Forgotten History
When I first started as a due diligence analyst in the late 1980s, I viewed affiliated transactions as a sign of potential trouble. The due diligence department that I worked in and eventually ran, initiated a prohibition against offerings that were affiliated. There was a good reason for this. It was because too many affiliated deals went bad. The Heartland and Meyers land deals went south (note investors against equity holders). The Hill Williams land development deals went south (raw land loans made based on "as completed" appraised values). The Nilcorp housing development deals also had note investors fighting equity investors. There where other affiliated transactions that did not turn out as planned, not just the risky land development programs.

Some deals were structured poorly and the real estate market did collapse. But many failed due to the lack of arms' length negotiations and misvalued investments, and the likely fact that the deal would never have been done if it had not been an unsophisticated affiliate offering.

The affiliated transaction is back with a vengence. The lure of capital - despite its cost - from unsophisticated investors is too great. The disclosure is better because the securities attorneys are better (but it is not the attorneys' job to tell investors whether the deal is good or bad). Disclosure does not make a deal sound and broker/dealers and investors need to beware.

My opinion is the same - these deals are considerably more risky than being presented and investors and broker/dealers should stay away. The returns do not, in my opinion, compensate investors for the risk being incurred. Yield and return hungry investors should look elsewere. History repeats itself and broker/dealers need to avoid the mistakes of the past.