All Forum Posts by: Phil Christian

If it was a $2.75m apartment deal this is how we would underwrite it. 

GP 5%/ LP 95% (Institutional equity wants to do 10 / 90)

1.25% Acq Fee

3% Asset Management is fine

70 / 30 after a 6% or 8% (institutional equity would want 10% but settle for 8%).  You can add additional hurdles, say after a 15% goes to 60/40, etc. 

Obviously, I don't know your deal so 12% pref might work if you confident you are hitting 20%IRR and you need a big pref as a carrot to attract equity. If you are not hitting a big IRR you might not be too happy with your returns compared to your equity in the deal and the amount of work you put in the deal.

If you are new to sponsoring deals... push the pref down to 10% and get focus on the deal and use this one to get better terms with on the next. 

the owner will only commit on principle to give me 120 days due diligence and to secure financing 

=/= 

The owner Wants To Partner in a new development. 

It doesn't sound like the owner wants to actually partner providing 120 days of DD.  That's not a partnership.  Candidly, land owners wanting to partner is tricky and even the most experienced developers get tired of partnering with inexperienced land owners. 

What multifamily brokers in SoCal do: 

1. Week 1. Quietly shop the deal to the most likely buyers depending on deal size, equity required and deal structure. 

2. Week 2. Email blast to their own database of 500-2,000+ landlords.  Follow up calls. Continue to do week 1 calls. 

3. Week 3. List on MLS, Loopnet, CoStar, OCBJ, OC Register, etc.... Continue to do week 1 and 2.

Since you don't have a data base you are going to simply list the property week one. If I were you I would go on SoStar/Loopnet and make a list of all of the listing brokers selling multifamily.  Then call/email them direct. Multifamily brokerage in Orange County is very small.  There are only a few groups that are truly active and only a handful of brokers. 

6 units is sort of small, so residential realtors do have these listings but I they end up falling into a listing rather than making it their business plan. 

Your return structure is incomplete as written above.  After the 12% pref is the splits simply prorata (60%, 20%, 20%?) or do you have a promote (success fee?). 

How big is the deal? 5% acq fee is off the charts big as a % but could be tolerable if its a small deal.

12% pref is sort of high but again all depending on deal size. 

Laundry usage is scattered, you are correct. 

What I do know, if the 3rd party companies essentially solve for a nice round number that they use to sell to the market place.  For example, what is commonly announced is that gross laundry income is $20 per unit and $10 net to the landlord.  Magically, all my receipts from these 3rd parties line up with this math.  What I do know, if I have the full financials for a 5000 unit portfolio I was worked on in the same market from 2010.  Our gross in 2010 was $33 per unit.  

Pay Range is interesting. Thanks for the tip. 

Yes, but I don't have the staff available to handle it. 

20-25 different communities... across a 30 mile radius.  

"If you're talking about the former, look for a more reputable company. I know there are some recommendations on the forums here." 

There's not, they all skim and yes I am referring to how much are you seeing skimmed off the top.  I have laundry contracts with 3 different groups as well as collect our own on a few projects (headache).  

So, what do we feel like is the amount being skimmed? 

Let's have a real in depth discussion about the loss income with third party supplied laundry?  We all know that third party managed laundry skips off the top.  How much do we think we are losing to skimming from the third parties? 

George, my partners and I bought 25 deals in SoCal and have placed ~$160m in value-add multifamily in the past 3 years...  shoot me a pm if you want to discuss further....