A private placement memorandum with no risk discussion is a red flag. Investors should expect to see tax considerations, capital stack composition, debt types, and whether interest rates are fixed or floating. If these are missing, ask questions.
If you see a deal and there's not any risk factors discussed, that is BS. If all you ever see is risks and it's like the world may get hit by a meteorite and wipe everybody out, that's silliness. But I want to know about taxation. I want to know what submarket concerns there might be. I want to know what the capital stack theoretically looks like. I want to know what type of leverage and what type of debt product the sponsors typically have. And I want to know if it's a floating rate, theoretically, you know, what the plan is from a standpoint of how do we cap our risk, right? All of that should be in your PPM. If it's not, make some notes, ask some questions so that you fully understand exactly what it is that the business plan is really predicated on.
