Ashcroft capital - Paused Distributions

[Evan Mitch]

Anyone else getting notified this morning of paused Ashcroft distributions due to refinancing issues? 

We have been working on refinancing the asset in order to access the equity and create liquidity to earnestly restart the renovations. The new lender we initially signed up with for the refinance notified us that they would not be able to provide the new loan at the agreed upon terms due to current market volatility.

We continue to pursue alternative refinancing options and anticipate having a new loan closed within the next six months. To remain conservative with liquidity and continue increasing NOI through unit renovations, we are pausing distributions beginning this month. Your preferred return will continue to accrue and will be paid at the next capital event, or when cash flow allows.

While distributions are on pause, we are not collecting its asset management fee and Birchstone Residential is collecting a reduced property management fee.

[Henry Clark]

Quote from @Todd Dexheimer:

Quote from @Henry Clark:

One of you Syndication GP's can help me understand.  Why do a Syndication, versus just do the deal by yourself.

Understand the basics:

1.  So, you can scale and do bigger deals.

2.  Reduce your risk by spreading the investment.

3.  Make money off of management.

4.  Even you get more juice from doing more deals faster.

But I don't see sharing the profits and having to answer to investors.  Would rather keep all of the profits and only answer to myself.  Would rather do 1 deal and make $1.3mm versus 3 syndication deals and make say $1.7mm.  We manage our risk, so Risk reduction isn't very valuable to us.

We do Self Storage and Country Subdivision lots only. Depending on if we do SBA 10% or commercial 25% downpayment, our Cash on Cash is different. Sometimes we will do 100% cash on a development, especially when the interest rates are high. We seek an 8 to 12 year payback. With a large upfront Value Add appraised value. Our returns differ whether we do a ground up development versus an existing business purchase. Expect either a 100% cash on cash or a 400% cash on cash over a 2 year period from the Value Add valuation. Not counting the annual NOI stream.

Beyond 1 thru 4 above, why are you doing a syndication? 

Are your numbers so great, which I can't see, or is your risk so low based on your terms?  I have never really looked behind the scenes on a Syndication, so can't answer those two last items.  Thanks.

 As a GP, if you do it correctly, you can make $1-$5mm+ off of a $50k+ investment. Plus you can make your LP investors a bunch of money as well. 

I'll give an example of a deal we did. I paid my investors their money, plus a 26% IRR on their investment. I received a $117,000 acquisition fee upfront, then $25k/year asset management fee, plus cash flow of about $15,000/year. Then 3 years later at the sale, I received $800k profit.

My underlying question is why didn’t you do the deal by yourself?  Keep all of the profits and not have to work with investors?  Again, forget the basics 1 thru 4 I noted above.  

[Nicholas L.]

I know not the point of this thread, but I get a lot out of both

@Calvin Thomas

and

@James Hamling

because:

-both of them know lots of things

-neither one is a cheerleader that tells every poster to "go for it!" no matter what harebrained negative nonsense they're proposing

OK everyone carry on

[James Hamling]

Quote from @Henry Clark:

Quote from @David M.:

@Henry Clark Well, part of it I think is "doing something I can't do..."  For example, I don't have the knowledge or deal flow to invest in Self Storage and Coutnry subdivision lots.  I don't have the time either.  But, if its something I want to invest in, this is one way to do it.  Also, you have the resources to do 1 of your own deals.  Not everybody does, or has insufficient resources to diversify.

Just another viewpoint...

Are you a GP?  Wondering from a GP standpoint on any type of REI type.  Thanks. 

To preface; I am nothing, NOTHING close to a @Todd Dexheimer, I am a "plankton" to his "Great Blue Whale" but here is my "why's": 

- CAPITAL BANDWIDTH or OPPORTUNITY COST.    Say I dig up a really good MFH value-add deal, it has a 9 month turn time, and I have the capital to do it but, it's going to devour my war-chest.     Now, I am locked into this 1 deal for 9 month's. Anything else that comes along, it's opportunity lost, because I have lost my ability to act.     If I "share the deal" yes I make less on that 1 deal, but I retain Bandwidth for more volume, to act upon more opportunities. It's a machine to dig up opportunities, similar to a freight train. It takes time and significant efforts to get it rolling, build the momentum that get's the job done. Stopping it, then restarting, take a lot of effort and time lost.     

- CAPITAL "KARMA":    Getting into a deal means OPM, knee-jerk thought is "the banks" OPM. But when we borrow from "the bank" what relationship is forged? Reality is banks have no loyalty. If I am borrowing $, paying a profit to lender, I would rather do that with/for people than "the bank" who is just a middle person, taking $ from the people, keeping 90% of the profits and giving a drip to the people. I say cut the bank out, forge people relationships and win-win's. Take care of the people, and untold good things come for us all. We bank ourselves, we keep our profits, Manhattan can figure itself out. 

- ITS PERSONAL:    I started in housing industry on my 15th birthday. (I think younger generation will have hard time wrapping head around this). Over the years and decades I worked my way through and up all things real estate until I wake up one in "the major leagues". And than family issues happen. My grandparents who spent everything EVERYTHING for us, working fingers to the bone on the farm, coming here with near to nothing but clothes on there backs, had 0 to retire upon. It enraged me. So, it's personal, for me. I care about PEOPLE. I care about the average person having financial freedom, and the everything that comes from that. It's personal for me in the battle of small biz vs corp biz, it's personal for me in the war for the middle class, it's personal for me in this fight for the family. I choose to become a "Ronin" for the people. I believe when we all do better, WE ALL DO BETTER. Most don't have the time, skill, bandwidth, energy or tools to do REI themself, but they may have capital, and together we can. Together we can achieve. Together we can "fire" Wall Street and the leaches sucking us dry, telling us there "too big to fail" and how we must support there elitist existence so we can be allowed our pittance in return. For me, it's personal....

Again, I am a "nothing-burger" in this GP/LP realm at this time, so maybe I'm just some tiny know nothing village idiot all jacked up on hopeium and ideals, IDK, but that's my "why's" of doing more than just being out for myself alone. 

[Henry Clark]

Quote from @James Hamling:

Quote from @Henry Clark:

Quote from @David M.:

@Henry Clark Well, part of it I think is "doing something I can't do..."  For example, I don't have the knowledge or deal flow to invest in Self Storage and Coutnry subdivision lots.  I don't have the time either.  But, if its something I want to invest in, this is one way to do it.  Also, you have the resources to do 1 of your own deals.  Not everybody does, or has insufficient resources to diversify.

Just another viewpoint...

Are you a GP?  Wondering from a GP standpoint on any type of REI type.  Thanks. 

To preface; I am nothing, NOTHING close to a @Todd Dexheimer, I am a "plankton" to his "Great Blue Whale" but here is my "why's": 

- CAPITAL BANDWIDTH or OPPORTUNITY COST.    Say I dig up a really good MFH value-add deal, it has a 9 month turn time, and I have the capital to do it but, it's going to devour my war-chest.     Now, I am locked into this 1 deal for 9 month's. Anything else that comes along, it's opportunity lost, because I have lost my ability to act.     If I "share the deal" yes I make less on that 1 deal, but I retain Bandwidth for more volume, to act upon more opportunities. It's a machine to dig up opportunities, similar to a freight train. It takes time and significant efforts to get it rolling, build the momentum that get's the job done. Stopping it, then restarting, take a lot of effort and time lost.     

- CAPITAL "KARMA":    Getting into a deal means OPM, knee-jerk thought is "the banks" OPM. But when we borrow from "the bank" what relationship is forged? Reality is banks have no loyalty. If I am borrowing $, paying a profit to lender, I would rather do that with/for people than "the bank" who is just a middle person, taking $ from the people, keeping 90% of the profits and giving a drip to the people. I say cut the bank out, forge people relationships and win-win's. Take care of the people, and untold good things come for us all. We bank ourselves, we keep our profits, Manhattan can figure itself out. 

- ITS PERSONAL:    I started in housing industry on my 15th birthday. (I think younger generation will have hard time wrapping head around this). Over the years and decades I worked my way through and up all things real estate until I wake up one in "the major leagues". And than family issues happen. My grandparents who spent everything EVERYTHING for us, working fingers to the bone on the farm, coming here with near to nothing but clothes on there backs, had 0 to retire upon. It enraged me. So, it's personal, for me. I care about PEOPLE. I care about the average person having financial freedom, and the everything that comes from that. It's personal for me in the battle of small biz vs corp biz, it's personal for me in the war for the middle class, it's personal for me in this fight for the family. I choose to become a "Ronin" for the people. I believe when we all do better, WE ALL DO BETTER. Most don't have the time, skill, bandwidth, energy or tools to do REI themself, but they may have capital, and together we can. Together we can achieve. Together we can "fire" Wall Street and the leaches sucking us dry, telling us there "too big to fail" and how we must support there elitist existence so we can be allowed our pittance in return. For me, it's personal....

Again, I am a "nothing-burger" in this GP/LP realm at this time, so maybe I'm just some tiny know nothing village idiot all jacked up on hopeium and ideals, IDK, but that's my "why's" of doing more than just being out for myself alone. 

Thanks for your view and input, @James Hamling.  Can remember personally $300, sack of clothes, box of books and a $100 flatbed pickup, I can understand starting small.  That was actually the happiest day of my financial life. Everything was up from there.

Deal creation is not a big effort for us the way we approach markets.  If we wanted to go do $60mm of developments or deals in one town, we can start the ball rolling very quickly.  Especially since we can take a bare piece of ground and add value.  Being on Bigger Pockets and helping people out has really opened my eyes to the market potential still available for Self-Storage.  

The banks are part of our team, community, friends and relative, so I'm okay having them take a bite.  All of our contractors and vendors are part of our team.  We don't go shopping for discounts or percentage points.  I can call any of them on a Sunday or late at night and they are happy to talk.

Still back to my GP question.  Why share with other investors?  Again, forget scaling, doing more deals, spreading risk.  I can, understand if we needed cash to get started.  But after the first deal if we sell it, we have more than enough cash to get rolling on our own.

Talking with investors and people is fine, by me.  Used to give financial updates to over 500 people every month.  But I would rather not have to report on the ups and downs of development.  Rather talk with just our banker.

The payout is so large, and the GP can dictate the size of deal they make, so why bring other investors in?  GP's???  $350k down/$1.1mm profit before taxes; $350k/$$1.7mm; $1mm/$1.2mm; $250k/$1.1mm.  2-year turnarounds, really 1 year, but an extra year to get Captial Gains tax treatment if you sale.  Why share?  Bankers supply the cash, Risk is minimal based on our market analysis- even with failure we make money; Investors don't bring and knowledge on resources to the mix.   The only times I have run across where I might bring in investors, if they own the ground and won't sell outright or the GP was also the General Contractor and made additional profit.

I am starting to think there are no GP's on Bigger Pockets. To busy making money.

@James Hamlingundefined

[Melanie P.]

@Henry Clark The GPs make the bulk of their money from fees. Fees charged in every aspect of their business operations allows them to make an outsize return on the backs of their LPs.

[Henry Clark]

Quote from @Melanie P.:

@Henry Clark The GPs make the bulk of their money from fees. Fees charged in every aspect of their business operations allows them to make an outsize return on the backs of their LPs.

 Thanks for the look behind the scenes.  I think my biggest misunderstanding is comparing developing Self Storage/Subdivision lots/Flex buildings versus MFH development or acquisition. 

[Carlos Ptriawan]

Quote from @Melanie P.:

@Henry Clark The GPs make the bulk of their money from fees. Fees charged in every aspect of their business operations allows them to make an outsize return on the backs of their LPs.

 there's a joke in twitter feed how one GP is charging liquidation fee when the project going foreclosure while at the same time they open a new offering.

[Carlos Ptriawan]

Quote from @Henry Clark:

Quote from @Melanie P.:

@Henry Clark The GPs make the bulk of their money from fees. Fees charged in every aspect of their business operations allows them to make an outsize return on the backs of their LPs.

 Thanks for the look behind the scenes.  I think my biggest misunderstanding is comparing developing Self Storage/Subdivision lots/Flex buildings versus MFH development or acquisition. 

 Henry you are the real one.

In GP's community, maybe "9 percent" is real. The rest is just like what Melanie described.

Btw one office was sold with 87% discount yesterday :) LOL

[Melanie P.]

Quote from @Carlos Ptriawan:

Quote from @Melanie P.:

@Henry Clark The GPs make the bulk of their money from fees. Fees charged in every aspect of their business operations allows them to make an outsize return on the backs of their LPs.

 there's a joke in twitter feed how one GP is charging liquidation fee when the project going foreclosure while at the same time they open a new offering.

Naturally this is the level of concern they have for people they get to invest over the telephone. Glengarry Glen Ross, Boiler Room, Wolf of Wall Street. In their minds it's "their money" once they talk you out of it. And if they can't get you for more money down the line or get you to reference for others burning someone they've never met is an easy decision. It's funny because it's probably true.

This is not to say that there aren't great deals out there, there are. Great deals don't require telemarketers. They don't need ads on Google and Facebook. They need a private placement memorandum, partnership agreement and subscription agreement. And you already know the ten or fifteen people in your network who will close out your offer in the first week.

My big issue with syndicators today is that they don't point their marketing toward sophisticated investors who understand the risks and fees involved. They troll for people just striking out in their investing journey. People looking for safe, income producing investments, with tax benefits. Why do you think so many of them are on here all day? They post conversation starters and troll for victims who are trying to learn how to get into real estate and take them for the ride of their life. If the SEC would audit one of these broker dealers to determine the suitability of their individual investors the number would be close to zero. Nobody with world experience would touch these guys with a barge pole. I wish we could get them out of the Apartment investing forum. 

[Carlos Ptriawan]

Quote from @Melanie P.:

Quote from @Carlos Ptriawan:

Quote from @Melanie P.:

@Henry Clark The GPs make the bulk of their money from fees. Fees charged in every aspect of their business operations allows them to make an outsize return on the backs of their LPs.

 there's a joke in twitter feed how one GP is charging liquidation fee when the project going foreclosure while at the same time they open a new offering.

Naturally this is the level of concern they have for people they get to invest over the telephone. Glengarry Glen Ross, Boiler Room, Wolf of Wall Street. In their minds it's "their money" once they talk you out of it. And if they can't get you for more money down the line or get you to reference for others burning someone they've never met is an easy decision. It's funny because it's probably true.

This is not to say that there aren't great deals out there, there are. Great deals don't require telemarketers. They don't need ads on Google and Facebook. They need a private placement memorandum, partnership agreement and subscription agreement. And you already know the ten or fifteen people in your network who will close out your offer in the first week.

My big issue with syndicators today is that they don't point their marketing toward sophisticated investors who understand the risks and fees involved. They troll for people just striking out in their investing journey. People looking for safe, income producing investments, with tax benefits. Why do you think so many of them are on here all day? They post conversation starters and troll for victims who are trying to learn how to get into real estate and take them for the ride of their life. If the SEC would audit one of these broker dealers to determine the suitability of their individual investors the number would be close to zero. Nobody with world experience would touch these guys with a barge pole. I wish we could get them out of the Apartment investing forum. 

 in our alumni investment group we called them "Biggerpocket-level GP" that's targeting newbie in BP.

And yes non-BP GP level usually don't have marketing team as they are the one that's being chased.

[Joel Owens]

It's all about what kind of life you want and what kind of risk you want to take with your investments.

Someone can be worth 50 million or 1 billion the number does not matter as much as are they living the life they want and happy?

I say this because some syndicators sometimes like to take money from non-accredited investors and newly accredited investors. Those types of investors statistically can be more highly manipulated. They get sucked in by promises of high returns.

Alot of it is bullsh*t and theory. In NNN for example a weak tenant could put out a 9 cap and sign a lease for 15 years. If they go out in 2 years then did you get the 9 cap? You sure didn't. You got a lot of re-leasing and other costs for money losers.

Some syndicators are nothing more than glorified property managers disguised as GP's praying some of the deals work out and limp along.

The newer accredited investors tend to get sucked in by the pref and do not study the deal as much. They want that money working day 1.

Many of my investors making millions per year or higher at their job or business are more concerned about safety of the investment and the hassle factor ( variables in a syndicators pro-forma that could go wrong and the returns could not materialize like they hoped ).

Someone mentioned office. Personally can't stand regular office I do not care how cheap it is UNLESS it is sitting on valuable land and I figure in existing building demo costs to re-adapt the dirt to a higher and better use than it becomes appealing. Years and decades of your life you never get back. Even if someone makes 5 million but it took away time wise one of the best decades of your life was it worth it? Not to me.

I see the care free go lucky hippie types that just chill all week. My massage guy is one of them. Little money but he has a great time and makes the most of experiences. Then on the other end of spectrum I see the work aholics with their 60 hour or more weeks with money and migraines but little to no fun in life.

Then there is that tiny percentage that has the secret sauce where they work so many hours and cap it but also make a lot of money and get the most enjoyment out of everyday. Now someone could say they enjoy working so they find joy in working 70hr weeks. To that I would counter that THEY might enjoy that but not their family, friends, their health etc. would all suffer.

Everyone's life and personal journey is different. I actually find it interesting to study other people and see how they think, what they value, and why.

As a syndicator myself I would rather do 10 great deals a year than 17 and have 4 be duds, 9 okay, and 4 huge winners. You just create a lot of busy work and drama in the name of scale. I don't care who the syndication group is nobody likely anticipated a 300 basis point hike in rates so fast that went up like a rocket. Everyone in life has adversity it's how you handle and respond to it that matters.  

[Vlad B.]

Quote from @Joel Owens:

It's all about what kind of life you want and what kind of risk you want to take with your investments.

Someone can be worth 50 million or 1 billion the number does not matter as much as are they living the life they want and happy?

I say this because some syndicators sometimes like to take money from non-accredited investors and newly accredited investors. Those types of investors statistically can be more highly manipulated. They get sucked in by promises of high returns.

Alot of it is bullsh*t and theory. In NNN for example a weak tenant could put out a 9 cap and sign a lease for 15 years. If they go out in 2 years then did you get the 9 cap? You sure didn't. You got a lot of re-leasing and other costs for money losers.

Some syndicators are nothing more than glorified property managers disguised as GP's praying some of the deals work out and limp along.

The newer accredited investors tend to get sucked in by the pref and do not study the deal as much. They want that money working day 1.

Many of my investors making millions per year or higher at their job or business are more concerned about safety of the investment and the hassle factor ( variables in a syndicators pro-forma that could go wrong and the returns could not materialize like they hoped ).

Someone mentioned office. Personally can't stand regular office I do not care how cheap it is UNLESS it is sitting on valuable land and I figure in existing building demo costs to re-adapt the dirt to a higher and better use than it becomes appealing. Years and decades of your life you never get back. Even if someone makes 5 million but it took away time wise one of the best decades of your life was it worth it? Not to me.

I see the care free go lucky hippie types that just chill all week. My massage guy is one of them. Little money but he has a great time and makes the most of experiences. Then on the other end of spectrum I see the work aholics with their 60 hour or more weeks with money and migraines but little to no fun in life.

Then there is that tiny percentage that has the secret sauce where they work so many hours and cap it but also make a lot of money and get the most enjoyment out of everyday. Now someone could say they enjoy working so they find joy in working 70hr weeks. To that I would counter that THEY might enjoy that but not their family, friends, their health etc. would all suffer.

Everyone's life and personal journey is different. I actually find it interesting to study other people and see how they think, what they value, and why.

As a syndicator myself I would rather do 10 great deals a year than 17 and have 4 be duds, 9 okay, and 4 huge winners. You just create a lot of busy work and drama in the name of scale. I don't care who the syndication group is nobody likely anticipated a 300 basis point hike in rates so fast that went up like a rocket. Everyone in life has adversity it's how you handle and respond to it that matters.  

Bolded the last point. Other end of the spectrum are Syndicator deals available now that are buying MFH at a low cost should balance out your portfolio. 

Buying, managing yourself or a PM, turns, evictions, etc = stress
Buying a syndication deal that you have no control over = stress

However, can your portfolio benefit from having some owned units and some syndicated units?

[Melanie P.]

Quote from @Joel Owens:

It's all about what kind of life you want and what kind of risk you want to take with your investments.

Someone can be worth 50 million or 1 billion the number does not matter as much as are they living the life they want and happy?

I say this because some syndicators sometimes like to take money from non-accredited investors and newly accredited investors. Those types of investors statistically can be more highly manipulated. They get sucked in by promises of high returns.

Alot of it is bullsh*t and theory. In NNN for example a weak tenant could put out a 9 cap and sign a lease for 15 years. If they go out in 2 years then did you get the 9 cap? You sure didn't. You got a lot of re-leasing and other costs for money losers.

Some syndicators are nothing more than glorified property managers disguised as GP's praying some of the deals work out and limp along.

The newer accredited investors tend to get sucked in by the pref and do not study the deal as much. They want that money working day 1.

Many of my investors making millions per year or higher at their job or business are more concerned about safety of the investment and the hassle factor ( variables in a syndicators pro-forma that could go wrong and the returns could not materialize like they hoped ).

Someone mentioned office. Personally can't stand regular office I do not care how cheap it is UNLESS it is sitting on valuable land and I figure in existing building demo costs to re-adapt the dirt to a higher and better use than it becomes appealing. Years and decades of your life you never get back. Even if someone makes 5 million but it took away time wise one of the best decades of your life was it worth it? Not to me.

I see the care free go lucky hippie types that just chill all week. My massage guy is one of them. Little money but he has a great time and makes the most of experiences. Then on the other end of spectrum I see the work aholics with their 60 hour or more weeks with money and migraines but little to no fun in life.

Then there is that tiny percentage that has the secret sauce where they work so many hours and cap it but also make a lot of money and get the most enjoyment out of everyday. Now someone could say they enjoy working so they find joy in working 70hr weeks. To that I would counter that THEY might enjoy that but not their family, friends, their health etc. would all suffer.

Everyone's life and personal journey is different. I actually find it interesting to study other people and see how they think, what they value, and why.

As a syndicator myself I would rather do 10 great deals a year than 17 and have 4 be duds, 9 okay, and 4 huge winners. You just create a lot of busy work and drama in the name of scale. I don't care who the syndication group is nobody likely anticipated a 300 basis point hike in rates so fast that went up like a rocket. Everyone in life has adversity it's how you handle and respond to it that matters.  

 Just curious... what do the duds look like to your LPs? How much, if any, of their original principal did they receive back?

[Joel Owens]

There are no absolutes to investing. No investment comes without risk. Nothing is guaranteed.

My current syndications have not lost money. On our value add side the goal is to try and double the initial investment within a 3 year hold period. Sometimes with single tenant on lease up we decide to sell the property to an end user or a developer rather than hold long term if we do not land the tenant strength and terms we want for the lease.

I call it my (90 day initial review period). We usually talk to about 2 to 3 leasing brokers before we purchase a property. After that we monitor interest over a 90 day period and decide what we want to do. If you take doubling money and divide it by 36 months then if we exited in 3 or 6 months time on our value add we try to hit what that would have been had we held for 3 years. Example 100/36 months or 3 years roughly equals about a 2.78% average return per month.

Now our core plus syndication for NNN is tenants already in with place with leases so that is a different model more long term holds. Our accredited investors could invest in both value add and core plus and blend their portfolio returns. I am more selective on deals I syndicate and more about quality than doing volume.

[Paul Azad]

I know a retail syndicator who takes a percentage of the property (15% about) on every deal as their interest/payment up front, they then buy an additional 10% with their own money so they have 25% skin in the game of the properties, They take no fees, no acquisition/disposal/asset management, no cash split, no preferred distributions etc, but their property management company does manage the property for the 10 years of the loan, for about 3% fee which is less than the big CBRE/JLL etcs charge i think, usually 5-6%. They are the general partner but get the same exact distribution every month and profit at end that any of the limited partners receive per percent ownership.  This style approach seems to be a better alignment of interests than what many other syndicators do which makes for very conservative underwriting. The limited partners have been very happy and keep investing in other projects w this syndicator since 1990's. They do syndication model and not buy whole projects themself to acquire larger projects beyond their own capital reserves and thus have grown faster than doing by themself. 

I know a Multi-family syndicator who uses the typical model with fees/preferred distribution w a cap/profit splits etc and he took way too much risk in his analysis/underwriting and has lost multiple large >60 unit properties this year, but he had no ownership or skin in the game, so his investors lost everything and one told me she may also have a tax due even though she lost all her investment over a couple of years, her accountant is working on that.  hope most people don't get burned too bad over next few years with real estate values going down and high rates

[Joel Owens]

I think it depends if they need to live on the fees or not. I make millions per year as a commercial broker. So I can go into a syndication deal as a GP with wanting to find the best deals.

So skin in the game is not always a predictor of success. Someone could be venturing into something with some money to put into a deal as a GP and lose all their money too because they have little to no experience.

You pay for experience. Experience tends to come with less risk unless the syndicator is not above board and just wants to scale at all costs.

Syndicators all have different models. You have to look at their track record and level of experience and then decide if you want to invest and how much.

I have potential clients on the broker side I say NO to all the time that we are not a fit. The minute you start trying to be everything to everyone in the name of scale you lose your vision quest and what you want out of life. That is with anything in life not just investing.

[Paul Azad]

"Syndicators all have different models. You have to look at their track record and level of experience and then decide if you want to invest and how much."         True Joel, but like pulling teeth to get Syndicators to show you their track record, ie actual total returns with breakdowns of distributions + capital appreciation + principal paydown etc, and SEC so loosely governs Real Estate that it's the only investment category that doesn't require standardized return metrics like the 30=day SEC yield on any fixed income product is mandatory, or audited GAAP accounting standards on finacials from public stocks/Reits etc 

Real estate seems to be still a bit more un-regulated "Wild Wild West" than other parts of the investment economy, but i guess hence the much better returns i've had in real estate, risk = rewards

[Chris Seveney]

Quote from @Paul Azad:

"Syndicators all have different models. You have to look at their track record and level of experience and then decide if you want to invest and how much."         True Joel, but like pulling teeth to get Syndicators to show you their track record, ie actual total returns with breakdowns of distributions + capital appreciation + principal paydown etc, and SEC so loosely governs Real Estate that it's the only investment category that doesn't require standardized return metrics like the 30=day SEC yield on any fixed income product is mandatory, or audited GAAP accounting standards on finacials from public stocks/Reits etc 

Real estate seems to be still a bit more un-regulated "Wild Wild West" than other parts of the investment economy, but i guess hence the much better returns i've had in real estate, risk = rewards

 This is why the good sponsors get have audited financials and have a third party verify their track record. It cost me like under $5k per fund to have the track record verified by an independent 3rd party. We also get audited financials. the issue is most syndications want to be like the big boy larger private and public companies but do not want to spend the money to do so. I can also see why as most investors do not care - all they look at is  "oh this company says I will get 18% return" and you only provide X without understanding the risk they are taking or getting themselves into. Ask an investor what the capital stack is on what they invested in and where they are at and 99% of them would have no clue.

[Paul Azad]

Chris, agreed, investors need to do far more due diligence. I have many friends who just invest on "word of mouth" or "projected IRR of X%"

Folks should have more  Caveat Emptor in 'em

[Carlos Ptriawan]

Quote from @Joel Owens:

I think it depends if they need to live on the fees or not. I make millions per year as a commercial broker. So I can go into a syndication deal as a GP with wanting to find the best deals.

So skin in the game is not always a predictor of success. Someone could be venturing into something with some money to put into a deal as a GP and lose all their money too because they have little to no experience.

You pay for experience. Experience tends to come with less risk unless the syndicator is not above board and just wants to scale at all costs.

Syndicators all have different models. You have to look at their track record and level of experience and then decide if you want to invest and how much.

I have potential clients on the broker side I say NO to all the time that we are not a fit. The minute you start trying to be everything to everyone in the name of scale you lose your vision quest and what you want out of life. That is with anything in life not just investing.

most accredited investors are dumb in investment.

but so does fund manager LOL

who is smarter ? the GP of course.

thing is just because investor is accredited and have sizeable networth doesn't mean he/she smarter than high school top grades. Someone like me that learnt macro economic from my first Econ class knows that any rate hike would would jeopardize most commercial ground up development but most AI doesn't understand that basic concept. This is why I also tired with offering of "Super Fund", "Fund of Fund" or "SPV investment" because at the end of the day most investment doesn't align to each other risk/reward profile.  

truly doing proper DD is almost impossible for investor that's not in real estate / finance background. But talking to group of AI group sometimes doesn't help too because they've strong ego as well (as they're succesful in life through different means). 

And why I said fund manager is dumb ?
just look at these PIMCO that lost money left and right .....  or what happen to VC that buy and destroy wework.

Thing is when we manage other people money, we become reckless. Hence real investor invest directly at beginning LOL

[Carlos Ptriawan]

Quote from @Paul Azad:

Chris, agreed, investors need to do far more due diligence. I have many friends who just invest on "word of mouth" or "projected IRR of X%"

Folks should have more  Caveat Emptor in 'em

 it's just almost impossible in practice, we have to outsource OR pay for someone to do due diligence that's what I've been thinking

[John Teachout]

Lots of Monday morning quarterbacks in this thread. Some have no idea what they're talking about. Returning to the original post, we are invested in Ashcroft Value Add Fund #2. They did stop distributions some months ago. They recently sent out an update indicating it was unlikely there would be any distributions in 2024 and likely not in 2025 until a capital event takes place (re-fi or sale)  We are involved in other syndications and most of them have paused distributions. One recently restarted distributions and one fund we're in never stopped. That said, we're currently investing in a new syndicated fund (new build apartments) and are optimistic it will perform as expected.

[Paul Azad]

John are you only invested in Multi-Family syndications or other classes like office/retail/self-storage/mobile-home/industrial etc? and if so are those classes having distribution suspensions as well?

[Chris Seveney]

Quote from @Carlos Ptriawan:

Quote from @Paul Azad:

Chris, agreed, investors need to do far more due diligence. I have many friends who just invest on "word of mouth" or "projected IRR of X%"

Folks should have more  Caveat Emptor in 'em

 it's just almost impossible in practice, we have to outsource OR pay for someone to do due diligence that's what I've been thinking

 Whats crazy is most of the time you DO NOT have to pay. There are a lot of broker-dealers who work in the real estate space and will do the due diligence for you and recommend several offerings. They get paid by the sponsors. Now someone may think well the broker-dealer is in bed with the sponsor. Well not really because if the deal goes bad the B-D will get a bad rap and they make their living that way, so they do not want to back a slow race horse.

[Jay Hinrichs]

Quote from @John Teachout:

Lots of Monday morning quarterbacks in this thread. Some have no idea what they're talking about. Returning to the original post, we are invested in Ashcroft Value Add Fund #2. They did stop distributions some months ago. They recently sent out an update indicating it was unlikely there would be any distributions in 2024 and likely not in 2025 until a capital event takes place (re-fi or sale)  We are involved in other syndications and most of them have paused distributions. One recently restarted distributions and one fund we're in never stopped. That said, we're currently investing in a new syndicated fund (new build apartments) and are optimistic it will perform as expected.

John,
Out of sheer curiosity why all of a sudden all these projects we are now hearing about distributions stopping when they were ginning along just fine for a few years or many years.. they all could not have had an adjustable rate loan that adjusted basically at the same time.. I mean renters are still paying right .. OR are these MF all of a sudden having vacancy issues.. I get that some of them might have 5 year notes coming due and they were never underwritten for interest rates rising at all or as much as they have .  Your thoughts or the reasons behind this that the GP s might have imparted on you ?