Thoughts on Real Estate Sydnicators
I've been speaking with syndication shop that's been around for \~30 years. Focused on income generating properties, 1031 exchanges, and net lease properties for HNWIs and small family offices. I come from the large, commingled fund PERE space, so deal-by-deal investing, and these smaller tickets sizes is a new area of interest for me. Would love to hear thoughts of those familiar the the space. What are typical fees, and have you ever participated in a syndication before?
[{"id": "erz3rba", "text": "When I worked for a hedge fund I did a bunch of pref deals to syndicators. They are BAD FUCKING DUDES. they have 0 human capital, no skin in the game, and don\u2019t care about their investors st all. Most mind blowing thing I ever saw was when one of them recapped me out and they overcapitalized the deal and took out over $1,000,000 in cash that they swept out as profit to themselves, on top of all the bullshit fees they charge to their investors. TIC syndicators are 100% a con job designed to take advantage of mom and pop investors who don\u2019t know what\u2019s what. \n\nMy $0.02.", "replies": [{"id": "erz83lq", "text": "Hmm we might be talking about different versions of the same thing. These guys do their own underwriting and invest in each deal. About 15 people in the shop. They see themselves as more private equity than the type of syndication you're talking about. I think. Does that sound like the same thing to you or not?", "replies": [{"id": "erz8lgg", "text": "Might be different but most of the TIC / 1031 Syndicators / non-traded REITs I\u2019ve dealt with are total scumballs. I\u2019m sure there might be some decent ones out there but generally their is a total misalignment of interests.", "replies": [{"id": "erz9hqd", "text": "Got it. Thanks.", "replies": [], "depth": 4}], "depth": 3}, {"id": "es49pwt", "text": "As and underwriter I wouldn\u2019t call it \u201cunderwriting\u201d in the cases I\u2019ve seen.", "replies": [{"id": "es4aw3h", "text": "i gotcha. it seems that this firm i'm talking about might be an exception. they do like 12-15 deals a year, which comes out to about very small percentage of their pipeline. i definitely understand where your coming from though. this firm appears to be more like a private equity firm that simply prefers to work in hnwis and smaller ticket sizes. almost boutique like. but i till have more DD to do.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "es0r39o", "text": "Not my experience at all.", "replies": [], "depth": 2}], "depth": 1}, {"id": "erz9y6l", "text": "I haven't seen too many well run syndicators. Most because of the small team, lack best practices, have not evolved their \"proven\" model, and lack efficiency. They can range but usually acquisition and management fees. Based on what I have seen - I would not participate in a syndication.", "replies": [], "depth": 1}, {"id": "erzb909", "text": "It is so easy for scam artists to become syndicators.   You REALLY want to know your syndicator well.   \n  \nThis is not like investing in a well regulated REIT, or well known mutual fund / index fund.   You are completely reliant on the trustworthiness of the person/people you are investing in.", "replies": [], "depth": 1}, {"id": "es0rcl4", "text": "I've been involved in about 40 syndications on the LP side as well a GP. \n\nUnderwriting the operator is much more important than underwriting the specific deal. \n\nFees can vary. Terms are usually a 6-9% pref with a 60/40-75/25 split. Some deals have more complicated waterfall structures but most do not. A 1-2% of pp aquisition fee is standard. Also, yet not always, a .5-1% of loan amount finance  fee and a 1% disposition fee. Property management (3-5%) is standard and sometimes an asset management (1-2%).\n\nLet me know if I can answer any specific questions. Most of my experience is in value add multifamily but have also participated in some commercial, medical office and NNN deals.", "replies": [], "depth": 1}]