Syndication Investing During a Recession

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From what I am seeing on the acquisition side of syndications, CAP rates have compressed even lower causing apartment values to increase. The shortage of lumber and building materials is causing new development prices to increase which directly increases the value of existing multi-family.

As far as operations go, collections are lower but increasing monthly. Some Syndicators have put distributions on hold for a month or maybe a quarter to make sure they have adequate reserves incase things were to get worse (which I agree with). Doing that is smart and is what a skilled asset manager/operator would do.

All in all syndications are still strong and I will continue to push investors to them and we will continue to buy apartment complexes. 

Hey @William Costello as others have mentioned the markets are scorching hot as a lot of the funds/institutions I work with are buying especially if it's a value add deal. A few turnkey groups, but everyone has money to spend and especially here in the Atlanta MFR market I'm in there is no downturn forecasted anytime soon. With rents steadily increasing 3% year over year which was the 2nd highest in the country driven by affordability, big tech coming in, low int rates and low inventory the positive net migration has been through the roof. Great time to be in real estate just be careful to analyze conservatively and not buying just to say I bought a deal in my opinion.

@William Costello Hey William, looks like you are from Indy as well! Would love to connect.

Not sure exactly what you mean by your question, but a couple things we are doing differently since COVID is being more conservative with our underwriting. We are being cautious with our rent growth in year 1 and taking a good look at the bad debt and vacancy on the T12. We like to really understand what kind of tenant demographic we have living in the units.

We are focused on more C+ and B class properties now. Cap rates are still compressing and we still see multifamily investing as a fantastic way to help our investors build generational wealth. 

If you follow Michael Zuber he is putting syndications on hold and focusing on lease options in SFR. It's great validation for the focus of what we are doing with my company.

Things took a big slow down for a while, but now, we are seeing pricing rise rapidly on acquisitions and we are also seeing a lot of LP investors looking for deals to invest in. Over the last 6 months, I have talked with more LP investors than ever before wanting to place money in a syndication. There is a lot of money and not a lot of good places to put it. 

Originally posted by @William Costello :

Still feel like syndications are not slowing down and are still a great investment option for some people @James Brown

That's good to hear things are coming back around on the acquisition side. I'm a believer in Multifamily and recommend them to my friends that are looking to invest in something stable. Of course "stable" comes down to the GP operator and the specific deal.

Caps rates have compressed and deals are getting harder to find.  Having said that, good syndicators/operators with a good track records are flourishing as brokers are working with buyers who can close on off-market deals with little to no fuss...making these relationships very important.  We have a good amount of multifamily in our portfolio in our backyard but now have diversified to self storage and OOS markets.

@Paul Choi great points, although deals are becoming few a farther between with cap rates becoming compressed being with a great organization who has a great reputation for syndication who focus on relationships will not skip a beat during this pandemic time.