All Forum Posts by: Brian Burke

I’ll never understand why sponsors do this. I’ve always allocated all depreciation to the investors, and to me as the sponsor only pro-rata to my co-invest.  Then I see sponsors bragging on social media about how they pay no taxes because they get all this depreciation even when they have no capital in the deal.  Makes no sense.

Quote from @Robert Ellis:

Sunbelt national, and existing only.  

@Harrison Lane shares, or LLC units, yes. There's a market, but you have to make the market, it won't come to you.

It depends on how you define multifamily investing.  Small stuff, like duplexes, 4-plexes, even 20-unit type of stuff is still viable for wealth building over the long term if you can find long-term financing such as local bank debt, and you are in a decent rental market.

If you define it as large multifamily, such as 100-unit and up apartment complexes, it gets more complicated.  This sector has been virtually un-investable for over three years, and remains so today.  It pains me to say it because this has been my primary business for over two decades and no one likes to see their industry non-viable, but I just have to call balls and strikes.  I sold 3/4 of my portfolio in 2021 and 2022 and my only wish is that I could have sold it all.

Maybe in a year or two I'll see the signs that point to a good re-entry point.  Today is certainly better than any time in the last three years, but there is just no rush--bottoming will be a process, not an event.

@Jay Hinrichs I suspect that “lunch eating” is about to see a repeat performance.  Owners of class C apartments with matured or maturing loans may feel a sense of hope now that the 10-year is dropping.  With the thought that lower rates will allow them to escape disaster by refinancing, many of these will have little to show for it. All the lower rates will do is encourage their lenders to force a sale at a complete loss to the owners because the lenders see lower rates providing hope that a buyer at or near loan value will materialize.

Quote from @Frank Sichelle:

For example, Rise48 has made the statement on one of their capital calls that if you contribute additional funds, the new funds will not only be in a priority position in the capital stack (which is normal) but they will also move the initial capital of those who contribute additional funds to also be in a priority position above the initial capital of those who do not contribute. To me that's financial extortion saying "contribute additional funds or else...". I won't claim to know if that is legal or not but if there are any attorneys on the bigger pockets platform, I would be very curious to hear their opinion on whether a sponsor has the ability to unilaterally erase an investors capital.

It’s legal if the operating agreement says they can do this. Remedies for non-participation in a capital call should be spelled out in the operating agreement.

If I saw a provision allowing the sponsor to unilaterally create share classes with rights superior to my investment class at will, that would be a hard-stop for me as an investor. Even placing the newly-called capital in priority is questionable—but again it depends on what the operating agreement says.

Where this gets messy is if the operating agreement is silent on capital calls and remedies.

Welcome to BP, @Harrison Lane.  

I see your idea as less of a real estate play and more of a dairy business play.  You'll be asking people to invest in your idea and business, and with that type of investment I think the acquisition fee and disposition fee would be a turn-off.  Structure this more like an operating business investment and I think you'll get more traction.

The starting point for investors would be people already in your inner circle, and people already familiar with the dairy business.  Unfamiliar people will have a harder time getting comfortable.

Quote from @Dan H.:

I have one that I believe will lose principle but has not exited (full cycle) and likely will not as long as they can hold it even if holding it may cause loss of all principle.

What time span do you need this info by?   I suspect mine will not have realized principle loss until too late for your use.

by the way I believe only #3 applies in the case of this syndicator but other items not on the list is 1) named partner has exited.   I heard it was related to a divorce.  2) commercial residential prices have declined significantly. 

I hope I am incorrect and these operators can recover at least all principle..

Dan, I’d still be interested in studying this.  My class is in a month so not enough time for a conclusion but I think the case study remains relevant. If you have the original pitch deck, send me a DM.  I’ll exercise the utmost discretion and confidentiality and I’m happy to share my prognosis with you, for what it’s worth.

Very true words. The people behind anything, is everything!

Quote from @Gregory Schwartz:

I've been searching for solid data on this. It seems like everyone knows someone losing money on a syndication or hears about apartments selling at a loss. But is this truly a growing trend, or are banks still propping up struggling operators? And beyond that, who is facing the biggest challenges?

I suspect we’ve only seen the tip of the iceberg.  Maturity defaults and loan defaults are only now beginning to rise.  Almost $1T maturing this year. At the first hint of market improvement lenders will stop kicking the can and start forcing moves.