All Forum Posts by: Jason Merchey

Hi Wendell, are you talking as an LP or a GP? 

Yep I would say absolutely start with The Hands Off Investor. I read it twice and think it is very solid. You'll know a lot about syndications and also about Brian Burke and Praxis Capital if you read that. 

Thanks all. @Bonnie Low yes please do IM me when you have your place I'd be interested to see what you have.

J

Quote from @John Whitfield:

@Jason Merchey  It seems that so much of what's going on right now is characterized by polarized views and over-reaction.  Hopefully, Buncombe County will regroup and swing back towards a more reasonable middle ground.  Admittedly, while I love living in the area (Black Mountain specifically), some of the current trends regarding crime rate definitely give me pause when I start thinking about how best to invest in the area.

Yes, if I were investing locally, I would be a bit wary of the whole thing. I read a while back that APD wasn't even responding to property crimes--to focus on violent crime. Maybe they shifted back but for a minute there it was pretty unsettling. Ya gotta have law and order or nothing else works.

Yes, yes, I got ya. I recently heard that the APD Chief was like "We need to be the highest paid department in North Carolina" or some similar quote. I think he meant that there are so many vacancies on the force, and so much scrutiny of the job cops are doing, and so many social problems such as homelessness and stress brought on by the need to make $20-$30 an hour minimum to live here, that if the pay doesn't incentivize good cops coming here then Asheville is facing a crime and safety catastrophe that has in fact already begun. Heck, with the dearth of cops on the street and the condition of the Buncombe County jail, I am loathe to even go there sometimes. It's too bad, too, because in 2019 when I started thinking about moving to town, I was so impressed by so much around town.... 

Darn I'm miff'd my link didn't work. Thank you all for the replies. If you're still interested, try https://www.realestateconsulti...   But it seems like the question can be approached theoretically, and you've all provided some nuance to the issue!

I know the real estate cycle is tied in large part to oversupply, and the very long lead time to completion. It's been likened to a train that takes a lot to build up steam, and slows down very, very slowly. So a little caution on the part of developers is a very good thing. 

As an LP in MF syndications, my hope is that the sponsors operate in submarkets and sub-sub-markets that have some barriers to entry for new supply, thereby protecting the status quo when it comes to supply-demand dynamics. A sponsor who misreads this or who rolls the dice unluckily is liable to be swimming upstream. I say if one combines a sponsor leading LPs to a 5.8% loan with a big yield maintenance fee (fixed debt) and who also got involved in a submarket that has an overabundance of new supply coming online in the next 1-3 years, you're facing a possible "Titanic" situation....

This is truly a stunning and revealing example of institutionalized racism. It doesn't always involve folks maliciously calling 911 on innocent African Americans, or police killing unarmed black men. Sometimes it's as subtle and hidden as things like redlining, implicit bias, or this story.

Update: WOW was I impressed with the first sale they got off. It's an IRR to write home about, that's for sure!

However in the mean time, the model of floating rate debt + a rate cap has shown signs of stress.... I don't want to say more than that lest I share too much information, but anyone in Praxis funds knows what I'm talking about. 

I asked Brian Burke about it and he was kind enough to write me back. He was fair, modest, confident, and measured. Praxis still has ample opportunity to be like the "tortoise" in Aesop's fable about the race, and Brian feels "the jury is still out" on how the fund ends up years from now (and how floating rate + a rate cap fares compared to fixed rate debt with gnarly yield maintenance fees).

Quote from @Sean Kelly-Rand:

Quote from @Steve Tse:

Following this discussion makes me wonder what should companies and for that part investors do if they have over $250k in liquid cash ?

Should the funds be evenly spread among various FDIC insured banks ?

 Steve that is one option, even better is to put it into treasuries / securities in your name depends on the cash sums. One wake up call is that you have accounts earning 0% or near it and then to wake up and find out they are not that safe when you can earn 4% in safer investments. I am going to put a bit more in private credit. 

Oh gosh, 5% CDs!? I'm down for that. Heck, my financial plan calls for an average of 7.5% ROI annually, so 5 or 5.5% for veritable safety is an absolute yes in my book.

It's a pretty interesting situation. On the one hand, the govt. is well-positioned to and has a vested interest in undercutting panic--bank runs are basically just panic on the part of the public. Banks have been paying into a fund to help each other and that is what was tapped to rescue SVB investors and it was good governance I would think. 

On the other end, it's pretty interesting how banks take risks, but lately because of the gutting of regulation, SVB was well within the flimsy regs that were left until it destroyed itself in days. We need better regulations, and corporate managers need to be held fully accountable. 

Also interesting is that this is capitalism. Banks are supposed to fail from time to time. Thins out the herd. As well, it's funny how folks at SVB--85% of them--kind of forgot what the FDIC is and what its limits are. They got a bailout for sure. A lot of startup types and big players tend to think they are special enough to receive a bailout. If you don't believe that, I would refer you to 2008.