Exits of Syndication Deals?

Question

If you had passively invested in syndication deals few years ago.. are any of those properties now sold (or not sold as expected)? Please share a little about those experiences. Did you get the est. IRR% on sale as expected? Did it actually sell (or not) within the years of hold planned? Would you have taken other route instead? It'll also help to know which teams were successful for your as a passive investor (and not so). TIA!

Taylor L. · Answer

My passive investments have had one exit so far. We exited before the business plan. The syndicator did not meet the pro forma, but we were profitable and my returns beat what I would have made on that capital following my previous strategy. Therefore I was satisfied.

Sam Grooms · Answer

I would add that it's also a good idea to pay attention to the equity multiple. You can inflate the IRR with an extremely early exit.

Kyle Kovats · Answer

I second this take, Alina. One of the deals that I am invested in has a sponsorship team of 5 but like you mentioned, it appears they've partnered up to simply be able to take the deal down. It's performing mediocre at best. It also seems to me as if they haven't really delegated tasks too well, in other words too many cooks in the kitchen. A smaller sponsorship team or at least ones with defined roles seems to operate best.

Tj Hines · Answer

@Hardik Patel Haven't experienced any exits, but common sense would tell me it totally depends on the sponsor. Be sure to vet the sponsor and ask for references. Ask sponsors tough questions. Don't just go off of what they tell you. Good luck

Theo Hicks · Answer

Hi @Hardik Patel,

The syndicator should let the investors know the projected hold period. Generally, the only reason (from the investor's perspective) to sell early is if they can achieve or exceed the projected IRR early. Of course, a bad reason to sell early is if the deal is performing poorly and he syndicator wants to preserve as much capital as possible.

John Fortes · Answer

I agree with @Alina Trigub as you will hear different opinions from others. I believe what you are asking is just the first of what you will finally uncover to see if it is a path you want to take. You seem to have concerns on what the returns will be and if it will properly exit. As Alina explained, it is a team sport and I know that term is thrown around often but its true. If you're seeking to invest, do your homework more on the operators than the actual business plan till you have found the operator you would like to invest in. Then proceed to research the exits of their deals.

Also, if you don't get the answers you are looking for with this post. Just research the forum as there are many conversations about this here topic. Good luck!

Alina Trigub · Answer

@Hardik Patel

The experiences will vary greatly. From my personal experience, a lot depends on how strong, experienced and transparent the sponsor team is. If you have a quality GP then there is a much stronger chance that even a bad deal may succeed at the end.

In one of my investments, I saw several people partner up to simply have enough financial force to acquire the deal. While each of the sponsors was a strong one separately, they didn't act as a cohesive team. Hence the investment didn't fully go as planned, and on exit the returns have suffered. Lessons learned: only invest with a team that has worked together in the past and have succeeded as a team.

My suggestion if you're looking for a good sponsors and deals to invest in, then do a search on the old posts and you'll be amazed how much you'll learn.

Exits of Syndication Deals?

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