syndicators payment and interest rates

[George Genovezos]

Hi all,

Just wondering what percentage your syndicators get for finding, managing and selling the deal, and what investors are seeing for interest rates.

[Joel Owens]

Preferred return I have seen anywhere from 5% to 8%. Depends on if it is a stabilized property for STNL or MTNL or a value add deal. In value add plays more cash is needed upfront with no to little cash flow going in but great equity growth on the back end. Some investors do not care much about the cash flow going but the equity upside. Other investors want the cash flow today and do not care as much for the upside.

So you have to match the passive investor with the sponsor for the project. Some new syndicators promise the moon trying to land funds but if you never get the promised high returns it means nothing. You would have been further ahead with the experienced operator getting 5 to 8%. Once syndicators get established they start seeking out cheaper sources of investment from passive investors and no longer want to pay out the higher rates.

The reason is typically there are tons of funds out there willing to partner and provide the cash for higher returns. This way the syndicator does not need to worry about raising funds for each deal. So if the syndicator is going to trade yield they might as well keep using the one company for the source of funds and not deal with investors and small amounts for investment.