Kansas City Syndication: First Investment, Need Feedback

[Chris C.]

Hi BP,

I am considering investing in my first syndication, and was hoping to get a sanity check on the numbers from those with experience. Here are the highlights:

• 100+ unit multi-family in Kansas City
• Total acquisition cost is $7m: $6.35m purchase price, $400k reserve and immediate needs (for unit upgrades), and the balance for loan fees, closing costs, attorney fees, etc
• It’s a limited partnership, where general partners take 1% acquisition fee, 2% asset management fee(of gross revenues), and 2% of gross proceeds upon sale
• Investors are paid 100% of cash flow until each has received 7% compounded annual return, then the GPs take 20% of total net profits distributed to investors, followed by 80/20 investor/GP split until each has received 12% return
• Upon sale, investors get 100% of investment returned, then the GPs get their 2% of gross proceeds, then investors get 7% compounded annual return, then GPs get 20% of net profits distributed to investors, and finally there is an 80/20 split for investors/GP

I am still doing my due diligence on the GPs, but so far it appears they have a good track record. I also like to story and economics behind KC and this particular property.

Would appreciate any thoughts on the numbers, fees, splits, etc and also on the KC market generally. Also, are there any other watch outs that I need to be careful of for this first (hopefully of many) investment? Thanks!