Syndications Gone Wrong

[Allen Lemay]

Bigger Pockets - 

I've listened to several BP Podcast about multi-family syndications and the success people are having.  They almost make it seem like it is a bullet prof investment strategy.  However, I want to hear the other side of the story and why syndications fail.  If you've been through a "Syndication Gone Wrong" I'd love to hear from you.  Why did it fail?  Please share specifics.  Person? Location? Property did not appreciate as much as intended? To much renter turnover? Market competition? 

Really appreciate anyone's willingness to share their stories with me. 

Happy Holiday's. 

Allen 

[Brian Burke]

I just don’t get it—this whole hired-gun KP thing.  Sponsors don’t have the balance sheet, reserves or experience to satisfy the agencies—so they farm it out.  Talk about having no skin in the game!  And if the sponsor isn’t good enough for the debt lender—the safest segment of the capital stack, why should they be good enough for the equity...the riskiest part of the capital stack?

Then the deals go sideways and the hired-gun has to kick them out—now the investors have a whole new sponsor, who might have a nice balance sheet but doesn’t know about how to manage a syndicated offering (talking worst-case scenario here—some KPs would probably make a better sponsor than the original sponsor).

Want to find failed syndications?  Look no further than inexperienced sponsors who are hiring out for balance sheets and experience because they are in it before they are ready.

Everybody wants to get into large syndications and look for the fast track. What ever happened to dedicating your life to this business, working your way up through the trials and tribulations of real estate ownership and market cycles, graduating to larger deals, building up your own balance sheet and liquidity and standing behind your own loans without farming that out to others?  Man, I guess I did this all wrong...