I'm working on structuring a NNN commercial property for JV. It's a $15,000,000 commercial complex with national AAA tenants that is projected to return 7% Cash on Cash Return day 1 (after vacancy, structural reserve, mgmt, 65% non-recourse financing, and non-recoverables) with an additional equity pay down of 6.7% per year. I'm working with a mentor that has been doing these types of deals for 35+ years but he hasn't done one this big in a while and worried we don't have enough investors to raise $5.3m before closing (once the offer is accepted). We have successfully raised $1m-$2m easily in the past.. within hours of releasing deals not as good as this one... However it's a much bigger raise and our unit prices would have to be triple what they have been in the past, $250k each minimum. Looking for input.
Thanks in advance,
We took the leap about three years ago with a $5 million raise double our previous largest capitalization.. We has been experiencing 15 minutes to raise $1 million, and less than a day for $2 million. We raised the first $2.5 million in no time, then it became a real struggle. We eventually raised almost $4 million, and was only able to complete the deal when the sellers agreed to invest $1 million with us as limited partners. Within 6 months we were able to arrange investors to buy them out.
Thanks @Don Konipol for the reply. About how many investors did you pull from at that point in time?
Depends on time of the year also. If it's around tax filing season or holidays it can become an afterthought as pre-occupied the passive investors to invest. Also if closing end of year lots of investors have already spent their money for the year and tax planning so in December lots of them are tapped out until next year.
If your existing investor base is used to NNN and already had success with them in the past then they might feel comfortable scaling up. If you are converting say apartment passive investors to NNN then might be harder as they might not understand the space as much.
My deal are retail value add I syndicate so I like super high income earners that make 500k to 1 million a year or more. They can wait for a property to stabilize and make a higher equity multiple on the exit. I find the people barely qualifying for accredited investor status they want max pref to keep the money working on take less upside on back end. Those are better suited to stabilized properties.
Is this in Canada or US? I'd say lineup other co-GPs who can also raise $1-2, give them a piece of your upside, but thats the most consistent way I've seen my clients "double their equity" on scary deals.