RAD Diversified

DDH Fund LP, a prior fund managed by the same manager/sponsor, reported net losses of $(835,797) in Year 2 and $(200,784) in Year 3.

“DDH Fund LP... Net loss $(835,797)... Net loss $(200,784)”

DHI Fund LP, a prior fund managed by the same manager/sponsor, reported net losses of $(444,295) in Year 2 and $(480,275) in Year 3.

“DHI Fund, LP... Net loss $(444,295)... Net loss $(480,275)”

DHI Holdings LP, a prior fund managed by the same manager/sponsor, reported net losses of $(1,047,013) in Year 3, $(797,982) in Year 4, and $(564,170) in Year 5.

“DHI Holdings, LP... Net loss $(1,047,013)... Net loss $(797,982)... Net loss $(564,170)”

The Company itself reported a net loss of $616,388 for the year ended December 31, 2020 (vs. $68,202 in 2019), and an unaudited net loss of $1,115,371 for the six months ended June 30, 2021, indicating recurring operating losses since inception.

“Net loss $ (616,388 ) $ (68,202 )”

The Company received a subpoena from the SEC for production of certain documents in connection with the Company's affiliation with RAD Diversified REIT, Inc. The subpoena arises from an SEC investigation of an unknown target. No proceedings have been brought against the Company, RAD Diversified REIT, Inc., or their affiliates as of the date of the offering circular, but the Company must devote time and resources to respond.

“The Company is not currently subject to any known or threatened legal proceedings or litigation at this time. Notwithstanding the foregoing, the Company has received a subpoena from the Commission for the production of certain documents as a result of the Company's affiliation with RAD Diversified REIT, Inc. The subpoena is a result of an investigation being performed by the Commission of an unknown target and no proceedings have been brought by the Commission against the Company, RAD Diversified REIT, Inc. or their respective affiliates at this time. Nonetheless, the Company will be required to allocate time and resources towards responding to such subpoena and any further SEC inquiries on the matter.”

The Company purchased its first two investments from RAD Diversified REIT, Inc., a related affiliate controlled by the same directors, by issuing a promissory note at 9.5% interest. The transaction was described as at fair market value but was not an arm's-length transaction with an independent third party.

“On July 1, 2023, the Company purchased two properties from RAD Diversified REIT, Inc., an affiliate, at fair market value commensurate to an arm's length transaction for $12,309,604 by issuing a promissory note. The promissory note bears interest at 9.5% per annum and is due on December 31, 2024.”

The Management Agreement with RADD Capital Management, LLC was negotiated between related parties. Executive officers, including a majority of directors, are also executives of the Manager. There is no independent review of Manager performance. The Company has no independent directors and no formal related-transaction review policies.

“The Management Agreement with our Manager was not negotiated on an arm's-length basis and may not be as favorable to us as if it had been negotiated with an unaffiliated third party. Our executive officers, including a majority of our Directors, are executives of our Manager. Our Management Agreement was negotiated between related parties and its terms, including fees payable to our Manager, may not be as favorable to us as if it had been negotiated with an unaffiliated third party.”

The Company's officers and directors, and owners/officers of the Manager and affiliates, are involved in ownership and advising of other real estate entities including RAD Diversified REIT, Inc., which has an ongoing Regulation A offering. The Company has not adopted specific conflicts of interest policies, and no policy restricts officers, directors, or affiliates from competing with the Company.

“Our officers and directors, and the owners and officers of our Manager and its affiliates, are involved in, and will continue to be involved in, the ownership and advising of other real estate entities and programs, including those sponsored by RAD Diversified REIT, Inc., which has an ongoing Regulation A offering. These pre-existing interests, and similar additional interests as may arise in the future, may give rise to conflicts of interest with respect to our business, our investments, and our investment opportunities.”

Despite providing real estate advisory services, the Manager is not a licensed asset manager or licensed real-estate advisor, and does not maintain errors and omissions insurance that could be used if improper investing advice is provided.

“Even though our Manager will be providing real-estate advisory services, our Manager is not a licensed asset manager nor is our Manager a licensed real-estate advisor. Our Manager provides real-estate advisory services on a best-effort basis. Because our Manager is not a licensed professional advisor and is not a licensed real-estate manager, our Manager does not maintain errors and omissions insurance that we could turn to in the event our Manager provides improper investing advice.”

The Manager also manages three competing funds — DHI Holdings, LP; DHI Fund, LP; and DDH Fund, LP — that may compete with the Company for real estate investments. The Management Agreement is not negotiated at arm's length. The Manager is not a licensed asset manager or licensed real-estate advisor.

“Our Manager also manages three other real estate investment funds. Because we intend to purchase the real estate owned by those three funds (DHI Holdings, LP; DHI Fund, LP; and DDH Fund), these funds have purchased shares in our company in order to use those shares to buy-out the equity holdings of their respective limited partners.”

The Manager is not a licensed asset manager, yet exercises full investment discretion over the Company's portfolio. The Management Agreement was not negotiated at arm's length.

“Even though our Manager will be providing real-estate advisory services, our Manager is not a licensed asset manager.”

The Company transacted extensively with affiliated funds (DHI Fund LP, DHI Holdings LP, DDH Fund LP) controlled by the same stockholder/manager, including issuing interest-bearing promissory notes totaling approximately $4.2 million to these entities at 10.75% interest, acquiring properties from these entities, and receiving rents collected by affiliates — all without arm's-length terms or competitive bidding.

“One of the Company's current stockholders also controls the limited liability company, RAD Management, LLC... One of the Company's current stockholders also controls the limited partnership, DHI Fund, LP. DHI Fund LP has periodically sold real estate holdings to the Company and collects rents on behalf of the Company. There is no fee schedule or formal agreement with respect to rents collected by DHI Fund LP.”