Private Equity Fund: Black Swan Team

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Private Equity Fund: Black Swan Team

Victoria H.
Rental Property Investor · Los Angeles · Member since 2021 · 8 posts · 2 votes

Just wondering if anyone has invested with the Black Swan Team and how their experience has been to date. They seem like a relatively new sponsor in the private equity space. The newness of their business makes me nervous, but I really like their investment strategy--focused on significant value add SFH and large multifamily assets utilizing the BRRR strategy and holding long term. Their deal structure seems somewhat unique -- no fees at all, 50/50 split of profits after full return of initial capital investment to LPs. The stated goal is full return of capital within the first 5 years of the investment after which they plan to hold the assets for the full 20-25 y, so you remain in the fund getting 50% of the profits and reap the longer term benefits of market appreciation upon the sale of the asset 20+years later.

Any thoughts on the upsides and downsides of such a structure would be greatly appreciated as I'm new to the world of syndications and funds. 

Thanks!

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
3y
Quote from @Nick Elder:

@Victoria H.I think you'd be better off putting your money into a syndication or fund focused on large multifamily with a 3-5 year hold and with a reputable fund manager. Time value of money is important. What are their IRR (Internal Rate of Return) projections over the 20-25 year hold time? I'd be happy to connect if you'd like to talk through the upsides and downsides. I'm also interested in learning more about this strategy!


ya no kidding not many business's like this operate for decades at least with the original principals.
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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Victoria H.

    Put a link as there are numerous companies with that name. Then we can review and advise

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  • Nick Elder
    Investor · Denver, CO · Member since 2023 · 5 posts · 5 votes
    3y

    @Victoria H.I think you'd be better off putting your money into a syndication or fund focused on large multifamily with a 3-5 year hold and with a reputable fund manager. Time value of money is important. What are their IRR (Internal Rate of Return) projections over the 20-25 year hold time? I'd be happy to connect if you'd like to talk through the upsides and downsides. I'm also interested in learning more about this strategy!

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    3y
    Quote from @Nick Elder:

    @Victoria H.I think you'd be better off putting your money into a syndication or fund focused on large multifamily with a 3-5 year hold and with a reputable fund manager. Time value of money is important. What are their IRR (Internal Rate of Return) projections over the 20-25 year hold time? I'd be happy to connect if you'd like to talk through the upsides and downsides. I'm also interested in learning more about this strategy!


    ya no kidding not many business's like this operate for decades at least with the original principals.
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  • Neil Cronkrite
    Investor · Wheat Ridge, CO · Member since 2013 · 75 posts · 41 votes
    3y

    I get BRRRing mutlifamily assets since they are commercial deals. They appraise on NOI. Raise income, reduce expenses, and you have a highly valuably asset. For SFHs, it's much different. You could raise rent 30% but the value may not change. Value is (typically) all about cost per square foot. So if they're going to BRRRR properties at scale, what is their plan to get such a discount on properties? This is why I now don't want to be in the SFH space - not enough time in the day (in my situation) to get assets +20% under market. I'd rather stick with triple net lease properties.

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  • Sue Young
    Member since 2023 · 3 posts · 0 votes
    3y

    Here's Black Swan's website. 

    https://blackswanteam.com/inve...

    I, too, would like to hear from accredited investors who have actually invested with them. 

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  • Ian IppolitoBusiness Member
    Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
    3y
    Quote from @Victoria H.:

    Just wondering if anyone has invested with the Black Swan Team and how their experience has been to date. They seem like a relatively new sponsor in the private equity space. The newness of their business makes me nervous, but I really like their investment strategy--focused on significant value add SFH and large multifamily assets utilizing the BRRR strategy and holding long term. Their deal structure seems somewhat unique -- no fees at all, 50/50 split of profits after full return of initial capital investment to LPs. The stated goal is full return of capital within the first 5 years of the investment after which they plan to hold the assets for the full 20-25 y, so you remain in the fund getting 50% of the profits and reap the longer term benefits of market appreciation upon the sale of the asset 20+years later.

    Any thoughts on the upsides and downsides of such a structure would be greatly appreciated as I'm new to the world of syndications and funds. 

    Thanks!


    Every investor does due diligence differently because they come from a different financial situations, have different goals and have different risk tolerances than others. So different  investors will have different opinions and there's no such thing as a deal that's great for everyone.

    As a conservative investor, I require my sponsors to have full real estate cycle experience with little to no money lost. I don't want them learning expensive lessons in a severe downturn using my money. So for me, their lack of experience is an immediate dealbreaker.

    I personally don't like funds that don't charge management fees at all. If a significant downturn happens, staying power is really important to avoid the deal imploding. And the management fees can allow a sponsor to "keep the lights on" versus a sponsor that has shifted all compensation to profits.

    Also, the 50% investor/50% sponsor split is extremely uncompetitive versus other options. Personally I like to see 75-85% to the investor. So this is another personal red flag.

    At the same time, a different investor will feel completely differently. Good luck with your search.

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