100-unit New Build. Syndication Questions. I'm promote + land.

Multi-Family and Apartment Investing
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100-unit New Build. Syndication Questions. I'm promote + land.

Colton T.
Wylie, TX · Member since 2014 · 58 posts · 5 votes

Happy Memorial Day Weekend everyone. I'll jump into it.

I've never syndicated a deal and only have some book knowledge of the process. I've never been on the preferred end or the promote end of any deal, so I'm green in how to structure it appropriately. A solo investor up until now, in other words.

At the moment, I have a deal I'm putting together for the 20% equity required to finance a MF new build project on my land. It's good land. Downtown. Will fit about 100 units. I will put up the land and some cash, plus act as the do-er in the deal from Yr 0 to Yr 5. If I were to do it entirely on my own, it would be a 15% IRR deal from Yr 0 - Yr 5 (new builds aren't cheap). What should I be looking to do to structure a favorable deal for potential investors, in order to maintain control of the project, while putting up only the land (valued at 30% of required equity) and maybe some cash. Are there certain types of splits that favor cash flow over equity build-up for the do-er during the project.

In addition, what are some typical IRR expectations on 5-yr MF deal at this time? I want to be on point with my offering.

Any additional thoughts / advice on this topic would be greatly appreciated. You may have seen a few other posts from me recently in the MF forum. This is because we're trucking along in the first phases and I want to get all the knowledge I can going in to the next steps.


Thanks for all of your comments!

Colton

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Percy N.
Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 905 votes
6y

Who is going to be doing construction management for the new build?

How much construction background do you have?

Lenders and investors will want to know that important fact.

How many investors are you looking for? Will they be active? If not, you may be selling a security and will need a PPM.

Have you confirmed if new Multi-Family the highest and best use for the land?

Have you considered partnering with a developer where your contribution is the land?

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  • Percy N.
    Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 905 votes
    6y

    Who is going to be doing construction management for the new build?

    How much construction background do you have?

    Lenders and investors will want to know that important fact.

    How many investors are you looking for? Will they be active? If not, you may be selling a security and will need a PPM.

    Have you confirmed if new Multi-Family the highest and best use for the land?

    Have you considered partnering with a developer where your contribution is the land?

    1Reply
  • Colton T.
    OP
    Wylie, TX · Member since 2014 · 58 posts · 5 votes
    6y

    Good afternooon, @Percy N. Thanks for touching base with me. 

    The project has a fee developer managing the construction and acting as HUD financing consultant. I also have some key players attached already for architecture and engineering. The developer is considered a sponsor in the deal and will be a key player in the financing approval.

    For the equity, I will be seeking a max of 2 investors at about 30% of the equity needed, each. My portion, outside of providing and managing the deal, will be the land (about 30% of equity needed) and a small injection of cash. I'm familiar with the basics of a split structure or preferred structure, just trying to weigh the options and see what's appropriate to meet everyones needs in this market.  

    MF is confirmed highest and best use for this land.

    1Reply
  • Shital Thakkar
    Specialist · Dallas, TX · Member since 2010 · 511 posts · 252 votes
    6y

    @Colton T.

    Is this land in Dallas or Wiley downtown? 

    Already zoned for MF?

    We can sync up on this.

    1Reply
  • Greg Dickerson
    Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
    6y
    Originally posted by @Colton T.:

    Happy Memorial Day Weekend everyone. I'll jump into it.

    I've never syndicated a deal and only have some book knowledge of the process. I've never been on the preferred end or the promote end of any deal, so I'm green in how to structure it appropriately. A solo investor up until now, in other words.

    At the moment, I have a deal I'm putting together for the 20% equity required to finance a MF new build project on my land. It's good land. Downtown. Will fit about 100 units. I will put up the land and some cash, plus act as the do-er in the deal from Yr 0 to Yr 5. If I were to do it entirely on my own, it would be a 15% IRR deal from Yr 0 - Yr 5 (new builds aren't cheap). What should I be looking to do to structure a favorable deal for potential investors, in order to maintain control of the project, while putting up only the land (valued at 30% of required equity) and maybe some cash. Are there certain types of splits that favor cash flow over equity build-up for the do-er during the project.

    In addition, what are some typical IRR expectations on 5-yr MF deal at this time? I want to be on point with my offering.

    Any additional thoughts / advice on this topic would be greatly appreciated. You may have seen a few other posts from me recently in the MF forum. This is because we're trucking along in the first phases and I want to get all the knowledge I can going in to the next steps.


    Thanks for all of your comments!

    Colton

    You have a couple of options. You could offer straight pref, straight equity or a combo of both. Without know the complete financials and numbers of the deal it would be difficult to advise you. As a developer I look for a 30% IRR return on any cash I invest. If I bring investors in its usually 6-8% pref or 25-50% equity depending on the amount of the investment.

    1Reply
  • Spencer Gray
    Syndication Expert and Investor · Indianapolis, IN · Member since 2016 · 591 posts · 808 votes
    6y

    A 15% project level IRR doesn't leave a lot of room for investors and the sponsor to both make much of a return. I would take a deeper dive into the plan to see if you're missing something. Can you build more than 100 units? Add retail? Add other income producing sources such as storage, covered parking, etc?

    1Reply
  • Colton T.
    OP
    Wylie, TX · Member since 2014 · 58 posts · 5 votes
    6y

    @Greg Dickerson

    Good afternoon, Greg. Thanks for providing some feedback on this.  I'll send you a DM to get more clarification on this specific deal.

    0Reply
  • Colton T.
    OP
    Wylie, TX · Member since 2014 · 58 posts · 5 votes
    6y

    @Spencer Gray

    In your experience, does adding retail into the mix usually change the numbers in a positive way?  It's not a huge site, so I'm not sure how feasible it is for this project, but it's certainly something I would entertain.  Current project does have carports factored in. No garages or storage, though.  I will admit, I'd love to see a higher return on cash for this deal, given that we're shooting for so many units and it's not a luxury product.   

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