IBJNews

Real estate startup hopes to raise millions in stock offering

Back to TopCommentsE-mailPrintBookmark and Share

A group of local entrepreneurs has filed plans with the Securities and Exchange Commission to raise as much as $306 million to buy real estate assets in a complex stock offering known as a "blind pool."

The proposed new company, a real estate investment trust dubbed Free and Clear Equity Inc., wants to buy commercial real estate and mortgages. The goal is to pay cash for stabilized properties and avoid taking on long-term debt.

Potential investors in the proposed firm would have to consider a daunting set of risks: FACE has not yet purchased or contracted to purchase any properties; has no operating history; and its only potential source of funds is from the sale of shares, the company said in a registration statement filed with the SEC Dec. 23.

FACE said it would need to raise at least $5 million to launch the company. Even if the firm can't raise that much, it would still hold onto about 10 percent of investors' money "to defray expenses and attempt to find other financing."

The stock sale is not a traditional initial public offering, and the company warns in its filing that "there will be no immediate trading market and there is no assurance a trading market will ever develop" for the shares. The offering will take place "as soon as practicable."

The CEO is Chance W. Bunger, 59, a residential real estate broker with Circle City Realty. Bunger and Thomas G. Ferkinhoff co-own two Dairy Queen franchises. Ferkinhoff, 48, an accountant and owner of Randolph County Insurance Agency, will serve as the new company's chief financial officer. The third partner is Jeffrey J. Jinks, an attorney and real estate consultant.

The partners say they capitalized the company with about $395,000—the cost of registering the shares and offering them for sale—and received shares in return. An investment fund called Monogenesis Corp. is set to receive 1.4 million shares and almost 3 million warrants in exchange for a payment of just $17,000, less than a penny for each share and a fraction of a penny for each warrant.

FACE plans to target existing buildings in stable or growing markets that are less than 10 years old and are leased to well-known tenants with at least seven years remaining on their lease.

"As we do not currently own any assets and plan to be an all-cash buyer, we are not restricted by legacy operating or legacy leverage issues that some of our competitors are presently facing," the company said in its registration statement.

Blind pool investments first surfaced in England 280 years ago, according to the North American Securities Administrators Association. They first appeared in the United States during the stock market boom of the 1920s and tend to proliferate during prosperous times for equity markets.

They are a cousin of so-called blank check offerings, and are considered a particularly risky investment that small-dollar and novice investors should avoid.

"During prosperous times, potential investors tend to become less cautious in considering investment alternatives, a course of action that can have disastrous results," the securities group warns on its website. "One type of investment instrument that lures unwary investors is the 'blind pool' offering. In these cases, it is only the investor who is truly blind to the use of his or her money. Strangely enough, investors readily agree to commit funds for totally unspecified purposes and with no assurance or commitments."

FACE plans to collect its startup cash by selling warrants that convert to common stock, then using the proceeds to buy properties and mortgages that align with the strategy outlined in the offering, spokesman Greg McAndrews wrote in an e-mail.

The company said it is registering 122.4 million shares with a conversion value of $2.50 apiece.

ADVERTISEMENT

  • Double Yikes!
    Quick search on the net showed that Circle City Realty has just one listing as of today. In addition they had only 2 sales this year. I'm not sure that is a good skill set for success in the commercial market.

    What do you think?
  • Why Bother
    Why bother to comment if you have no interest in it? A little google search and it seems there have been several small start up REIT's that have been very successful in 2010. These guys may be on to something.
  • Can't Stop Laughing
    This is the funniest thing I have heard in a long time. Cory, why is this news? I asked the same thing a couple of years ago when you wrote about some kid that wanted to redevelop the NW corner of Penn/Washington into some kind of spiraling mess - nevermind he had NO real estate experience. What idiot would invest in this!? A residential real estate broker that wants to invest in commercial properties? Come on - I feel like I am even wasting my time in commenting on this.
  • Seriously?!?
    An investment fund led by fellows named "Bunger" ("Chance" Bunger, at that), "Ferkinhoff" (say it three times aloud) and "Jinks." What could possibly go wrong?

    This press release wasn't supposed to come out April 1st, was it?
  • details
    I can confirm that Mr. Brizzi is NOT an investor, shareholder, officer, director, or in any way affiliated with this company. Jeffrey J. Jinks, Secretary, Free And Clear Equity, Inc.
  • interested in details
    Is Brizzi an investor? I would be willing to lend my expertise as a CRE Analyst to help them valuate properties. There are plenty of properties they could possibly invest in and an easy way to sort through the crowd of CRE properties; however, I am not a fan of Brizzi and would stay clear if I found he is involved. So do you know for a fact he is an investor, or is this just speculation?
    • Good Luck With That
      Would anyone have been surprise if Brizzi's name had popped up as one of the investors?

      Post a comment to this story

      COMMENTS POLICY
      We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
       
      You are legally responsible for what you post and your anonymity is not guaranteed.
       
      Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
       
      No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
       
      We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
       

      Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

      Sponsored by
      ADVERTISEMENT

      facebook - twitter on Facebook & Twitter

      Follow on TwitterFollow IBJ on Facebook:
      Follow on TwitterFollow IBJ's Tweets on these topics:
       
      Subscribe to IBJ
      1. The Affordable Care Act is not the reason for the slow recovery and lack of high paying jobs for low skill workers. This is a trend that has been going since the early 80's. The recovery is real in the sense that GDP has been growing steadily at a rate of roughly 2.5% since the recession ended in late 2009 (newsflash, the stimulus worked) and the unemployment has been steadily dropping. The reason issue we are facing deals with a skills gap (not enough workers with the right credentials / experience) and wage stagnation due to corporate America being focused solely on maximizing profits for shareholders and not caring about the American middle class. Why should they? Multi-billion dollar mutlinational companies keep offshoring their profits in order to avoid paying taxes (which makes our deficit worse) they convince Americans to fight amongst themselves. If you want to create jobs and reduce the deficit, raise the minimum wage and change corporate tax laws. Of course, if you want to continue to belive that tax cuts for wealthy create jobs (which they don't) and allow corporations and the wealthy to continue to make you cover more and more of the costs of maintaining infrastructure, funding the military and other government services, then keep voting Republican. Hopefully someday you wake up and realize what's been going on since Reagan took office.

      2. Helloooooo, my name is Kate. I am so joyous to share this wonderful testimony about what Dr. Osoijiakhena, a great spell caster, did for me and my family. I wedded a year and 6 months ago, we were very happy during this whole period, i really love my husband so so much. I started noticing changes when he started coming home late at night, he stop paying attention to me, i later found out that he was having an affair with another lady, i dont know what she did to get to him but she really got a hold on him. He started spending weekends with her, and threaten for divorce. I was so heart broken and devastated, i spent many night thinking on how to get my husband back. A friend took it upon herself to to introduce me to one Dr. Osoijiakhena, a great spell caster, who once helped her with a spell that reunited her family and helped her husband secure a very prolific job. Though i had my doubts and never believed, but i decided to give it a try because i was helpless. I contacted Dr. Osoijiakhena, the Spell caster, to help me reunite my family by bringing back my husband from that other woman and break whatever hold she had on him. He only just told me that it's a minor issue, once i provide and do everything he will ask me to do, then i will have my family back again. I did everything he required. And he did it!!!!! My husband returned back to me and pleaded for forgiveness, and i also secured a well paid job in a big company, just as the great spell caster, Dr. Osoijiakhena said. I am so so happy to share my testimony on this wall. I am using this medium to tell every one that has same or similar problem to try the great Dr. Osoijiakhena through his mail: drosoijiakhenaspell@gmail.com......he is so real!!!!! He can also help you with: (1) IF YOU WANT YOUR EX GIRL/BOYFRIEND TO RETURN BACK TO YOU (2) IF YOU WANT YOUR HUSBAND/WIFE BACK (3) IF YOU WANT TO BE PROMOTED IN YOUR OFFICE (4) IF YOU WANT YOUR MAN OR WOMAN TO LOVE YOU (5) IF YOU WANT A CHILD (BARREN) (6) IF YOU WANT TO BE RICH/WEALTHY (7) IF YOU WANT YOUR HUSBAND/WIFE TO BE YOURS FOREVER (8) IF YOU'VE BEEN SCAMMED AND WANT YOUR MONEY BACK (9) IF YOU ARE HAVING DELAY IN GETTING MARRIED (10) IF YOU HAVE A COURT CASE AND WANT TO WIN (11) IF YOU'RE A DRUG ADDICT AND YOU WANT TO REALLY STOP (12) IF YOU CANNOT IMPREGNATE A WOMAN (STERILE) (13) ALL TYPES OF DISEASES I advise you to contact the great Dr. Osoijiakhena, the spiritualist for solutions via his email: drosoijiakhenaspell@gmail.com

      3. Sergeant McNally is buried in Cathcart Cemetery on a hill known as McNally%u2019 Hill. The Cemetery is in a natural bushland setting and is very well maintained.The emergency department at Ararat Hospital is known as the John McNally Emergency Department. Cathcart is approx. 4.6 km from Ararat and is approx. 345 m above sea level.

      4. My spring chicken of a Mom is turning 75 years young. She is a big fan of Frankie and I think she would get a big kick out of the film. I wanted to take her to the Broadway play but am priced out. Thanks for your time and consideration. Oh yea, Wildwood! Joie

      5. I thought this company would go bankrupt in 2013/2014. I predicted that four years ago. I was wrong. It will take another couple of years, but they will get there.

      ADVERTISEMENT