Track Record Pre-2018 vs New Normal- Syndicator Vetting

[John Blanton]

There are some Syndicators who have been on the sidelines for sometime waiting for a 'Correction' or at least relief on current Cap rates. Of course within any investment thesis there must be many 'assumptions' made about future values, economics, etc.

If someone has a successful track record before 2019, but has not bought in this new low interest, hyper Cap rate compression market...is it fair to rely on their past track record to justify future success?

How much credence should you give someone who bought on the upswing (2011-2019) vs buying in the current market environment?

It appears low interest rates are going to be here to stay for quite some time some assumptions must be even more aggressive than 2018-today.

Just making sure I am comparing apples to apples...

[Arn Cenedella]

@John Blanton

Yours is a legitimate and insightful question.

The syndication model has blown up in the past 10 years. Prior to that time, there just weren’t many syndications. I am fuzzy on the details but there was some change in the law that opened the door to widespread syndication use.

So truth is most sponsors got into the syndication space during the boom economy and so your question about how these sponsors perform and how syndications perform in a different economic environment is a good one.

There are many excellent syndicators out there - I invested in 6 as a LP and I am just closing my first Co-sponsor syndication deal as a GP. Many have bought 10+ deals but maybe only have exited a few. Many have bought and not yet exited.

I think each investor has to evaluate any syndication deal from multiple aspects - the market, the property and deal itself, and the sponsor. Each investor should know the data and the numbers but I also think at a certain point, investors need to rely on their experience and instinct.

I would submit investing is as much an art as a science. It’s not just all about the numbers. Instinct is particularly useful in evaluating sponsors.

Great question, will be interested to follow this thread.