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Updated over 1 year ago on . Most recent reply

Multi-family Syndicate Investing … is this madness?
So I follow the news and listen to the BP podcasts and the signs are clearly flashing danger for MF syndications - high interest rates and short-term debt coming due, constrained bank lending, slowdown in rent increases and tons of new projects coming online to soak up demand. Cap rates still heading up and getting more difficult to grow NOI. Valuations going down.
But - I am still getting inundated with 503c offerings still telling me I'm going to get that 15% IRR and 2.5X multiple in 5 years.
Is investing in MF syndications the foolishest thing to do right now? Is a massive collapse on the horizon or is this just a cooling down period? If the cap rates peak out in the next year or so wouldn’t it make sense to invest in fresh deals at that time that can take advantage of the higher cap rates?
Please convince me one way or the other ? Is love to hear what the BP community is doing in this space right now.
Most Popular Reply

Quote from @Steven Rosenfeld:
So I follow the news and listen to the BP podcasts and the signs are clearly flashing danger for MF syndications - high interest rates and short-term debt coming due, constrained bank lending, slowdown in rent increases and tons of new projects coming online to soak up demand. Cap rates still heading up and getting more difficult to grow NOI. Valuations going down.
But - I am still getting inundated with 503c offerings still telling me I'm going to get that 15% IRR and 2.5X multiple in 5 years.
Is investing in MF syndications the foolishest thing to do right now? Is a massive collapse on the horizon or is this just a cooling down period? If the cap rates peak out in the next year or so wouldn’t it make sense to invest in fresh deals at that time that can take advantage of the higher cap rates?
Please convince me one way or the other ? Is love to hear what the BP community is doing in this space right now.
Hey Steven! Great thought. There is no doubt that there is billions (if not more) of bridge and variable rate loans coming due now -the next 36ish months. For the past few years, it can be argued that it was very difficult to lose money as an operator with debt rates being a fraction of what they are now and a very bullish aura in the general environment. The environment has changed significantly, but that being said, a lot of opportunity is coming to the marketplace. There are absolutely still deals now that pencil out, but I think that it is very important to really study the operators and opportunities that are here today before placing capital.
Our team has only ever used fixed debt when doing mf syndications, and are sticking to that strategy for the foreseeable future. Given it is harder to find deals that are worth pursing from an underwriting perspective, but we are not comfortable with gambling with our investor's capital with that uncertainty. Fortunately our partners have very strong relationships with credit unions and we are still able to leverage more inexpensive fixed rate debt than most of the buyers in the marketplace. Long story short, in my opinion I think it is still a great time to be bullish on syndications in the current environment, but you really need to double down on operator & project due diligence before placing any of your capital :)