All Forum Posts by: Clark Stevenson

 According to what Ashcroft told me, as of Tuesday 5/21, they had around 64% of the capital call in hand with 88% committed.

 They could promise me 120% and I wouldn't meet the capital call. I gave them my answer on the deadline 5/20 but can confirm, at least from what they told me, that they had 88% committed but a much lower percentage (around 64%) fully funded and were now offering the diluted shares to any existing investor.

What helped me was advice I heard when I had a friend inherit property. An old, wise investor asked my friend if he had inherited cash, would he invest in that property. He said, "if you say yes, keep the property; if you say no, sell it."

I used the same logic so since I had mentally marked my investment in AVAF1 down to $0, I asked myself, if I had the amount of the capital call available today to invest in this as a new deal, would I do it? The answer was an absolute no so I didn't meet the call.

 I've only done one syndication lately and you are absolutely correct. Since the AVAF1 fund stopped distributions, I got much better at evaluating the numbers. The one syndication I entered wasn't advertised and the fees were much lower for the GP and the GP has much more skin in the game. Also, the business case was much stronger than any LP deal I've done. They are assuming a low agency debt and there is no high interest mezzanine financing involved.

 I am an investor in this fund AVAF1 and I too was amazed that they made the claim that their 11m loan would be repaid because the banks said it was needed to meet lender covenants. I have never heard of a bank requiring someone to withdraw capital to meet covenants unless they made it a senior loan with all others subordinate to this GP loan. They did make the concession that the AM fees are waived but the waterfall change is really no change because it will take a literal miracle for there to be a need for the waterfall. I did note that they didn't waive the 1% disposition fee which, if they meet their targets, will be over $6m. Dilution is going to be north of 16% but I am accepting that rather than putting good money after bad. I expect the Class B shareholders are going to be wiped out so I'm looking at it like I have already been diluted 100% because that is the reality today.

@Todd Goedeke Not familiar with STVR. 15% cash on cash is very good. In terms of ConC over my 25 years, my return is infinite. The reason is I started literally with nothing and a $25k loan from a credit card and now, along with my brother have 3 good, cash flowing businesses, residential RE, commercial RE, a country club, and stocks and other investments. The last syndication I participated as a LP had a ConC return north of 40% annualized but that one exited right at the top of the market.

From an academic perspective, I agree with you...CRE should not be speculative but as @Brian Burke pointed out, for conservative operators, there were NO opportunities during this time period because all of the speculative operators bid up the prices to insane levels and they relied on rubes like me to fund this speculative bubble. Many of these worked out but this one did not.

From the real world, all investments are speculative as Silicon Valley Bank found out with the gold standard of investments- Treasuries. Why they didn't hedge this investment is a whole other story.

Quote from @Carlos Ptriawan:

These are the actual surveillance asset condition from one pool of CLO from one the bridge-lender mentioned above , look at AS-IS DSCR.

It's game over buddy, the status of their loan is 100% in trouble with 3 in watch list and most is at loan extension, to get loan extension the GP may ask for capital call for further reserve.

Those are nightmare numbers. On the 2 assets in Atlanta, my assumption is the DSCR is somewhere between 0.65 and 0.85 given the numbers provided by the GP. That's why I am assuming at this point I am wiped out!

 Actually, I was at the unfortunately named "Best Ever Conference" in Salt Lake 2 weeks ago that Joe Fairless (Ashcroft) helped start and all the talk from some very highly placed economists and analysts was that the regulated lenders and banks were the focus. I'm certain the private entities want to stay out of the spotlight. The issue with the public lenders is having a repeat performance of the negative results of entities like Silicon Valley Bank and New York Community Bancorp. Therefore, we are getting the "pretend and extend" maneuver to make loans conforming, asset swaps, capital calls, and every trick they have in their playbook to push the problem down the road.

Overall, you nailed it! The big banks are going to mop of the assets of the small banks, larger operators are going to get more realistic prices on good assets, and the little guy is going to get the sharp edge of the stick!

 First, thanks so much @Scott Trench and Bigger Pockets for hosting this forum. This has been a huge help just to know I am not alone in this capital call. BIG THANKS!!! Also, a huge shoutout to @Brian Burke @Jay Hinrichs and many others who have spoken out of decades of experience.

The Ashcroft Value Fund 1 is not a single apartment community. It is 8 communities that are located: a) 2 in the greater Atlanta area b) 2 in Arlington, TX c) 2 in Orlando d) 1 in Jacksonville, FL and e) 1 between Orlando and Tampa so it gets very complicated, very quickly.

The big issue is the 2 north of Atlanta and interest rates. The Atlanta communities have been so bad that it doesn't matter what the rest of the portfolio has done and those haven't been without issues of their own. It is simply a mess.

@Todd GoedekeI can see how you might see that be a cavalier attitude but it is a mindset that an investor must have in order to not be petrified on future projects that carry high risk. 

I am an investor in other lower risk projects that provide a safer, more predictable return but in my investments, I would never get involved on a 10 cap deal. I guess I am fortunate that I have opportunities for a better cap rate or maybe I just have a higher risk tolerance but that's how I approach investments and it has worked for the last 25 years.