watched Dick Hoyt run with his son. I think his son was Rick, actually, that's right. So Rick had, I want to say, cerebral palsy. He had some debilitating disease that prevented him from running. But he and his dad, I saw them run a dozen more Thelmouth Road races and Boston marathons, right, it was an absolute inspiration and joy to watch. It was like one of the things we all paid attention to was oh, here come the Hoyts. Yeah, it's amazing. And most of the time there wasn't a dry eye in the place, because they are an absolute. I'm getting chills just talking about it, remembering it. It was just an amazing experience to watch those two do what they did and it was just out of a place of sheer love, yeah.

Speaker 2:

There's a race that definitely gives me chicken skin towards the end, because we do it every year and it's the Marine Corps Marathon and because they're Marines, you run 26 miles and then the last 0.2 is like a 40 degree incline and we're always pushing chairs and by then you have no gas in the tank to just charge up the hill proudly. So we're usually just pushing to get up to the hill so we can finish the race. And the amount of applause is so deafening it's practically shaking. It's incredibly moving. You can't not be moved by it, because people were just so happy to see that you all have done this together and that you're finishing. Yeah, it's tremendous.

Speaker 1:

Amazing, and unfortunately I don't think either Rick or Dick are with us anymore.

Speaker 2:

Sadly not. That was a tragic loss, I would say. In the last five years we lost both of them, but definitely their mission definitely is widespread and lives on for sure.

Speaker 1:

It's New Englander. I knew all about the Hoyts and I've seen them run many times.

Speaker 2:

Yeah.

Speaker 1:

So, Fantastic. Richard, if people want to learn more about you or your practice at Wood Rogers or anything else about you, what's the best way to get in touch?

Speaker 2:

Okay, my email address and I'll say it and spell it so it's richardcrouch and my last name is spelled like Crouching Tiger, and then it's at woodsrogerscom. So Woods is plural and Rogers is plural. No dots in between that. And then this will blow your mind, but I'll give you my mobile phone, which I will get, and I'll get back to you swiftly 757-353-0969. And one thing I think we touched on it before. I'm licensed in Virginia and North Carolina. I think I mentioned our firm's license in 19 different jurisdictions. But if you're doing a deal, that's outside of that and you need assistance. We have done deals all over the country, and so we definitely have a nice network of local counsel with whom we can collaborate to help with some of those state-specific nuances too. So just in case anybody listening is wondering about that, Wonderful Richard.

Speaker 1:

Thank you so much for the opportunity to speak with you today. I've really enjoyed this and I got a lot out of it. I learned my deuce indications and I learned a bunch. Thank you very much and it's good to see you, my friend. Thank you, my pleasure.

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