Company Risks
The Company’s business, operations, and financial performance are subject to various risks and uncertainties. The Company has described below some risk factors which may adversely affect its business, operations, financial performance or industry. The Investor should carefully consider these risk factors, together with other information in the Offering Memorandum, before making any investment decision about the Promissory Notes.
The Company faces competition in the commercial real estate industry.
This competition evidences itself in (a) battles to attract and retain tenants, (b) efforts to attract financing and (c) efforts to acquire desirable commercial real estate investments. Actions of the Company’s competitors, or the entry of new competitors into the New Mexico market, could lead the Company to lower rents in an effort to maintain occupancy and cash flow and also could lead to lower overall rental revenue. The Company’s competitors include but are not limited to local, regional, and national commercial real estate owners, investors and developers. Some of them are expanding more aggressively than the Company or identifying or pursuing opportunities that the Company is either not identifying or choosing not to pursue. Some of these potential competitors may have been in business longer or may have greater financial or marketing resources than the Company has. They may be able to devote greater resources to acquiring, developing and leasing their properties. If the Company’s business is adversely affected by competition, its ability to pay interest or principal on the Promissory Notes could be eroded.
Reduction in Value of the Company’s Properties can decrease the value of the Company.
Property values can fluctuate due to a number of factors, including but not limited to the amount of rent paid, occupancy, the availability of institutional lending and interest rates. Reductions in the value of the Company’s Properties could impact its ability to maintain the debt to value ratio required of the Company as a condition of the Promissory Notes or obtain financing from institutional lenders.
The failure of Property tenants to pay may decrease the Company’s cash flow.
The value and viability of the Company is dependent upon the tenants occupying the Properties paying the rent to which they have agreed. If tenants fail to pay rent, or if vacant spaces do not rent at all or rent for less than anticipated, the cash flow from and value of the Company’s Properties would suffer. The Company would become less valuable and could default on debt obligations, including the Promissory Notes.
A calamity in the Albuquerque area could adversely affect the Company.
The Company’s Properties are concentrated in Albuquerque, NM. A calamity that is specific to the Albuquerque metropolitan region could have a negative impact upon the Company. A calamity could include, for instance, a natural disaster, severe weather, terrorist attack or the closure or severe cutback of a major regional employer such as Sandia National Labs or Kirtland Air Force Base.
Governmental regulations and actions could adversely affect the Company’s business and profitability.
The Company’s Properties are impacted by governmental regulations and actions, such as zoning laws, traffic pattern changes or changes in overall economic development decisions. These could have a negative impact upon the Company’s ability to use the Properties in the most profitable way.
The Company depends on personnel from a related company, Peterson Properties, LLC, to operate its business.
The Company uses Peterson Properties, LLC (“Peterson Properties”), where the Company’s Manager is a principal, to manage the Company’s Properties. However, the Company’s Manager and owner, Douglas Peterson, only owns (by and through his interest in a New Mexico limited liability company called “JMD Partnership Ltd. Liability Co.”) 10% of Peterson Properties and does not control Peterson Properties and cannot assure access to Peterson Properties’ personnel. The Company’s Manager, Douglas Peterson, manages the Company’s Properties largely by directing employees of Peterson Properties, LLC, to do certain tasks. The Company has no employees of its own. Loss of the ability to use Peterson Properties, LLC’s personnel to manage all or part of the Company’s portfolio would add unforeseen costs of operation to the Company.
The Company is completely dependent on the availability and willingness of Douglas Peterson to direct its operations.
The Company is completely controlled by Douglas Peterson and is extraordinarily reliant upon the knowledge, experience and contacts that he possesses as well as his operational efforts. The death, disability or other whole or partial incapacitation or unavailability for any reason of Douglas Peterson could have a detrimental impact upon the Company. The Company does not maintain, nor does it plan to acquire, life insurance or disability insurance on Douglas Peterson.