Penn Capital - Syndicator - Feedback?

Question

Anybody have experience as an LP with Penn Capital? They are marketing a new deal in North Carolina on FB. I'm interested in that region but know nothing of Penn Capital. Thx for your input!

Evan Polaski · Answer

@Steven Rosenfeld, I am hoping to provide a little more color here.

It sounds like what you are wanting are "vertically integrated" operators, like BAM.  They own the investment management and property management functions.

I would say the majority of syndicators are closer to what you note: deal sourcing, marketing, capital raising, but they do not partner with local operators.  At least in how I define it.  They hire a local management company to handle property management.  Some, do indeed, partner with the management company, where the management company is either an investor themselves or help raise capital and PM is part of the GP group.  But most, simply hire fee based management companies.  And, yes, if it is a new market for that syndicator, there is a good chance they have never worked with that management company before.  Although, some management companies have a pretty big footprint and work, say, in FL, GA, and Carolinas. These syndicators often tout themselves as operators because they act as Asset Management teams, setting the business plan and directing the actual PMs to implement.

And then there are the "syndicators" that are just capital raisers.  These groups "find the deal" by raising money for other operator/syndicators, they market themselves (often with tag lines on LinkedIn of: I help busy (fill in industry) professionals create passive income through real estate),  They raise money from their own network and funnel it into a syndicators deal for part of the GP ownership.  These groups are often in a big grey area.  They also have no real control of anything.  They raise money and funnel it.

I cannot help with vertically integrated sponsors in NC.  I know there are some, but as for names, I don't have any specifically, let alone if they are any good.

Bruce Lynn · Answer

I looked at a few of their deals in Alabama early on in my syndication investments.  I never did invest with them.  See how those past deals went.   There are 1000s of syndicators, so don't feel like they're the only deal around.   Plenty of opportunities.

One thing that might be of concern to me today, as if I remember correctly they were out of Philly or Pittsburgh.   I just think it is vital to have some boots on the ground in the city where the investment property is, especially for smaller operators.  Not sure if they do or not.  Of course there have been plenty of deals that were successful without that requirement, but more and more I think it is really important to know the asset, know the area, know that deal.   They all look pretty in the presentation and everyone always says the projections are conservative, but then how many deals have gone bad?  From what I remember they seemed to be a fairly small outfit out of PA.  Many of the deals I've seen with problems are when the GP group was not local or wasn't really familiar with the local market.

Ask about capital calls and distributions on their current deals.

I have not always practiced this, but I think I will on future deals....no excuse you can't go visit the property before you buy in.  Go fly in for the day, or better yet spend a night.  Go sit in the parking lot to see when the PM shows up.  What kind of residents are there?   Is the property kept, or need a lot of work.  Is paint enough or is all the trim rotted?  People hanging outside?  Trash picked up?  Lawn mowed?  Pool blue or green? Go talk to the the current PM....ask them about property performance, asked about rent bumps on upgraded units, ask about the competition and go visit.  Check to see if there is new construction in the area that will hurt your rents during lease up.  Do your own due diligence and don't depend on a 20-30 minute Zoom pitch.

Good luck.  Let us know if you invest with them. Let us know in a year if you do and if the performance matches what is pitched.

Steven Rosenfeld · Answer

Bruce - thx very much for your feedback. My philosophy is similar to yours in that I prefer the GP to be local to the area they are investing in and have boots on the ground on an ongoing basis. Seems in the syndication world there are capital management companies that find the deals, do the marketing, and collect the capital, and then they partner with local operators that they may never have worked with before. The first syndicator I invested with was BAM Capital as they seemed to have a geographical base in the Indianapolis area. I'm looking for other syndicators similar to this but in the southeast. If you know of any I would greatly appreciate your input.

Chris Seveney · Answer

Looks like they are a public company so there should be plenty of historical information online about them.Penn Capital Short Duration High Income Fund | penncapital

Penn Capital - Syndicator - Feedback?

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