Steadfast REIT: Is this the next David Lerner?

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Joined: Mon Oct 24, 2011 7:43 am

Steadfast REIT: Is this the next David Lerner?

Post by sfwatcher » Mon Oct 24, 2011 7:46 am

I know that the multi-family space is white hot right now, but I’m not convinced that Steadfast, one of the current multi-family non-traded REITs, is operating anywhere near well enough to pay a 7% distribution to investors. I don’t see a thread for this REIT, maybe because it’s relatively new, but does REITWrecks or any dedicated readers have any experience with multi-family REITs? It seems as if the public ones are paying at most a 5% dividend, not 7%. Also, looking at the last quarterly filings for this company it appears that they have negative cash flow. I’m wondering where the money is coming from to pay that 7% distribution if they have negative cash flow. It also looks like the expenses this company has incurred are over $1M in excess of the “2% 25% Limitation” mentioned in their 10-Q from 6/30/2011. The CEO, Rod Emery, signed a personal guarantee for this difference. He has also signed personal guarantees for mortgages against the REITs properties. It is unclear if Mr. Emery would have the assets to make good on all of these guarantees if the worst were to happen.

My real question is how does a product like this end up being sold by some of the biggest broker dealers out there, like LPL and AIG? They recently hired a bunch of hot shot distribution guys, so maybe their old relationships got them approved, but still it seems like this product throws off a number of red flags to anyone who would sell it. I can’t imagine a relationship strong enough to overcome the financial concerns alone.


Further, if you look at this 8-K it seems that the CEO, Rod Emery, continues to be required to provide personal guarantees for loans and other obligations of the REIT. And yet, Emery had to file personal bankruptcy several years ago for the exact same problem on loans related to Cove Development, one of his previous ventures.

This fund is among the worst performers in the business. The management has issues and the fund is clearly not performing. I hope there aren’t many investors putting their savings into this fund before communities like REITWrecks and due diligence companies have a chance to address some of these concerns.

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Re: Steadfast REIT: Is this the next David Lerner?

Post by gocards » Thu Oct 27, 2011 6:33 pm

Now hear this:

According to an 8-K filed yesterday the independent director on the audit company unexpectedly resigned in advance of the 3Q11 10-Q being filed. This is another bad sign for this company when combined with the resignation of two CFOs and the financial troubles of the CEO.

The 8-K can be found here:" onclick=";return false;.

It will be interesting to see what surprises the Q might hold in store next month.

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Re: Steadfast REIT: Is this the next David Lerner?

Post by NTRGUY » Thu May 17, 2012 6:14 pm

Steadfast has one of the higher upfront loads which makes it harder to perform well at the begining. More problematic than that has been the slow pace at which they have been raising money. They dug themselves into a hole because they have not yet hit their critical mass. If they can raise sufficient funds this reit will be able to perform. The Cap Rates are very good and the prospects for rent growth are high. However they at this point havent raised enough money to scale the fixed costs associating with launching a new reit. The verdict is not out on this one.

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Re: Steadfast REIT: Is this the next David Lerner?

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