All Forum Posts by: Duke Giordano

Good point on the "Property Mgmt Co" and whether it is in house or farmed out.

Now that we have a rough idea on some of the important points/variables, I would like to ask a FU question.  

For those interested in investing in a syndication as a LP, what are the 5-10 most important variables "In Order" you look at in these deals?

I know #1 by far is the Sponsor, and I think we would all answer that way.  However, I am curious how you all would rank the more objective variables:

I think mine might be as follows:

1. Number of full cycle deals?

2. Prior performance of IRR/Equity Multiple etc vs Pro Forma.

3. Crime rate at location

4. Job growth at location

5. Fee Structure (Acquisition, Asset Mgmt, etc)

6. Return Structure (Pref, LP Split, if a Waterfall)

7. Reversion/Exit Cap

8. Loan Terms (I/O, Bridge etc)

9. LTV ( Loan to Value)

10. Rent Increase Per unit vs Comps

Thanks for all your responses, it is certainly helpful.  I do find some sponsor are willing to answer, others refer me to the PPM, Webinar.

If you or a spouse can qualify for real estate professional status then its worth it from a tax standpoint to do both.  Own a 4 or 8 plex, get your 750 hours, at least 50% total time and deduct W2.  Then do syndications on the side.  If you or significant other will not get RE Prof status then just do syndications and keep day job.

Thank you so much for all of your thoughtful responses, I truly appreciate it.  

I agree @Brian Burke, if I blindly sent to sponsor I could see how that would become annoying. I am using it as you suggested to really compile the information I look for in deals and to be able to decipher between many deals that on the surface these days look so similar (everyone nearly has the same pref, IRR, equity multiple etc). Unfortunately, many of the deals I see leave out many of the answers to these questions in the PPM, in particular the GP fee structure.

In addition, i left some variables out but I also look at a few other variable of the geographic location that i do not ask the sponsor about and just do my own due diligence such as population growth within a 5 mile radius, average annual income, job growth, and local employers etc.  

Being a quantitative geek, I then assign points and create a score for each of these categories based on responses of the objective categories previously outlined above to come up with an overall score for the deal by adding the scores up.  (mind you this scoring system i created is subjective to whats currently important to me at this phase/point in the cycle, based on objective data).  Having a questionnaire sheet that gives me all this info without having to search every line in the PPM can be helpful to tabulate these things quickly, even though i certainly look at the PPM in detail.  Lastly, I take into consideration the most important variable being the sponsor themselves and the "gut" feel i get from them and that is by far the most weight of them all.

Once again thanks so much for all your responses and dialogue.  

Hello All,

Thanks in advance for your replies.  I am curious to get peoples opinion on both the GP and LP side in syndication deals as to how they feel about receiving a questionnaire sheet from a new prospective LP to get objective info to get to know the Sponsor and the deal?  I would be curios to hear from both GP/Sponsors, as well as, LP who have done this and how it was received.  Do people (GP'S) get offended?  Not respond?  Or do GP/sponsors like this as it indicates a thorough and well thought out LP who understands the risk/implication in a deal and the due diligence on a sponsor required?

I base a large deal of weight as I am sure many LP's do on the sponsor and feel that in addition to either a phone call or a meet up in person, a questionnaire sheet would seem a more efficient way to ask and get answers to common objective questions ahead of time to get an idea on a sponsor.  For those LP feel free to add other questions you think may be important/salient.  

For example:

Sponsor Experience:

1. How many years have you specifically been a GP in syndication deals? What year did you start?
2. How many full cycle Syndication deals have you seen through as a GP?
3. What years were the full cycle Syndication deals sold?
4. What states were each of this Syndication deals in?
5. What were the expected vs actual return metrics of those full cycle deals, such as IRR, Equity Multiple, Hold time etc?
6. How many active current/active syndication deals do you have as a GP? What states are they in?
7. What asset class to you look at or focus on as a syndicator (Multi-Family, self-storage, mobile home, retail, industrial etc).
8. What is your strategy as a syndicator (Value add, stabilized etc). What typical Class in relation to multifamily do you focus on (Class A,B,C etc).

Deal Location/Strategy:

1. Geographic location
2. Strategy (Value Add etc)
3. Property Class if Multi-Family (A.B.C)
4. Number of Units
5. Number of planned Units Renovations if Value Add? Reno cost per Unit?
6. Planned Monthly Rent Growth per Unit?
7. Current Cap Rate? Planned Exit Cap/Reversion Cap Rate?
8. Planned Hold time?
9. Current Occupancy rate?
10. Break Even Occupancy rate of deal once Value add complete?

Deal Loan/Financing:

1. Type of Loan such as I/O (interest only), flat rate etc.
2. Is loan a non-recourse Fanni/Freddie?
3. Length of loan?
4. Rate on loan?
5. Is there bridge loan/debt?
6. What is Loan to Value Ratio (LTV)?
7. What is Debt Service Coverage Ratio (DSCR)?

Deal Fees:

1. All GP Fees for deal?
2. Acquisition Fee and if so %?
3. Asset Management Fee?
4. Disposition Fee?
5. Refinance Fee if Refi Occurs?

Deal Return:

1. Preferred Return and %?
2. If Preferred return, when does it start? Is it Cumulative?
3. Is preferred return given after or before fees such as Asset Mgmt fee (Excluding Acquisition Fee)?
4. Is preferred return given of or off Capitol? Does Capitol account $ amount change as preferred return given?
5. Is there a waterfall structure after preferred return and if so what is it? What’s GP/LP split? Is there a ladder of GP/LP Split?
6. IRR? IRR with Different Hold times such as 3, 4, 5 years?
7. Partitioned IRR if available?
8. Equity Multiple?

Hey Guys,

Do you know of any RE syndicators that specialize in Senior Housing?  Do any of you have experience in these syndications?  Whats typical factors to look at, and common return/fee structures.

Thanks

Duke

Would be interesting to have the excel sheets used in these examples to test different scenarios from an LP perspective with the associated graphs.  

Any reccs on where to search google for these tools, or some free ones?

No replies huh, I would think more people would have dabbled in this area?