Ashcroft capital - Paused Distributions
Member since 2020 · 9 posts · 8 votes
Ashcroft capital - Paused Distributions
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Melanie P.Pro Member
Rental Property Investor · Member since 2023 · 1k+ posts · 922 votesI guess there are about 20 suckers born every minute. Every one of you in this is an accredited investor, right? A two-second glance at their materials reveals that when they distribute funds from a property sale one of the categories is: unpaid distributions. This has been the plan since the start.
Investing in real estate is not that hard. I can't imagine what would make anyone put their money into one of these things. Pure laziness I guess. TBills are paying over 5% if you need lazy guys. No need for this nonsense.
248 Replies
- Investor · Austin, TX · Member since 2021 · 83 posts · 80 votes2y
I know a few syndicators who are the "legit, real-deal". Although I'd bet for every 1 legit real-deal, there is no less than 100 if not 1000 who are just like you said, another CEO stacking there cash and if it crashes and burns, oh-well, onto the next.
And yes, that's exactly how $ is set-up for many if not most. Most syndicators will NOT get financially ruined by an investment going to 0. For most they just loose the profit potential, it's the LP's who are generally holding all the $ risk. Via various smoke and mirror tactic's it's readily made to look like a GP has a bunch of $ on the line, but it's rarely the case. That's generally fee's of some form or fashion used in a manner that views as invested capital.
So yeah, how you said. No consequence.
Again, Traders who got into Real Estate. WS was too slow or boring so RE is hot, rinse and repeat in RE what they do in WS. That sums up a great # of syndicators today.
And the good few syndicators I know, are just waiting for them to implode and swoop in with offers cent's on the dollar.
@Carlos Ptriawan who do you consider those 1% syndicators that are legit? Thanks
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Pretty Khare:
I know a few syndicators who are the "legit, real-deal". Although I'd bet for every 1 legit real-deal, there is no less than 100 if not 1000 who are just like you said, another CEO stacking there cash and if it crashes and burns, oh-well, onto the next.
And yes, that's exactly how $ is set-up for many if not most. Most syndicators will NOT get financially ruined by an investment going to 0. For most they just loose the profit potential, it's the LP's who are generally holding all the $ risk. Via various smoke and mirror tactic's it's readily made to look like a GP has a bunch of $ on the line, but it's rarely the case. That's generally fee's of some form or fashion used in a manner that views as invested capital.
So yeah, how you said. No consequence.
Again, Traders who got into Real Estate. WS was too slow or boring so RE is hot, rinse and repeat in RE what they do in WS. That sums up a great # of syndicators today.
And the good few syndicators I know, are just waiting for them to implode and swoop in with offers cent's on the dollar.
@Carlos Ptriawan who do you consider those 1% syndicators that are legit? Thanks
They are all legit but most are dumb if not too say irresponsible suicidal type cowboy
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes2y
Quote from @Carlos Ptriawan:
Quote from @Pretty Khare:
I know a few syndicators who are the "legit, real-deal". Although I'd bet for every 1 legit real-deal, there is no less than 100 if not 1000 who are just like you said, another CEO stacking there cash and if it crashes and burns, oh-well, onto the next.
And yes, that's exactly how $ is set-up for many if not most. Most syndicators will NOT get financially ruined by an investment going to 0. For most they just loose the profit potential, it's the LP's who are generally holding all the $ risk. Via various smoke and mirror tactic's it's readily made to look like a GP has a bunch of $ on the line, but it's rarely the case. That's generally fee's of some form or fashion used in a manner that views as invested capital.
So yeah, how you said. No consequence.
Again, Traders who got into Real Estate. WS was too slow or boring so RE is hot, rinse and repeat in RE what they do in WS. That sums up a great # of syndicators today.
And the good few syndicators I know, are just waiting for them to implode and swoop in with offers cent's on the dollar.
@Carlos Ptriawan who do you consider those 1% syndicators that are legit? Thanks
They are all legit but most are dumb if not too say irresponsible suicidal type cowboy
I was going to say, most funds and syndications are legit, and what I mean by that is they are not running a ponzi scheme / stealing money etc. Just because they are legit does not mean they will be successful. I know many restaurants and other business ventures where people work really hard and are looking out for investors best interest but they may not have the knowledge, skillset or may have bad luck. Just because a deal goes bad does not mean its fraud. I think that is where too many people lean towards. Good companies have problems.
Note: This post is not meant to support or discredit any of the funds/syndications mentioned in this post.
7e investments53 Reviews - Member since 2019 · 7k+ posts · 4k+ votes2yYes
Quote from @Chris Seveney:
Quote from @Carlos Ptriawan:
Quote from @Pretty Khare:
I know a few syndicators who are the "legit, real-deal". Although I'd bet for every 1 legit real-deal, there is no less than 100 if not 1000 who are just like you said, another CEO stacking there cash and if it crashes and burns, oh-well, onto the next.
And yes, that's exactly how $ is set-up for many if not most. Most syndicators will NOT get financially ruined by an investment going to 0. For most they just loose the profit potential, it's the LP's who are generally holding all the $ risk. Via various smoke and mirror tactic's it's readily made to look like a GP has a bunch of $ on the line, but it's rarely the case. That's generally fee's of some form or fashion used in a manner that views as invested capital.
So yeah, how you said. No consequence.
Again, Traders who got into Real Estate. WS was too slow or boring so RE is hot, rinse and repeat in RE what they do in WS. That sums up a great # of syndicators today.
And the good few syndicators I know, are just waiting for them to implode and swoop in with offers cent's on the dollar.
@Carlos Ptriawan who do you consider those 1% syndicators that are legit? Thanks
They are all legit but most are dumb if not too say irresponsible suicidal type cowboy
I was going to say, most funds and syndications are legit, and what I mean by that is they are not running a ponzi scheme / stealing money etc. Just because they are legit does not mean they will be successful. I know many restaurants and other business ventures where people work really hard and are looking out for investors best interest but they may not have the knowledge, skillset or may have bad luck. Just because a deal goes bad does not mean its fraud. I think that is where too many people lean towards. Good companies have problems.
Note: This post is not meant to support or discredit any of the funds/syndications mentioned in this post.
What newbie doesn’t understand is risk/reward ratio and market risk.
in any syndication, GP risk/reward is always way way favoring the GP, GP almost has no risk even if the asset defaulted , while LP has more probability of receiving default risk and limited upside.In term of market risk, LP needs to understand the boom bust cycle especially when it does happen in 2023/2024, wait until at least all the turbulence is gone and restart investing , watch carefully each T12 line , examine DSCR, market rent and especially upcoming supply in the market, watch competition. Don't fall into marketing hype.
I can always invest in DSCR 1.8 asset why I need to invest at lousy 0.9 DSCR. There lot of professional and good syndicators out there and most of the times they don't need new investor. we can also invest in different asset class that's shielded from the turbulent of reduced rent or Fed rate changes.
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Carlos Ptriawan:
YesQuote from @Chris Seveney:
Quote from @Carlos Ptriawan:
Quote from @Pretty Khare:
I know a few syndicators who are the "legit, real-deal". Although I'd bet for every 1 legit real-deal, there is no less than 100 if not 1000 who are just like you said, another CEO stacking there cash and if it crashes and burns, oh-well, onto the next.
And yes, that's exactly how $ is set-up for many if not most. Most syndicators will NOT get financially ruined by an investment going to 0. For most they just loose the profit potential, it's the LP's who are generally holding all the $ risk. Via various smoke and mirror tactic's it's readily made to look like a GP has a bunch of $ on the line, but it's rarely the case. That's generally fee's of some form or fashion used in a manner that views as invested capital.
So yeah, how you said. No consequence.
Again, Traders who got into Real Estate. WS was too slow or boring so RE is hot, rinse and repeat in RE what they do in WS. That sums up a great # of syndicators today.
And the good few syndicators I know, are just waiting for them to implode and swoop in with offers cent's on the dollar.
@Carlos Ptriawan who do you consider those 1% syndicators that are legit? Thanks
They are all legit but most are dumb if not too say irresponsible suicidal type cowboy
I was going to say, most funds and syndications are legit, and what I mean by that is they are not running a ponzi scheme / stealing money etc. Just because they are legit does not mean they will be successful. I know many restaurants and other business ventures where people work really hard and are looking out for investors best interest but they may not have the knowledge, skillset or may have bad luck. Just because a deal goes bad does not mean its fraud. I think that is where too many people lean towards. Good companies have problems.
Note: This post is not meant to support or discredit any of the funds/syndications mentioned in this post.
What newbie doesn’t understand is risk/reward ratio and market risk.
in any syndication, GP risk/reward is always way way favoring the GP, GP almost has no risk even if the asset defaulted , while LP has more probability of receiving default risk and limited upside.In term of market risk, LP needs to understand the boom bust cycle especially when it does happen in 2023/2024, wait until at least all the turbulence is gone and restart investing , watch carefully each T12 line , examine DSCR, market rent and especially upcoming supply in the market, watch competition. Don't fall into marketing hype.
I can always invest in DSCR 1.8 asset why I need to invest at lousy 0.9 DSCR. There lot of professional and good syndicators out there and most of the times they don't need new investor. we can also invest in different asset class that's shielded from the turbulent of reduced rent or Fed rate changes.
Also , Bill Ackman one of the best hedge fund manager, all these folks keep mention that to invest one should find asset that has asymmetrical risk ratio , meaning the probability of you making profit is greater than making a loss.
all these folks along with the Fed essentially shorting the bond market and do not buy MBS, so why in the world I have to invest at syndication when everyone is shorting against us ? When they short bond they are essentially trying to bankrupt the GP/LP.
- Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes2y
AWESOME picks....start with Dalio. I certainly would not have thought about that, but working thru some of his essays now. For me at least they require concentration and thought and time to digest. Also rereading Ravi Batra's The Great Depression of 1990, just wanted a paperback for the plane ride and it is amazing how much of it is relevant to today's economy.
- Member since 2019 · 7k+ posts · 4k+ votes2y
Yes, in any interest rate abrupt changes, any leveraged loan including short term loan would have massive valuation changes to underlying asset, this is very basic principle.
The extremely very reason why residential is going up even during high interest rate like today is because the availability of 30 years long term fixed-rate debt and the note is guaranteed by the goverment. In other country, residential usually has variable loan and guaranteed by private, hence the asset valuation could fall because supply-demand dynamic is more sentitive to interest rate changes.
What's the dumbest idea that has been teached for us for so long is that direct ownership is more like active investment while syndication is passive. It is totally the other way around. Becaue direct ownership we could have control with fixed rate debt that's guaranteed by gov, our asset would usually flat or going up/stable, since it's controllable it's more like 'passive'. single family residential is not valued by the movement of cap rate, but it's valued by the real market supply-demand metrics.in all my direct asset everything is going up with scale of 20-40% IRR, so all these naives LP investors are just being fooled so much by the most teaching in real estate and they're not unable to decipher whether what they learnt is accurate or not. Equity Syndication is very very far from being passive.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2y
Quote from @Carlos Ptriawan:
Yes, in any interest rate abrupt changes, any leveraged loan including short term loan would have massive valuation changes to underlying asset, this is very basic principle.
The extremely very reason why residential is going up even during high interest rate like today is because the availability of 30 years long term fixed-rate debt and the note is guaranteed by the goverment. In other country, residential usually has variable loan and guaranteed by private, hence the asset valuation could fall because supply-demand dynamic is more sentitive to interest rate changes.
What's the dumbest idea that has been teached for us for so long is that direct ownership is more like active investment while syndication is passive. It is totally the other way around. Becaue direct ownership we could have control with fixed rate debt that's guaranteed by gov, our asset would usually flat or going up/stable, since it's controllable it's more like 'passive'. single family residential is not valued by the movement of cap rate, but it's valued by the real market supply-demand metrics.in all my direct asset everything is going up with scale of 20-40% IRR, so all these naives LP investors are just being fooled so much by the most teaching in real estate and they're not unable to decipher whether what they learnt is accurate or not. Equity Syndication is very very far from being passive.
I think I get where your going from, but seems to be a bit muddled here, for most to immediately grasp I think.
In Single Family Residence, which is predominantly transacted by those for personally occupying, right. Market price to acquire said residence follows a math output from; demand vs supply (this pushes price variations up or down from the "basis"), and Cost To Acquire.
NOW, with the lending mechanisms what they are in the U.S. a homes selling price is NOT it's cost to acquire, is it? No. It's cost to acquire is closing cost's, down payment, the cash at closing AND monthly cost's going froward.
The U.S. residential housing market is a BUDGET not whole-$ based market, in generality. A budget based market with a whole-$ impactor.
What I think Carlos is saying is if U.S. didn't have this mortgage mechanism as it is, say one where "average" mortgage was 15yr at longest, market price would be vastly different.
And YES, it would, but it is the same market, a BUDGET based market. Because the consumers are using the same exact #'s for there actions right, $2k per month in "affordability" is still $2k per month. What changes is how much $2k per month BUYS IN WHOLE $'s based upon term's offered for the acquisition.
That IS the U.S. residential housing market. That's why as rates shot up, volume dropped. Demand/supply curve impact's this BUT it does not over-ride this, demand/supply impact variations, amplitude to the changes. We have HUGE demand with miniscule supply, hence amplitude is at 150% UP, but, one a diminished affordability metric.
Now, COMMERCIAL, which is vast majority of syndication market, is completely different market.
In Commercial, the "basis" is on revenues. First variant factor for valuation is conversion factor of gross to net revenues, both in current realized and potential. Value-add investing is exactly this, acquiring based on a profitable margin between realized and potential revenues and there conversion rate from gross to net.
The LAST factor in pricing variation, which we saw the last few years in greater weight than ever in my life-time is OPPORTUNITY COST. That is, the price to gain the "opportunity" which is to say, just to get "A" place vs not get one. This, generally, is a minimal variant but in recent years with seemingly everyone and there cousin jumping into the space it actually started tacking on some crazy $$$$. This is why smart syndicators took a step back from acquisitions during such.
Now, as you see a BIG factor is how gross revenues translate into NET revenues, rent's paid converting to profit's in pocket, cost of $ has big impact when cost of $ has big changes.
In this regard, I don't see any difference between the two segment's. Both are with pricing market's that stem from a funding foundation, making both BUDGET market's for prices.
Each exist as they are today, including in pricing, solely thanks to the TERMS of financing, because price on both is all but universally based upon BUDGET for acquisition and not whole-$ of acquisition.
What does a whole-$ acquisition market look like? Well, closest most relevant look we have to such in '09'. When mortgage financing melted down and such was scarce at best, what happened?
For this fact I see 0-risk of such diminished term's anywhere on horizon because the fall-out would cataclysmic. What's all but certain is enhanced, extended terms, ever growing. Normalization of 40yr than 50yr residential mortgage. Followed with similar extensions of terms in commercial.
And as the math clearly shows, when "grow" the terms, so does price follow.
This is my personal translation of "You will own nothing, and be happy". Normalized term's of such where all "feel" they "own" ______, but in reality all are just the banks tenant's. And, the BEST tenant's to boot, tenant's who cover ALL cost's, all maintenance, all repairs, everything, with 0 tenant right's what so ever. Why would they ever confiscate property right's to then take on liability of landlord to rent to all when they can make us all tenant's via LENDING terms.
It's brilliant, it is. Credit where credit is due. People WOULD applaud a 50 even 60yr mortgage ear-2-ear grin's saying they now "own" a home, lol. No, the bank own's it and allows you to use it.
This is the future we are living NOW, we are frog's in a pot.
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @James Hamling:
Quote from @Carlos Ptriawan:
Yes, in any interest rate abrupt changes, any leveraged loan including short term loan would have massive valuation changes to underlying asset, this is very basic principle.
The extremely very reason why residential is going up even during high interest rate like today is because the availability of 30 years long term fixed-rate debt and the note is guaranteed by the goverment. In other country, residential usually has variable loan and guaranteed by private, hence the asset valuation could fall because supply-demand dynamic is more sentitive to interest rate changes.
What's the dumbest idea that has been teached for us for so long is that direct ownership is more like active investment while syndication is passive. It is totally the other way around. Becaue direct ownership we could have control with fixed rate debt that's guaranteed by gov, our asset would usually flat or going up/stable, since it's controllable it's more like 'passive'. single family residential is not valued by the movement of cap rate, but it's valued by the real market supply-demand metrics.in all my direct asset everything is going up with scale of 20-40% IRR, so all these naives LP investors are just being fooled so much by the most teaching in real estate and they're not unable to decipher whether what they learnt is accurate or not. Equity Syndication is very very far from being passive.
I think I get where your going from, but seems to be a bit muddled here, for most to immediately grasp I think.
In Single Family Residence, which is predominantly transacted by those for personally occupying, right. Market price to acquire said residence follows a math output from; demand vs supply (this pushes price variations up or down from the "basis"), and Cost To Acquire.
NOW, with the lending mechanisms what they are in the U.S. a homes selling price is NOT it's cost to acquire, is it? No. It's cost to acquire is closing cost's, down payment, the cash at closing AND monthly cost's going froward.
The U.S. residential housing market is a BUDGET not whole-$ based market, in generality. A budget based market with a whole-$ impactor.
What I think Carlos is saying is if U.S. didn't have this mortgage mechanism as it is, say one where "average" mortgage was 15yr at longest, market price would be vastly different.
And YES, it would, but it is the same market, a BUDGET based market. Because the consumers are using the same exact #'s for there actions right, $2k per month in "affordability" is still $2k per month. What changes is how much $2k per month BUYS IN WHOLE $'s based upon term's offered for the acquisition.
That IS the U.S. residential housing market. That's why as rates shot up, volume dropped. Demand/supply curve impact's this BUT it does not over-ride this, demand/supply impact variations, amplitude to the changes. We have HUGE demand with miniscule supply, hence amplitude is at 150% UP, but, one a diminished affordability metric.
Now, COMMERCIAL, which is vast majority of syndication market, is completely different market.
In Commercial, the "basis" is on revenues. First variant factor for valuation is conversion factor of gross to net revenues, both in current realized and potential. Value-add investing is exactly this, acquiring based on a profitable margin between realized and potential revenues and there conversion rate from gross to net.
The LAST factor in pricing variation, which we saw the last few years in greater weight than ever in my life-time is OPPORTUNITY COST. That is, the price to gain the "opportunity" which is to say, just to get "A" place vs not get one. This, generally, is a minimal variant but in recent years with seemingly everyone and there cousin jumping into the space it actually started tacking on some crazy $$$$. This is why smart syndicators took a step back from acquisitions during such.
Now, as you see a BIG factor is how gross revenues translate into NET revenues, rent's paid converting to profit's in pocket, cost of $ has big impact when cost of $ has big changes.
In this regard, I don't see any difference between the two segment's. Both are with pricing market's that stem from a funding foundation, making both BUDGET market's for prices.
Each exist as they are today, including in pricing, solely thanks to the TERMS of financing, because price on both is all but universally based upon BUDGET for acquisition and not whole-$ of acquisition.
What does a whole-$ acquisition market look like? Well, closest most relevant look we have to such in '09'. When mortgage financing melted down and such was scarce at best, what happened?
For this fact I see 0-risk of such diminished term's anywhere on horizon because the fall-out would cataclysmic. What's all but certain is enhanced, extended terms, ever growing. Normalization of 40yr than 50yr residential mortgage. Followed with similar extensions of terms in commercial.
And as the math clearly shows, when "grow" the terms, so does price follow.
This is my personal translation of "You will own nothing, and be happy". Normalized term's of such where all "feel" they "own" ______, but in reality all are just the banks tenant's. And, the BEST tenant's to boot, tenant's who cover ALL cost's, all maintenance, all repairs, everything, with 0 tenant right's what so ever. Why would they ever confiscate property right's to then take on liability of landlord to rent to all when they can make us all tenant's via LENDING terms.
It's brilliant, it is. Credit where credit is due. People WOULD applaud a 50 even 60yr mortgage ear-2-ear grin's saying they now "own" a home, lol. No, the bank own's it and allows you to use it.
This is the future we are living NOW, we are frog's in a pot.
The difference is actually the fight between short term financing vs long term financing …
you just can’t beat the fixed rate long term debt vs short term 5 years IO loan only with floating debt.If office sector could have 30yfrm their asset would be stable.
- Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes2y
Quote from @Carlos Ptriawan:
Yes, in any interest rate abrupt changes, any leveraged loan including short term loan would have massive valuation changes to underlying asset, this is very basic principle.
The extremely very reason why residential is going up even during high interest rate like today is because the availability of 30 years long term fixed-rate debt and the note is guaranteed by the goverment. In other country, residential usually has variable loan and guaranteed by private, hence the asset valuation could fall because supply-demand dynamic is more sentitive to interest rate changes.
What's the dumbest idea that has been teached for us for so long is that direct ownership is more like active investment while syndication is passive. It is totally the other way around. Becaue direct ownership we could have control with fixed rate debt that's guaranteed by gov, our asset would usually flat or going up/stable, since it's controllable it's more like 'passive'. single family residential is not valued by the movement of cap rate, but it's valued by the real market supply-demand metrics.in all my direct asset everything is going up with scale of 20-40% IRR, so all these naives LP investors are just being fooled so much by the most teaching in real estate and they're not unable to decipher whether what they learnt is accurate or not. Equity Syndication is very very far from being passive.
What? This makes no sense. Direct ownership is not passive and investing in a syndication is passive. There is really no argument in that.
You can make an argument that one strategy is better than the other (in your case, you feel that direct ownership is better), but saying that direct ownership is passive is completely false. This is how people get in trouble owning their own real estate. Some guru says its passive, so they listen and buy a bunch on active investments that they don't have the time for.
- Member since 2019 · 7k+ posts · 4k+ votes2yI know it is controversial take
Quote from @Todd Dexheimer:
Quote from @Carlos Ptriawan:
Yes, in any interest rate abrupt changes, any leveraged loan including short term loan would have massive valuation changes to underlying asset, this is very basic principle.
The extremely very reason why residential is going up even during high interest rate like today is because the availability of 30 years long term fixed-rate debt and the note is guaranteed by the goverment. In other country, residential usually has variable loan and guaranteed by private, hence the asset valuation could fall because supply-demand dynamic is more sentitive to interest rate changes.
What's the dumbest idea that has been teached for us for so long is that direct ownership is more like active investment while syndication is passive. It is totally the other way around. Becaue direct ownership we could have control with fixed rate debt that's guaranteed by gov, our asset would usually flat or going up/stable, since it's controllable it's more like 'passive'. single family residential is not valued by the movement of cap rate, but it's valued by the real market supply-demand metrics.in all my direct asset everything is going up with scale of 20-40% IRR, so all these naives LP investors are just being fooled so much by the most teaching in real estate and they're not unable to decipher whether what they learnt is accurate or not. Equity Syndication is very very far from being passive.
What? This makes no sense. Direct ownership is not passive and investing in a syndication is passive. There is really no argument in that.
You can make an argument that one strategy is better than the other (in your case, you feel that direct ownership is better), but saying that direct ownership is passive is completely false. This is how people get in trouble owning their own real estate. Some guru says it’s passive, so they listen and buy a bunch on active investments that they don't have the time for.
By giving control to other folks when doing business actually makes it active.
I see more lp investor crying everyday to their 10 funds that require capital call , while direct owners with 10 SF we could still sleep well , repair is not an issue as asset keeps going up.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2y
Quote from @Todd Dexheimer:
Quote from @Carlos Ptriawan:
Yes, in any interest rate abrupt changes, any leveraged loan including short term loan would have massive valuation changes to underlying asset, this is very basic principle.
The extremely very reason why residential is going up even during high interest rate like today is because the availability of 30 years long term fixed-rate debt and the note is guaranteed by the goverment. In other country, residential usually has variable loan and guaranteed by private, hence the asset valuation could fall because supply-demand dynamic is more sentitive to interest rate changes.
What's the dumbest idea that has been teached for us for so long is that direct ownership is more like active investment while syndication is passive. It is totally the other way around. Becaue direct ownership we could have control with fixed rate debt that's guaranteed by gov, our asset would usually flat or going up/stable, since it's controllable it's more like 'passive'. single family residential is not valued by the movement of cap rate, but it's valued by the real market supply-demand metrics.in all my direct asset everything is going up with scale of 20-40% IRR, so all these naives LP investors are just being fooled so much by the most teaching in real estate and they're not unable to decipher whether what they learnt is accurate or not. Equity Syndication is very very far from being passive.
What? This makes no sense. Direct ownership is not passive and investing in a syndication is passive. There is really no argument in that.
You can make an argument that one strategy is better than the other (in your case, you feel that direct ownership is better), but saying that direct ownership is passive is completely false. This is how people get in trouble owning their own real estate. Some guru says its passive, so they listen and buy a bunch on active investments that they don't have the time for.
I believe Carlos is using these word's (Passive, Active) in a very unconventional way to make references to the leveraged fund's segment of things and the variations impact such has on investment's.
Which, I kind-of get but the verbiage is, well it's not great, it's rather cryptic and misleading for most, at best.
Carlos I just gotta chime-in again with one VERY big context to all this. This is all steaming from a place, an assumption, that Syndicators and the various syndicated investment's, as a whole, are poorly performing, to whatever degree.
While yes, many have issues, yes many syndicators and GP's of recent years are, in my opinion, dumpster fires to put it kindly....... Some Syndicators, GP's and syndicated investment's are GREAT.
Not all Syndicator's are glorified used care salesman, or as I put it W.S. Traders who moved to Real Estate.
I don't think it's fair, or accurate, to only speak in polarized negative on this industry. It would better make point's highlighting those doing things RIGHT. There is some really good ones out there who are not surprised by this market cycle, who prepared for it, anticipated it, took actions in preparation for it, and are weathering it like the Master Navigators of the investing sea they are.
If not aware of any of these great practitioners, fair enough, but they do exist. Some may be right under your nose (hint-hint, and no, not referring to self)....
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @James Hamling:
Quote from @Todd Dexheimer:
Quote from @Carlos Ptriawan:
Yes, in any interest rate abrupt changes, any leveraged loan including short term loan would have massive valuation changes to underlying asset, this is very basic principle.
The extremely very reason why residential is going up even during high interest rate like today is because the availability of 30 years long term fixed-rate debt and the note is guaranteed by the goverment. In other country, residential usually has variable loan and guaranteed by private, hence the asset valuation could fall because supply-demand dynamic is more sentitive to interest rate changes.
What's the dumbest idea that has been teached for us for so long is that direct ownership is more like active investment while syndication is passive. It is totally the other way around. Becaue direct ownership we could have control with fixed rate debt that's guaranteed by gov, our asset would usually flat or going up/stable, since it's controllable it's more like 'passive'. single family residential is not valued by the movement of cap rate, but it's valued by the real market supply-demand metrics.in all my direct asset everything is going up with scale of 20-40% IRR, so all these naives LP investors are just being fooled so much by the most teaching in real estate and they're not unable to decipher whether what they learnt is accurate or not. Equity Syndication is very very far from being passive.
What? This makes no sense. Direct ownership is not passive and investing in a syndication is passive. There is really no argument in that.
You can make an argument that one strategy is better than the other (in your case, you feel that direct ownership is better), but saying that direct ownership is passive is completely false. This is how people get in trouble owning their own real estate. Some guru says its passive, so they listen and buy a bunch on active investments that they don't have the time for.
I believe Carlos is using these word's (Passive, Active) in a very unconventional way to make references to the leveraged fund's segment of things and the variations impact such has on investment's.
Which, I kind-of get but the verbiage is, well it's not great, it's rather cryptic and misleading for most, at best.
Carlos I just gotta chime-in again with one VERY big context to all this. This is all steaming from a place, an assumption, that Syndicators and the various syndicated investment's, as a whole, are poorly performing, to whatever degree.
While yes, many have issues, yes many syndicators and GP's of recent years are, in my opinion, dumpster fires to put it kindly....... Some Syndicators, GP's and syndicated investment's are GREAT.
Not all Syndicator's are glorified used care salesman, or as I put it W.S. Traders who moved to Real Estate.
I don't think it's fair, or accurate, to only speak in polarized negative on this industry. It would better make point's highlighting those doing things RIGHT. There is some really good ones out there who are not surprised by this market cycle, who prepared for it, anticipated it, took actions in preparation for it, and are weathering it like the Master Navigators of the investing sea they are.
If not aware of any of these great practitioners, fair enough, but they do exist. Some may be right under your nose (hint-hint, and no, not referring to self)....
That’s not the case James.
in reality there is no such thing as passive investment.if you invest in 10 SF in different location, you still facing one market risk. An LP with ten syndication has ten different market risk which is extremely hard to do DD. It is not even about good sponsor vs bad sponsor ; because just about everything , everything is different with different asset class, different market risk.
Think for someone that has investment into value add class B in Texas , core class A in Idaho , self store in Portland, assisted living in FL , industrial warehouse in Texas, cannabis operation syndication in CA etc etc lol……
It is way from passive in reality , you could do more passive perhaps in REIT as market risk is being shared more across many more investors.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2y
Quote from @Carlos Ptriawan:
Quote from @James Hamling:
Quote from @Todd Dexheimer:
Quote from @Carlos Ptriawan:
Yes, in any interest rate abrupt changes, any leveraged loan including short term loan would have massive valuation changes to underlying asset, this is very basic principle.
The extremely very reason why residential is going up even during high interest rate like today is because the availability of 30 years long term fixed-rate debt and the note is guaranteed by the goverment. In other country, residential usually has variable loan and guaranteed by private, hence the asset valuation could fall because supply-demand dynamic is more sentitive to interest rate changes.
What's the dumbest idea that has been teached for us for so long is that direct ownership is more like active investment while syndication is passive. It is totally the other way around. Becaue direct ownership we could have control with fixed rate debt that's guaranteed by gov, our asset would usually flat or going up/stable, since it's controllable it's more like 'passive'. single family residential is not valued by the movement of cap rate, but it's valued by the real market supply-demand metrics.in all my direct asset everything is going up with scale of 20-40% IRR, so all these naives LP investors are just being fooled so much by the most teaching in real estate and they're not unable to decipher whether what they learnt is accurate or not. Equity Syndication is very very far from being passive.
What? This makes no sense. Direct ownership is not passive and investing in a syndication is passive. There is really no argument in that.
You can make an argument that one strategy is better than the other (in your case, you feel that direct ownership is better), but saying that direct ownership is passive is completely false. This is how people get in trouble owning their own real estate. Some guru says its passive, so they listen and buy a bunch on active investments that they don't have the time for.
I believe Carlos is using these word's (Passive, Active) in a very unconventional way to make references to the leveraged fund's segment of things and the variations impact such has on investment's.
Which, I kind-of get but the verbiage is, well it's not great, it's rather cryptic and misleading for most, at best.
Carlos I just gotta chime-in again with one VERY big context to all this. This is all steaming from a place, an assumption, that Syndicators and the various syndicated investment's, as a whole, are poorly performing, to whatever degree.
While yes, many have issues, yes many syndicators and GP's of recent years are, in my opinion, dumpster fires to put it kindly....... Some Syndicators, GP's and syndicated investment's are GREAT.
Not all Syndicator's are glorified used care salesman, or as I put it W.S. Traders who moved to Real Estate.
I don't think it's fair, or accurate, to only speak in polarized negative on this industry. It would better make point's highlighting those doing things RIGHT. There is some really good ones out there who are not surprised by this market cycle, who prepared for it, anticipated it, took actions in preparation for it, and are weathering it like the Master Navigators of the investing sea they are.
If not aware of any of these great practitioners, fair enough, but they do exist. Some may be right under your nose (hint-hint, and no, not referring to self)....
That’s not the case James.
in reality there is no such thing as passive investment.if you invest in 10 SF in different location, you still facing one market risk. An LP with ten syndication has ten different market risk which is extremely hard to do DD. It is not even about good sponsor vs bad sponsor ; because just about everything , everything is different with different asset class, different market risk.
Think for someone that has investment into value add class B in Texas , core class A in Idaho , self store in Portland, assisted living in FL , industrial warehouse in Texas, cannabis operation syndication in CA etc etc lol……
It is way from passive in reality , you could do more passive perhaps in REIT as market risk is being shared more across many more investors.
If your using the words "Passive" and "active" in the sense of active is doing literally anything, and passive requires literally doing nothing, 0 thought, 0 consideration, 0 research......
Well there is obviously NO "passive" investment in life itself. No "passive" anything because literally everything requires some level of thought, some component of risk vs reward analysis.
When you go to the restaurant and selecting on menu, your making a decision point, you evaluating risk vs reward. But nobody would infer it's anything remotely close to going to grocery store, picking out ingredient's, cooking all up, creating the meal in totality.
And that is the level of difference between being an LP in Syndication vs self-operating Landlord doing "all the things".
One is clearly FAR more "passive" and the other vastly more "active", and that is what those terms define. There not meant to define absolute states of totality.
For example, 0 degrees is not technically 0 degrees is it. Only "Absolute 0" is, if getting anally technical, actual 0 degrees as in 0 heat of any kind.
But people "get this" that it's terms of meaning, not terms of absolute.
Syndications are "Passive" vs self-operating Landlord/owner is "Active".
I get your saying you have to do DD for a Syndication, that does not make it "active". your not collecting rent's, filling CRP's, taking tenant calls, managing PMc's, your doing none of that. You do DD, send $, sit back and read report's, maybe make a few added decisions/action's here and there. That's as passive as it get's. And, it's "Passive" by investment definition as your not involved in any of the day-2-day operational aspect's what so ever.
- Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes2y
@Carlos Ptriawan investing in a commercial property with an experience group traditionally has less risk that investing in your own SF or small MF. Certainly there are times in the market where commercial real estate experiences difficulties, but the default rate on commercial real estate, especially large multifamily, mobile home parks and self storage, is much less that a single family home. We can point to today and say that is not the case, but we can also point to 2008 and say you're wrong.
PS. Passive vs active is not a conversation of risk profile. It is about how much work you need to do. Direct ownership is buying your own small business. Anyone that thinks differently is a slumlord. Investing in a syndication, fund or REIT is investing passively
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Todd Dexheimer:
@Carlos Ptriawan investing in a commercial property with an experience group traditionally has less risk that investing in your own SF or small MF. Certainly there are times in the market where commercial real estate experiences difficulties, but the default rate on commercial real estate, especially large multifamily, mobile home parks and self storage, is much less that a single family home. We can point to today and say that is not the case, but we can also point to 2008 and say you're wrong.
PS. Passive vs active is not a conversation of risk profile. It is about how much work you need to do. Direct ownership is buying your own small business. Anyone that thinks differently is a slumlord. Investing in a syndication, fund or REIT is investing passively
This is I think where traditional teaching has been very wrong ….
I will write a book for that lol …. Even definition of experienced sponsor itself is wrong if experienced sponsor invest at wrong financing modeling.
if I am an inexperienced GP, I am sure I can beat the experienced GP if I use no debt and the so called experienced one using floating. - 2yDon SpaffordPro MemberInvestor · Idaho Falls, ID · Member since 2016 · 912 posts · 629 votesThere are many syndicators who have paused distributions. It is favorable to a capital call. Ashcroft is a reputable group, I know them fairly well. In fact their main person literally wrote the book on syndications. But even the best operators can run into difficulties, such as in this case. Not every deal will go perfectly every time. But many risks can be mitigated at the purchase. Such as not overpaying just to get a "deal" and not expect to have a refinance as the only way to make it work.
I am a partner with two different syndication teams. Neither of them buy value-add MF. - Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes2y
I think you have to look beyond the company and look at the GP as a core. I am talking in generalities but on the commercial real estate broker side I am always blown away by investors that want to own direct themselves and get talked into crap deals. You are talking about people's legacies, their life savings, all their blood, sweat, and tears of work for their profession or their business built up often after many decades of time.
How can someone take something like that so lightly?
I see some syndicators that have to do deals because of high carrying costs with lots of employees. So to make payroll they have to keep churning over deals OR they might be a good person but simply have limited knowledge. I see some stuff syndicated in the NNN space that I would not touch with a ten foot pole but I have been in commercial about 20 years and reviewed millions of properties in that space. It becomes like breathing air you just know how to do it optimally without thinking about it.
I have seen syndicators take on loan assumptions with marginal terms and high fees or they used floating debt just to massage the numbers so they could hit a certain projected pref (hopefully) to the investors to entice investment of capital. I just personally do not think that is a good way to do business. I like pay all cash with the raise and then you can exit at optimal time of the cycle because you do not have the lender or banking situation environment causing potential waves with your investment.
- Investor · Newport Beach, CA · Member since 2019 · 190 posts · 176 votes2y
Most syndicators, strongly correlated to those with a large online presence, acted with inexperience and made unwise purchases in 2021 and 2022. Capital calls and pausing distributions across portfolios is entirely avoidable but somewhere in 2021 this industry started being flooded with inexperienced sponsors and LPs expecting to get rich quick.
Not applicable to all but the pause in distributions is just the start of it for many large 2021-2022 portfolios.
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Joel Owens:
I think you have to look beyond the company and look at the GP as a core. I am talking in generalities but on the commercial real estate broker side I am always blown away by investors that want to own direct themselves and get talked into crap deals. You are talking about people's legacies, their life savings, all their blood, sweat, and tears of work for their profession or their business built up often after many decades of time.
How can someone take something like that so lightly?
I see some syndicators that have to do deals because of high carrying costs with lots of employees. So to make payroll they have to keep churning over deals OR they might be a good person but simply have limited knowledge. I see some stuff syndicated in the NNN space that I would not touch with a ten foot pole but I have been in commercial about 20 years and reviewed millions of properties in that space. It becomes like breathing air you just know how to do it optimally without thinking about it.
I have seen syndicators take on loan assumptions with marginal terms and high fees or they used floating debt just to massage the numbers so they could hit a certain projected pref (hopefully) to the investors to entice investment of capital. I just personally do not think that is a good way to do business. I like pay all cash with the raise and then you can exit at optimal time of the cycle because you do not have the lender or banking situation environment causing potential waves with your investment.
100% correct, sometimes this gp guy just to make a deal so they get their annual fee ; then the industry becoming problematic.
There is really no such thing as experienced/inexperienced sponsor, everyone can just become a bad guy when they know the market risk is not favourable but they still hit the buy button. It's all avoidable mistake.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2y
Quote from @Carlos Ptriawan:
Quote from @Joel Owens:
I think you have to look beyond the company and look at the GP as a core. I am talking in generalities but on the commercial real estate broker side I am always blown away by investors that want to own direct themselves and get talked into crap deals. You are talking about people's legacies, their life savings, all their blood, sweat, and tears of work for their profession or their business built up often after many decades of time.
How can someone take something like that so lightly?
I see some syndicators that have to do deals because of high carrying costs with lots of employees. So to make payroll they have to keep churning over deals OR they might be a good person but simply have limited knowledge. I see some stuff syndicated in the NNN space that I would not touch with a ten foot pole but I have been in commercial about 20 years and reviewed millions of properties in that space. It becomes like breathing air you just know how to do it optimally without thinking about it.
I have seen syndicators take on loan assumptions with marginal terms and high fees or they used floating debt just to massage the numbers so they could hit a certain projected pref (hopefully) to the investors to entice investment of capital. I just personally do not think that is a good way to do business. I like pay all cash with the raise and then you can exit at optimal time of the cycle because you do not have the lender or banking situation environment causing potential waves with your investment.
100% correct, sometimes this gp guy just to make a deal so they get their annual fee ; then the industry becoming problematic.
There is really no such thing as experienced/inexperienced sponsor, everyone can just become a bad guy when they know the market risk is not favourable but they still hit the buy button. It's all avoidable mistake.
Carlos let's re-frame this a bit here, I think it will help in clarity for all.
For most part there is 2 different kind of Syndicator's/GP's:
- Those who are INVESTOR's; using OPM, to invest. There mind, focus, actions are that of an investor. The Syndication is simply a "how" to the operation. Via OPM, they can scale at a rate far beyond what could ever do limited to own fund's alone. That's simple math.
- Those who are FUND MANAGERS; for whom investing in real estate is more happen stance than any kind of focus, the actual investing actions are the "how" to the REAL focus, FUNDS UNDER MANAGEMENT. These persons often come from WS, Finance, VC realm. There centric focus cycles of life are: Raise capital, Get capital deployed to lock it in, Fee the capital, Get MORE capital, do it again, and again, and again, again, again until fee's reach $______.
From the outside, these 2 VERY different Syndications can look all but identical. The various investment's, fund's, all but indiscernible to tell which is which. But, there are VERY different, act very different, and lend a very different performance because note 1 is focused on the investing, there working to WIN because it's centric to there person, it's who they are, hard-baked into there DNA. The Fund Manager, well, there a fund manager. Often silver-tonged devils, amazing pitch-men, but one will find a giant gaping void where passion for the "deal" should be, because it's not there passion, that's more a necessary annoyance for them than anything else because focus is controlling the $ that's it that's all.
There is absolutely some who are very seasoned and experienced at each, and "noob" at each.
In recent years we have had a FLOOD of the later. And as a LP, one should be certain to know EXACTLY which they hitched there wagon to.
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @James Hamling:
Quote from @Carlos Ptriawan:
Quote from @Joel Owens:
I think you have to look beyond the company and look at the GP as a core. I am talking in generalities but on the commercial real estate broker side I am always blown away by investors that want to own direct themselves and get talked into crap deals. You are talking about people's legacies, their life savings, all their blood, sweat, and tears of work for their profession or their business built up often after many decades of time.
How can someone take something like that so lightly?
I see some syndicators that have to do deals because of high carrying costs with lots of employees. So to make payroll they have to keep churning over deals OR they might be a good person but simply have limited knowledge. I see some stuff syndicated in the NNN space that I would not touch with a ten foot pole but I have been in commercial about 20 years and reviewed millions of properties in that space. It becomes like breathing air you just know how to do it optimally without thinking about it.
I have seen syndicators take on loan assumptions with marginal terms and high fees or they used floating debt just to massage the numbers so they could hit a certain projected pref (hopefully) to the investors to entice investment of capital. I just personally do not think that is a good way to do business. I like pay all cash with the raise and then you can exit at optimal time of the cycle because you do not have the lender or banking situation environment causing potential waves with your investment.
100% correct, sometimes this gp guy just to make a deal so they get their annual fee ; then the industry becoming problematic.
There is really no such thing as experienced/inexperienced sponsor, everyone can just become a bad guy when they know the market risk is not favourable but they still hit the buy button. It's all avoidable mistake.
Carlos let's re-frame this a bit here, I think it will help in clarity for all.
For most part there is 2 different kind of Syndicator's/GP's:
- Those who are INVESTOR's; using OPM, to invest. There mind, focus, actions are that of an investor. The Syndication is simply a "how" to the operation. Via OPM, they can scale at a rate far beyond what could ever do limited to own fund's alone. That's simple math.
- Those who are FUND MANAGERS; for whom investing in real estate is more happen stance than any kind of focus, the actual investing actions are the "how" to the REAL focus, FUNDS UNDER MANAGEMENT. These persons often come from WS, Finance, VC realm. There centric focus cycles of life are: Raise capital, Get capital deployed to lock it in, Fee the capital, Get MORE capital, do it again, and again, and again, again, again until fee's reach $______.
From the outside, these 2 VERY different Syndications can look all but identical. The various investment's, fund's, all but indiscernible to tell which is which. But, there are VERY different, act very different, and lend a very different performance because note 1 is focused on the investing, there working to WIN because it's centric to there person, it's who they are, hard-baked into there DNA. The Fund Manager, well, there a fund manager. Often silver-tonged devils, amazing pitch-men, but one will find a giant gaping void where passion for the "deal" should be, because it's not there passion, that's more a necessary annoyance for them than anything else because focus is controlling the $ that's it that's all.
There is absolutely some who are very seasoned and experienced at each, and "noob" at each.
In recent years we have had a FLOOD of the later. And as a LP, one should be certain to know EXACTLY which they hitched there wagon to.
In reality it doesn't really matter. What matter is the underwriting for each asset.
I have to tell you this.
At the end, syndication experience does not really matter or at least it's secondary factor, WHY ?
The biggest risk in syndication is market risk. The second biggest risk in syndication is the financial modelling.
1) an experienced syndication that is purchasing during 2020 would have greater market risk than inexperienced-slacker syndicator that purchase during 2015 only and get out of the market in 2020.2) an first time syndication that has fixed debt 40% LTV value-add buying at cap 6 with DSCR 1.5 on year 1 ; would perform better than so called experienced syndication that purchase with floating using 80% LTV with DSCR 1.1 buying cap 3 during purchase.
The key thing here is doing DD in the T12 and which one has the most conservative underwriting model.
Most basic mistake by LP is filtering syndication based on IRR expectation, but that itself is marketing ploy that you can't rely on.You keep saying there's this experienced and inexperienced sponsor, in reality, the good sponsor during 2015-2020 also got wiped out if they purchase during 2020-2022 using bad financial modelling LOL
- Member since 2019 · 7k+ posts · 4k+ votes2y
I've checked hundred of GP track record and I found In this industry, a high school drop out GP can beat PIMCO fund manager that has 999M AUM if the high school GP can do better underwriting and execution.
Relying with sponsor experience should be secondary when LP is investing but LP job is really has to go supeer deep dive into the underwriting. LP job is to understand the market risk and extreme due diligence/verify comps/verify proforma of the financial model, this is why I said LP investment is actually not passve because the LP investor has to have capability to go deep into financial like a CFO level.
I can give list of "good sponsor" three years ago but becomes bad sponsor in today's environment but they would sue me due to privacy concern haha. This syndication is really very difficult for LP man because we throw money to someone in private transaction and the gp can hide everything unlike when we invest into public compay whereas tons of smarter people than me can do the risk analysis in public market. This is why I think many times it's just better to invest at public/private that's structured as REIT instead because there would be more transparency. - Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes2y
#syndication
- Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes2y
Basically syndications, and a lot of other office and residential commercial is in real trouble over the next 1-2 years. They’re praying for 3x fed rate cuts this year, to stimulate refi’s and new buyers. But if that doesn’t materialize, or if we hit a recession, it’ll get worse.
My personal advice is, if you don’t already own stabilized real estate, in solid areas, with fixed debt or low/no mortgage…take the 5% return available now for your liquid savings and wait. Cowboys can get in the market now rebuying recent failures at discount, and hoping to ???. But I’ll pass, as I like keeping my early retirement and prefer staying in cash with new money. We’ll see what the future brings.
Best to everyone out there!
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