Help - having trouble finding deals

[Ben Leybovich]

Guys, we are having trouble getting deals. Are you finding stuff?

Last week we competed on 150+ units. We had known from the get-go that it was part of a portfolio, but we were hoping, based on broker guidance, that the seller will break up the portfolio to get the highest price on each asset. 

I have reason to believe that ours was the best offer - traded as a portfolio in the end…

It sure seems that vast majority of assets are trading as portfolios now days, which makes sense. These guys bought up portfolios a few years back, by and large with 1031 moneys, waited for the cap rates to compress, and now they are unloading. 

Now, my team, which includes @Sam Grooms and @Brandon Turner can show a combined balance sheet of about $10MM. I can bring more onto the sponsor team if need be. The question is - how much more?!

A typical portfolio is plus or minus 700 doors. On the low end we’d need to show $35 MM on the balance sheet. And in a lot of markets it’d be double +.

So, is this what the market is telling me? I mean - if we are not able to take down such a portfolio, we are limited to one of individual assets, which are seemingly far and few between. There is some smaller stuff out there, but I don't know how to build a syndication-grade management model on a 60-unit.

What are you guys seeing? What are you buying? If you are buying, are you syndicating? And if so, to what hurdles are you underwriting? 

I even spent about an hour on the phone with @Joel Owens discussing other asset classes, such as strip malls. This would be a whole another kind of learning curve, but I can't see paying $122/door in Charlotte for $950 blended weighted rent. The cap rate compression game is over.

Thanks, guys!

[Jeff Kehl]

@Ben Leybovich instead of looking for one piece of a 700 unit portfolio, why not try looking for a couple of 50-100 unit properties you could put together? I've seen a few in that range I've been tempted by and I think you could do ok by finding a good one and then looking for another of similar size close by to get the economies of scale. 

More work to put together but if you really want to syndicate something right now I think you have to think outside the box. Especially if it's your first one. 

I'm recently in a couple of syndications passively that didn't look horrible just for the experience to see how they perform. So I will see how some of these deals I see as marginal actually perform.