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Today we put aside Jesus’ warning about how a rich man needs to go through the eye of a needle with his camel to get to heaven. Instead, we consider the “plight” of those who are too “poor” to invest and too rich to complain. Much like the Missouri River being too thick to drink and too thin to plow. (Mark Twain may have said that first.)
About 25 people showed up at the North Shore Winery on March 13th, to hear a presentation on the Cook County Real Estate Fund [“CCREF”]. More folk came to two sessions at the Best Western Inn the next day. Eight local General Partners and the Principals of Northfield-based Revocity want to invest in Cook County real estate projects. Their goal is to meet community needs and earn a hoped-for profit of 8-12% on a minimum investment of $25,000 by Limited Partners.
It is likely the CCREF Investment partnership is good for Grand Marais and Cook County. It may be too bad more people are not eligible to invest.
CCREF already has contracts to purchase two Grand Marais properties to be developed for residential and business space needs. The goal is for investors to do well by doing good for the County. Local general partners include Howard Hedstrom, Tim and Beth Kennedy, Steve Surbaugh, the Latz brothers, banker Roger Opp, and Ann Possis of WTIP. Collectively, they represent broad knowledge of our area.
I was impressed that the program promises the Limited Partners will get returns on their money before the General Partners. Some of the members of the General Partnership will invest their own money as limited partners as well.
Sounds good. Where do I sign up? But… even if you think you have $25,000 to lose [or win] without suffering, you may still not qualify. Let’s say you have an income of $100,000 per year from the maximum social security benefit and pensions from blue chip companies. Hold on there! You ain’t rich enough to get richer—or lose your investment.
To invest in the CCREF you must be an “Accredited Investor” as defined by federal securities law. The Accredited Investor Questionnaire says we may invest with $200,000 annual income (sole) or $300,000 if espoused. Or folks must have $1,000,000 in assets other than a homestead. Or you must meet the definitions of about 20 other possibilities not likely applying to most Cook County residents.
One internet chart says that if we have an annual income of $100,000, we are in the 84th percentile of American incomes. [The top 2% have incomes exceeding $400,000.] Notice that the $100,000 is too little by half to invest in these things. So, too, will the $999,000 in government bonds you hold to help support your paid-for, $750,000 lake home be insufficient. Angel Tax Credit for Investors / Minnesota Department of Employment and Economic Development (mn.gov).
I understand and support the purpose of securities and other consumer protection laws and regulations. We are free to pour our money down rat holes by ourselves. But those laws are to protect us from rat holes created and sold by others. We can go poor alone, but others cannot help us get there in crooked ways. The U.S. has a long history of people who went bust on the most recent “sure thing.” Many of our ancestors bought health elixirs in the 19th century while the con man’s wagon left town at night. Or Ivermectin more recently?
But what if I live in Cook County, either a comfortably retired professional or working for less because we like living in the out of doors with other interesting people? Sorry, we still have to be defined as rich enough to throw away our money.
Take the example of retired folk with pensions, a $750,000 paid-for lake home, and $999,000 in other assets. Can we not create a category for those folks who go in with their eyes wide open and sufficient intelligence to protect themselves? How about CPA’s or lawyers who chose to make less instead of billing 2000+ hour a year? How much protection do they need? At minimum, professionals to advise them not suggested by the General Partners or their agents would be a good minimum protection to retain.
Maybe something for our legislators to think about? Especially for investments at the $25,000 level? Or maybe there is an exception I haven’t found yet?
Income inequality is a far bigger social problem than those excluded from CCREF. Census data show Cook County’s median household income at $57,432. Per capita income in 2019 dollars: $33,194. Persons in poverty = 8.7 percent. Wealth has flowed to the top two percent since 1980 at least.
We seem more likely to pass bills to help the “suffering” upper-middle classes than those in greater need. In the meantime, those who qualify will want to look into CCREF and get its Private Placement Memorandum and consider their roles in doing better—or well enough–by doing good. Cook County needs more housing and… Contact revocity.com/.
Steve Aldrich is a retired Hennepin County lawyer, judge, and neutral, serving as judge from 1997-2010. He and his wife moved here in 2016. He likes to remember that he was a Minnesota Super Family Lawyer before being elected to the bench. Steve really enjoys doing weddings, the one thing a retired judge can do without appointment by the Chief Justice. He has no financial interest in CCREF. Writing this article was not suggested by anyone but himself. Bouquets or brickbats to the Editor or stevealdrich41@gmail.com. If you object because this is too far away from your expectations, note the defining element of this Column is our curiosities.
Copyright Stephen C. Aldrich and News Herald, 2022
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