Site visit for the syndication?

Question

Hi,

I just invested in a 272 unit apartment - new development. I live in Boston and the syndication is located near Pittsburgh. Is there any value in flying to another part of the country, whether it be Pittsburgh or LA, to visit a project that I invested in?  Also, if I do, is there certain information that I should be gathering/evaluating, and certain questions that I should ask of the people working at the site to make the most of the visit?

Thank you,

Nirav

Evan Polaski · Answer

@Nirav Patel, I guess it depends on your goals.  As others noted, unfortunately, once you are invested, you are in.  So visiting the property could have some value, depending on your goals of the visit.

I have hosted investor tours at properties in the past, where we dedicate time with our investors and the community manager to walk the property so they can see their investment, as well as talk about current operations, how the business plan in going, and allow them to meet people on the team that they invested with.

I have also had investors reach out to tour properties on their own, when they were already going to be in that town.

Personally, as an LP, I would not go out of my way to tour a property that I was already an investor in.  If I was nearby for other reasons and could swing by, yes.  It could give you insights into how the deal is looking versus what is being reported to you (hopefully this aligns pretty closely).  It can also help you better understand some of the marketing that syndicators use. I.e. the glossy photos might look a lot better in the brochure than in person.

Common questions I have been asked or had investors ask PMs while touring properties with them:What do you see is the biggest hurdle to your operations today?What are the common professions of the tenants?What is the biggest draw to this property over others?

Of course you are looking at touring a new development, so ideally you can talk to the construction manager/superintendent with more construction related questions:Hurdles to progress?Current status versus schedule/budget?Potential hangups with materials?Likelihood of delays?

And if they have a marketing team member there:When is preleasing anticipated to start?How they are marketing?Are they having to offer concessions to get interested tenants?What does the property have that others don't to drive interest?

Chris Seveney · Answer

I would have visited the site prior to investing to gauge the area and understand the market better. For example questions I like to ask are: What are the current rents, target rents and who did the market study to show you can get those rents? For a building that size I would expect they would have had someone like a John Burns or someone else provide a report to understand the comps and current absorption rates and vacancy rates for this class of building.

Now that you have invested, it cannot hurt to go out and view the property but what are you trying to accomplish by visiting ?

Lastly, if you show up unannounced and start asking questions, you are probably not gonna get far. Saying you are an "investor" to the property manager etc or someone onsite you probably are going to get looked at like you have six heads.

Think of it another way, if you invest in apple stock and show up to a store asking questions or their office to ask questions and say you are an investor in the company - what type of response do you think you would get?

Nathan Gesner · Answer

Check with the syndication. Many syndications will have special days or events for investors to visit the property to see how things are running, see improvements, ask questions, etc.

I invested in a syndication last year and have been invited to several events already, plus they give regular updates on improvements and performance.

Ian Ippolito · Answer

Since you already pulled the trigger...and are a limited partner...this means you have the benefits of that (i.e. no liability beyond your investment) in exchange for generally having no ability to vote or have a say in how the investment is managed. So, in my opinion, the time for this sort of due diligence would have been before you invested (rather than after).

At this point if you visit and find a big problem, it's likely going to be like trying to close the barn doors after the cows have already all left.

The one possible exception might be if it's a problem investment (which you didn't say it was)...and you are wanting to try to "shake up" management by visiting.  As mentioned, you have no say in things, so your ability to affect change is limited. But if the manager is at least good enough that they care about their long-term reputation (and also trying to get you to be an investor in future deals)...then this might help.

If they are a bad one (or a good one and unable to change), then this is unlikely to make any difference.Remotely you can also do things like doing Google maps drive-bys, etc. (but again, I feel this should be part of pre-investment due-diligence).

Gino Barbaro · Answer

@Nirav Patel

I would visit the site before I invested, and possible other deals that the syndication group owns. I would also vet their property management before I invest with them, along with a slew of other team members.

Not much as an LP once you're invested.

Justin Moy · Answer

@Nirav Patel Sure there's value there. I'd message the sponsor and tell them you'll be traveling to the area and it'd be nice to get a brief tour to see progress. Without some type of guided tour through it it may be hard to see what's changed unless you've been on site before you invested.

As far as questions to ask, the big ones should be covered in the financials of the updates you get. Specifically I like to track occupancy and NOI and income per door especially if it's a value add project.

Ask about any unforeseen challenges that have come up (there always are, so not all challenges are a red flag), and overall let them know you're an involved LP who likes to be kept up to date on things

Site visit for the syndication?

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