Ashcroft Capital AVAF2 Fund 2 Status - Potential Capital Call?

Rental Property Investor · Chicago, IL · Member since 2020 · 11 posts · 13 votes

I just received an email this morning about Fund 2 with an update on first quarter performance. They had paused distributions in 2023. I calculated the overall DSCR to be 0.77.

1) I know Ashcroft's Fund 1 just had a 20% capital call. Based on the charts below, do you think Fund 2 investors should be expecting a capital call as well?

2) For Fund 2 investors, would it be beneficial for Ashcroft to sell the buildings now so we can recoup some of our investment instead of the fund losing $580k/year, buying more rate caps, and having a capital call? See charts from Ashcroft below.

FROM ASHCROFT:
Based on projections, we anticipate achieving a 1.0x DSCR by the end of 2024. In the interim, we have a $4M reserve balance to cover any cash shortfall.

Debt Terms - We anticipate re-evaluating a refinance in 12-24 months, as the capital markets improve. Given current cap rate expansion, and the interest rate
environment, it would require a significant capital infusion to refinance now.

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Joel OwensBusiness Member

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Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes

What I have been seeing by various syndication companies.

1. Start a new fund

2. Change their name all together like it never existed

3. Buy new properties in existing funds while trying to sell off the dogs or get the fleas off the dogs.

4. Go dabble in other asset classes they know almost NOTHING about to then blend a portfolio to entice investment.

Personally if I lost that kind of money for investors I would not be able to sleep at night. As a commercial broker also talking with thousands of millionaires over the decades in this business I know having wealth myself coming from nothing how hard earned those dollars are. Sometimes it's not just the current person that earned them but a family legacy built on decades or hundreds of years of time and sacrifice. I make it a personal challenge not to lose even 1 dollar of a syndication investment and make every deal profitable. I don't really believe in waterfalls and all these complex metrics to do a deal. I like VANILLA syndications easy to understand the investment and what is being distributed and when.

Our syndication structure for value add single tenant NNN is typically we buy all cash. We are currently buying blend and extends with tenants having low years remaining on the guaranteed primary lease term.

Closed on one last month at 11 cap rate. Closing another this month at 11.75 cap rate. Closing another end of January at 10.7 cap rate. The goal between the existing cash flow and the estimated equity upside on the lease renewal to hit 2X total multiple to LP's in 3 years or under time. We typically do 8% pref starting out day 1 and split of cash flow thereafter 50/50 between LP and GP or we as GP charge 10% management fee of NOI it just depends on the deal. We tend to split equity upside 50/50 between LP and GP. Our minimum per deal is currently 200k but fixing to go to 300k due to investment demand.

I have been looking at lots of new offerings from multifamily syndicators and they throw big flyer saying all these returns and then you look into the pitch deck and it makes no sense to me. The LP investors think they must be missing some key item looking at all of the numbers so invest anyways. It boggles my mind.

Sorry John Teachout for your expected loss hopefully it doesn't happen.

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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
1y
I feel for these investors. When I sold multifamily as a broker decades ago I saw the cycles. It was like a game of musical chairs.
I knew many years ago when everyone and their brother was buying multifamily saying you can't lose it was residential 2.0 selling the story from single family to multifamily. I don't care what anyone says you can lose your *** with any asset class if you do not buy right yourself or invest with the proper syndicator who understands this.
You have to be careful with multifamily syndicators now showing past performance like the new property will perform as good or better than the last one in record time etc.
Some syndicators craft the offerings in a way that mind screws the investors ( talking in generalities only not specific companies) that hypes them up for the buy in. Yes they typically do more deals but the syndicator loses their soul in the name of making money fast without thought to who gets hurt financially along the way.
Again I love buying all cash. I am not a slave to a lender or the financial markets as to what will happen next.
WHY do syndicators take on tons of debt and leverage high then? It's often the only way they can pump the expected pref cash on cash projections to investors and make the numbers work. If they paid all cash the could not typically pay the pref accredited investors are demanding to do a deal.
They make big fees also on a larger property going in. They can charge bigger asset management expense fee based on higher numbers. They can raise less capital by leveraging debt.
Example if their LP investor capital base is 100 million to invest as a cap then they could buy 1- 100 million multifamily all cash or 3 to 4 projects for 300 to 350 million as an example. They make more fees with the bigger numbers.
When I syndicate I ask what is best for their needs?
My net worth might not be what some of these syndicators are but I go to sleep very well at night.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
1y
Quote from @Joel Owens:

I feel for these investors. When I sold multifamily as a broker decades ago I saw the cycles. It was like a game of musical chairs.
I knew many years ago when everyone and their brother was buying multifamily saying you can't lose it was residential 2.0 selling the story from single family to multifamily. I don't care what anyone says you can lose your *** with any asset class if you do not buy right yourself or invest with the proper syndicator who understands this.
You have to be careful with multifamily syndicators now showing past performance like the new property will perform as good or better than the last one in record time etc.
Some syndicators craft the offerings in a way that mind screws the investors ( talking in generalities only not specific companies) that hypes them up for the buy in. Yes they typically do more deals but the syndicator loses their soul in the name of making money fast without thought to who gets hurt financially along the way.
Again I love buying all cash. I am not a slave to a lender or the financial markets as to what will happen next.
WHY do syndicators take on tons of debt and leverage high then? It's often the only way they can pump the expected pref cash on cash projections to investors and make the numbers work. If they paid all cash the could not typically pay the pref accredited investors are demanding to do a deal.
They make big fees also on a larger property going in. They can charge bigger asset management expense fee based on higher numbers. They can raise less capital by leveraging debt.
Example if their LP investor capital base is 100 million to invest as a cap then they could buy 1- 100 million multifamily all cash or 3 to 4 projects for 300 to 350 million as an example. They make more fees with the bigger numbers.
When I syndicate I ask what is best for their needs?
My net worth might not be what some of these syndicators are but I go to sleep very well at night.

no debt on a site like BP is a ultra minority view as so many investors chase yield with very little comprehension of risk . Just think how many GP;s would raise cash when their deal all cash is bringing in a 5 cap and the other guys is showing some huge return.. be really tough sell I remember being one GP over the years that only buys in cash.. Myself all but one of my deals is all cash no debt.. and of course on a personal level no debt is were we have to end up at retirement age. u cut down how many investments you need to make the same cash flow much better safer and easier.. but i get it for those starting out debt is pretty much required. And of course one of my main business's i providing debt ( in a JV format not a loan format) for flippers and investors so we have no debt on our projects.
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2 Reply
Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1y
Quote from @Jay Hinrichs:

Quote from @Joel Owens:

I feel for these investors. When I sold multifamily as a broker decades ago I saw the cycles. It was like a game of musical chairs.
I knew many years ago when everyone and their brother was buying multifamily saying you can't lose it was residential 2.0 selling the story from single family to multifamily. I don't care what anyone says you can lose your *** with any asset class if you do not buy right yourself or invest with the proper syndicator who understands this.
You have to be careful with multifamily syndicators now showing past performance like the new property will perform as good or better than the last one in record time etc.
Some syndicators craft the offerings in a way that mind screws the investors ( talking in generalities only not specific companies) that hypes them up for the buy in. Yes they typically do more deals but the syndicator loses their soul in the name of making money fast without thought to who gets hurt financially along the way.
Again I love buying all cash. I am not a slave to a lender or the financial markets as to what will happen next.
WHY do syndicators take on tons of debt and leverage high then? It's often the only way they can pump the expected pref cash on cash projections to investors and make the numbers work. If they paid all cash the could not typically pay the pref accredited investors are demanding to do a deal.
They make big fees also on a larger property going in. They can charge bigger asset management expense fee based on higher numbers. They can raise less capital by leveraging debt.
Example if their LP investor capital base is 100 million to invest as a cap then they could buy 1- 100 million multifamily all cash or 3 to 4 projects for 300 to 350 million as an example. They make more fees with the bigger numbers.
When I syndicate I ask what is best for their needs?
My net worth might not be what some of these syndicators are but I go to sleep very well at night.

no debt on a site like BP is a ultra minority view as so many investors chase yield with very little comprehension of risk . Just think how many GP;s would raise cash when their deal all cash is bringing in a 5 cap and the other guys is showing some huge return.. be really tough sell I remember being one GP over the years that only buys in cash.. Myself all but one of my deals is all cash no debt.. and of course on a personal level no debt is were we have to end up at retirement age. u cut down how many investments you need to make the same cash flow much better safer and easier.. but i get it for those starting out debt is pretty much required. And of course one of my main business's i providing debt ( in a JV format not a loan format) for flippers and investors so we have no debt on our projects.

I agree. We have a fund that has no debt, do you think we can compete with MF syndicators on the upside? People need to understand debt is like an accelerant, it can accelerate the returns to not only the positive but the negative. So when things go bad, they go real bad. Unfortunately people on saw the good during 2020-2022ish and now are on the other end of the spectrum. I have posted this in other forums previously and there is no right answer whcih is would you rather get 10% investing in something with no debt or 15-20% with 75% debt? No right or wrong answer here but its something people in the past would not even consider as they would look at 15-20%.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
1y
Quote from @Chris Seveney:

Quote from @Jay Hinrichs:

Quote from @Joel Owens:

I feel for these investors. When I sold multifamily as a broker decades ago I saw the cycles. It was like a game of musical chairs.
I knew many years ago when everyone and their brother was buying multifamily saying you can't lose it was residential 2.0 selling the story from single family to multifamily. I don't care what anyone says you can lose your *** with any asset class if you do not buy right yourself or invest with the proper syndicator who understands this.
You have to be careful with multifamily syndicators now showing past performance like the new property will perform as good or better than the last one in record time etc.
Some syndicators craft the offerings in a way that mind screws the investors ( talking in generalities only not specific companies) that hypes them up for the buy in. Yes they typically do more deals but the syndicator loses their soul in the name of making money fast without thought to who gets hurt financially along the way.
Again I love buying all cash. I am not a slave to a lender or the financial markets as to what will happen next.
WHY do syndicators take on tons of debt and leverage high then? It's often the only way they can pump the expected pref cash on cash projections to investors and make the numbers work. If they paid all cash the could not typically pay the pref accredited investors are demanding to do a deal.
They make big fees also on a larger property going in. They can charge bigger asset management expense fee based on higher numbers. They can raise less capital by leveraging debt.
Example if their LP investor capital base is 100 million to invest as a cap then they could buy 1- 100 million multifamily all cash or 3 to 4 projects for 300 to 350 million as an example. They make more fees with the bigger numbers.
When I syndicate I ask what is best for their needs?
My net worth might not be what some of these syndicators are but I go to sleep very well at night.

no debt on a site like BP is a ultra minority view as so many investors chase yield with very little comprehension of risk . Just think how many GP;s would raise cash when their deal all cash is bringing in a 5 cap and the other guys is showing some huge return.. be really tough sell I remember being one GP over the years that only buys in cash.. Myself all but one of my deals is all cash no debt.. and of course on a personal level no debt is were we have to end up at retirement age. u cut down how many investments you need to make the same cash flow much better safer and easier.. but i get it for those starting out debt is pretty much required. And of course one of my main business's i providing debt ( in a JV format not a loan format) for flippers and investors so we have no debt on our projects.

I agree. We have a fund that has no debt, do you think we can compete with MF syndicators on the upside? People need to understand debt is like an accelerant, it can accelerate the returns to not only the positive but the negative. So when things go bad, they go real bad. Unfortunately people on saw the good during 2020-2022ish and now are on the other end of the spectrum. I have posted this in other forums previously and there is no right answer whcih is would you rather get 10% investing in something with no debt or 15-20% with 75% debt? No right or wrong answer here but its something people in the past would not even consider as they would look at 15-20%.

I just got an e mail blast from one of the syndicators that started in 19 or so.. He now has a fund he wants to raise money for.. he listed the use of the money.

1. pay off my 20% gap fund on apartment complex so paying you 12 will save me money.

and a couple other items he mentioned.. My thought is 100% of this money will go into his failing syndication's and instead of saying he has a cash call .. he is just starting anther fund that will in essence be a rescue fund for himself.. returns are kind of on par with the Norada Notes.. and of course all unsecured.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
1y
My accredited investors like higher yields of course BUT ONLY when downside protection is factored in.
I have found the newly accredited investors not always but many times to be unreasonable. The ones that make 200k or under a year and want that 300k invested to do miracles or magic. When they do not find that with me or other realistic syndicators they get sucked into they must have landed the one company that has the magic pill (returns) they are looking for. Often what they get is marketing that looks like a diamond but performs like a lump of coal.
I like the accredited investors that make many millions a year from their job or business. Investing larger amounts is fine with them and they put more emphasis on experience of the syndicator over a higher return for cash flow because they already make tons of cash annually. What they are interested in is lower risk investments with safer yields that that hopefully outpace inflation and if get lucky also have some equity growth.
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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1y
Quote from @Jay Hinrichs:

Quote from @Chris Seveney:

Quote from @Jay Hinrichs:

Quote from @Joel Owens:

I feel for these investors. When I sold multifamily as a broker decades ago I saw the cycles. It was like a game of musical chairs.
I knew many years ago when everyone and their brother was buying multifamily saying you can't lose it was residential 2.0 selling the story from single family to multifamily. I don't care what anyone says you can lose your *** with any asset class if you do not buy right yourself or invest with the proper syndicator who understands this.
You have to be careful with multifamily syndicators now showing past performance like the new property will perform as good or better than the last one in record time etc.
Some syndicators craft the offerings in a way that mind screws the investors ( talking in generalities only not specific companies) that hypes them up for the buy in. Yes they typically do more deals but the syndicator loses their soul in the name of making money fast without thought to who gets hurt financially along the way.
Again I love buying all cash. I am not a slave to a lender or the financial markets as to what will happen next.
WHY do syndicators take on tons of debt and leverage high then? It's often the only way they can pump the expected pref cash on cash projections to investors and make the numbers work. If they paid all cash the could not typically pay the pref accredited investors are demanding to do a deal.
They make big fees also on a larger property going in. They can charge bigger asset management expense fee based on higher numbers. They can raise less capital by leveraging debt.
Example if their LP investor capital base is 100 million to invest as a cap then they could buy 1- 100 million multifamily all cash or 3 to 4 projects for 300 to 350 million as an example. They make more fees with the bigger numbers.
When I syndicate I ask what is best for their needs?
My net worth might not be what some of these syndicators are but I go to sleep very well at night.

no debt on a site like BP is a ultra minority view as so many investors chase yield with very little comprehension of risk . Just think how many GP;s would raise cash when their deal all cash is bringing in a 5 cap and the other guys is showing some huge return.. be really tough sell I remember being one GP over the years that only buys in cash.. Myself all but one of my deals is all cash no debt.. and of course on a personal level no debt is were we have to end up at retirement age. u cut down how many investments you need to make the same cash flow much better safer and easier.. but i get it for those starting out debt is pretty much required. And of course one of my main business's i providing debt ( in a JV format not a loan format) for flippers and investors so we have no debt on our projects.

I agree. We have a fund that has no debt, do you think we can compete with MF syndicators on the upside? People need to understand debt is like an accelerant, it can accelerate the returns to not only the positive but the negative. So when things go bad, they go real bad. Unfortunately people on saw the good during 2020-2022ish and now are on the other end of the spectrum. I have posted this in other forums previously and there is no right answer whcih is would you rather get 10% investing in something with no debt or 15-20% with 75% debt? No right or wrong answer here but its something people in the past would not even consider as they would look at 15-20%.

I just got an e mail blast from one of the syndicators that started in 19 or so.. He now has a fund he wants to raise money for.. he listed the use of the money.

1. pay off my 20% gap fund on apartment complex so paying you 12 will save me money.

and a couple other items he mentioned.. My thought is 100% of this money will go into his failing syndication's and instead of saying he has a cash call .. he is just starting anther fund that will in essence be a rescue fund for himself.. returns are kind of on par with the Norada Notes.. and of course all unsecured.

If it walks like a duck and quacks like a duck... I agree seeing a lot of these and is it really saving them money or delaying the inevitable?
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John Teachout
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
1y
A cash call can't save AVAF2, however, it can kick the can down the road so they won't be forced to "exit" at a loss. Many of the syndicators that are in trouble with current projects are delaying exiting so they can advertise and tout their excellent results from every property they exited. I suspect there's going to be little participation in the fund regarding the cash call and thus Ashcroft will be forced to exit. Most likely however, they will sell a property at a significant loss and use the cash to float the fund for longer. But wait, I don't see how they will even net enough to satisfy the loan so that's not a viable option. There's no possibility in my estimation that this fund will not lose 100% of our investment.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
1y
Quote from @Chris Seveney:

Quote from @Jay Hinrichs:

Quote from @Chris Seveney:

Quote from @Jay Hinrichs:

Quote from @Joel Owens:

I feel for these investors. When I sold multifamily as a broker decades ago I saw the cycles. It was like a game of musical chairs.
I knew many years ago when everyone and their brother was buying multifamily saying you can't lose it was residential 2.0 selling the story from single family to multifamily. I don't care what anyone says you can lose your *** with any asset class if you do not buy right yourself or invest with the proper syndicator who understands this.
You have to be careful with multifamily syndicators now showing past performance like the new property will perform as good or better than the last one in record time etc.
Some syndicators craft the offerings in a way that mind screws the investors ( talking in generalities only not specific companies) that hypes them up for the buy in. Yes they typically do more deals but the syndicator loses their soul in the name of making money fast without thought to who gets hurt financially along the way.
Again I love buying all cash. I am not a slave to a lender or the financial markets as to what will happen next.
WHY do syndicators take on tons of debt and leverage high then? It's often the only way they can pump the expected pref cash on cash projections to investors and make the numbers work. If they paid all cash the could not typically pay the pref accredited investors are demanding to do a deal.
They make big fees also on a larger property going in. They can charge bigger asset management expense fee based on higher numbers. They can raise less capital by leveraging debt.
Example if their LP investor capital base is 100 million to invest as a cap then they could buy 1- 100 million multifamily all cash or 3 to 4 projects for 300 to 350 million as an example. They make more fees with the bigger numbers.
When I syndicate I ask what is best for their needs?
My net worth might not be what some of these syndicators are but I go to sleep very well at night.

no debt on a site like BP is a ultra minority view as so many investors chase yield with very little comprehension of risk . Just think how many GP;s would raise cash when their deal all cash is bringing in a 5 cap and the other guys is showing some huge return.. be really tough sell I remember being one GP over the years that only buys in cash.. Myself all but one of my deals is all cash no debt.. and of course on a personal level no debt is were we have to end up at retirement age. u cut down how many investments you need to make the same cash flow much better safer and easier.. but i get it for those starting out debt is pretty much required. And of course one of my main business's i providing debt ( in a JV format not a loan format) for flippers and investors so we have no debt on our projects.

I agree. We have a fund that has no debt, do you think we can compete with MF syndicators on the upside? People need to understand debt is like an accelerant, it can accelerate the returns to not only the positive but the negative. So when things go bad, they go real bad. Unfortunately people on saw the good during 2020-2022ish and now are on the other end of the spectrum. I have posted this in other forums previously and there is no right answer whcih is would you rather get 10% investing in something with no debt or 15-20% with 75% debt? No right or wrong answer here but its something people in the past would not even consider as they would look at 15-20%.

I just got an e mail blast from one of the syndicators that started in 19 or so.. He now has a fund he wants to raise money for.. he listed the use of the money.

1. pay off my 20% gap fund on apartment complex so paying you 12 will save me money.

and a couple other items he mentioned.. My thought is 100% of this money will go into his failing syndication's and instead of saying he has a cash call .. he is just starting anther fund that will in essence be a rescue fund for himself.. returns are kind of on par with the Norada Notes.. and of course all unsecured.

If it walks like a duck and quacks like a duck... I agree seeing a lot of these and is it really saving them money or delaying the inevitable?

I watched this particular GP meet him at a mastermind when he pitched me for his very first deal. Then a few years later after he closes a few of these he is posting about the 4 million dollar home he bought on the water I wont mention the city . Just seems kind of typical. Now he is raising a fund based on you need cash flow since his deals are not doing that.. But when you look at use of funds one is lending his partnerships money because they are leaking oil .. At least he was up front about it.. they are going to retire 20% apr mezz debt with 12 to 15% not sure how much that will help.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
1y
Quote from @John Teachout:
A cash call can't save AVAF2, however, it can kick the can down the road so they won't be forced to "exit" at a loss. Many of the syndicators that are in trouble with current projects are delaying exiting so they can advertise and tout their excellent results from every property they exited. I suspect there's going to be little participation in the fund regarding the cash call and thus Ashcroft will be forced to exit. Most likely however, they will sell a property at a significant loss and use the cash to float the fund for longer. But wait, I don't see how they will even net enough to satisfy the loan so that's not a viable option. There's no possibility in my estimation that this fund will not lose 100% of our investment.

can they throw it in BK and try to cram down lenders ?
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John Teachout
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
1y
Not sure that would be of any benefit since it would still be a "failed deal". That's what I think they are desperately trying to avoid because it will stain their amazing performance record. I saw the ads for the notes they're selling and thinking that someone is likely to get burned on those too. They're apparently pulling every lever and turning every dial but forestalling the inevitable will be their only possible outcome.
0 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
1y
Since the syndicator is likely under water are they giving away their pref or return of the fees they made in exchange for a capital call for a potential sinking ship?
It seems that if the LP investors are asked to do more to save a project then the syndicator should give up their benefits and use it as a learning experience.
People need to remember short term floating debt or fixed for low years is not good in most cases. If debt has to be ran and re-ran multiple times and tweaked with number projections to work going in that is a time bomb and recipe for disaster in the future.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
1y
Quote from @John Teachout:

Not sure that would be of any benefit since it would still be a "failed deal". That's what I think they are desperately trying to avoid because it will stain their amazing performance record. I saw the ads for the notes they're selling and thinking that someone is likely to get burned on those too. They're apparently pulling every lever and turning every dial but forestalling the inevitable will be their only possible outcome.

the notes i mentioned were a different company was not ashcroft but I can see other syndicators hacking others to try to raise capital .. I think Open door even tried another avenue as well although I dont know what the use of their capital was for or advertised for.
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Himali Shah
Member since 2021 · 1 post · 0 votes
1y
I am a first time investor in syndications and picked Ashcroft in 2022 for the reputation they had built. I spoke with them today about restarting distributions and learnt they are going to issue a capital call on avaf2. I think this is a lost cause and there is no way I am putting in more money into something that has been mismanaged to begin with. Is there a way to vote for a forced sale to hopefully recoup portion of the initial investment?
0 Reply
Dan Rowley
Investor · Cary, NC · Member since 2012 · 218 posts · 196 votes
1y
there is a fairly new 'syndicator review' site and I'd encourage those affected to post their honest, unvarnished reviews: https://investclearly.com/sponsors/ashcroft-capital
0 Reply
John Teachout
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
1y
Quote from @Himali Shah:

I am a first time investor in syndications and picked Ashcroft in 2022 for the reputation they had built. I spoke with them today about restarting distributions and learnt they are going to issue a capital call on avaf2. I think this is a lost cause and there is no way I am putting in more money into something that has been mismanaged to begin with. Is there a way to vote for a forced sale to hopefully recoup portion of the initial investment?

I don't believe that AVAF2 can be saved no matter how much capital is infused. We're expecting the cash call and will not participate. We've already written our investment off as a 100% loss. A cash call will only kick the can down the road further but based on what I'm seeing in the reports, this is a hopeless cause. It will however keep Ashcroft from "exiting" at a loss and leaving a stain on their touted good record. And don't think a forced sale will get you any money back, they'll be lucky if the bank gets what's due. Either way, mentally prepare for a complete loss of principal because that's where this is going.
0 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
1y
Himali typically unless this is a TIC model ( usually where each individual investor or entity gets a voting right ) then NO you likely cannot force a sale.
You would have to get an attorney to review all your docs for thousands in costs to give a legal opinion and reality of trying to get some money back. Usually there is language in the investment that you understand all potential loss of capital is possible. You are an accredited investor correct? If they did offering to non-accredited investors then there are more rules and processes to follow because those investors are not normally classified as sophisticated when it comes to investments and have additional protections sometimes.
In the future when people invest PLEASE look at the property and what debt the syndicator is using and if their numbers seem realistic or not. If the heavens and the stars have to align perfectly for the stated outcome to happen then you have minimal upside and huge downside risk. No reason to do those deals there are lots of syndications that do not use those models.
A potential 1 percent more return on paper annually means nothing if it doesn't happen and some or all capital is lost.
You need to first look at your investment amount (50k,100k) versus your net worth and what you make per year. If you make 300k,500k, 1 million a year it's not worth pursuing the 50k in time and cost. Getting say 25k back minus 5k legal in 12 months time could use 500k worth of your earning time and cause lots of daily stress.
A syndicator in this situation might just want to give high equity on better deals they are syndicating now to those that have had losses on their other deals to try and make up for it.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
1y
Quote from @Joel Owens:

Himali typically unless this is a TIC model ( usually where each individual investor or entity gets a voting right ) then NO you likely cannot force a sale.
You would have to get an attorney to review all your docs for thousands in costs to give a legal opinion and reality of trying to get some money back. Usually there is language in the investment that you understand all potential loss of capital is possible. You are an accredited investor correct? If they did offering to non-accredited investors then there are more rules and processes to follow because those investors are not normally classified as sophisticated when it comes to investments and have additional protections sometimes.
In the future when people invest PLEASE look at the property and what debt the syndicator is using and if their numbers seem realistic or not. If the heavens and the stars have to align perfectly for the stated outcome to happen then you have minimal upside and huge downside risk. No reason to do those deals there are lots of syndications that do not use those models.
A potential 1 percent more return on paper annually means nothing if it doesn't happen and some or all capital is lost.
You need to first look at your investment amount (50k,100k) versus your net worth and what you make per year. If you make 300k,500k, 1 million a year it's not worth pursuing the 50k in time and cost. Getting say 25k back minus 5k legal in 12 months time could use 500k worth of your earning time and cause lots of daily stress.
A syndicator in this situation might just want to give high equity on better deals they are syndicating now to those that have had losses on their other deals to try and make up for it.

Last Time I was around this kind of situation was in 89 90 in Northern CA. we had the war and the earthquake and left over from tax reform and syndicators were having major problems the one that I worked with as a 1099 doing land development for them.. They ended up losing ALL of their 500 million worth of apartments..but its started in Texas and went downhill from there. And what investors did there was put committees together of investors and kicked out the GP.. Now this got control from the BP but these folks could not really do any better and many did way worse with folks throwing more money in only to that as well.. The only one who profited in that deal was the Attorney they hired..
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Paul Azad
Member since 2024 · 162 posts · 232 votes
1y
Quote from @Himali Shah:

I am a first time investor in syndications and picked Ashcroft in 2022 for the reputation they had built. I spoke with them today about restarting distributions and learnt they are going to issue a capital call on avaf2. I think this is a lost cause and there is no way I am putting in more money into something that has been mismanaged to begin with. Is there a way to vote for a forced sale to hopefully recoup portion of the initial investment?

As a first time investor in syndications, very sorry to hear about this situation with Ashcroft. Obviously many young and inexperienced or too aggressive syndicators got caught up in a very hot multi-family market a few years ago fueled by historically low mortgage rates allowing for extremely low market cap rates where everyone was committing the cardinal sin of investing, which is "paying too much", but they were continuously bailed out by a greater fool every 18 to 24 months. It was the CRE equivalent of 1999 and multifamily was the JDS Uniphase and pets.com. Unfortunately, now they are likely underwater 30 or 40% due to the return of interest rates to a more normalized level but I fear still historically lower than where they will be in the next two to 5 years. With massive inventory which came online last year and this year as an echo from those boom years and more likely rising interest rates it may be best for you to stay out of multifamily syndication for another one to two years when the ground should improve, as now permits to start to do multifamily are near all-time lows which should create a lack of supply two to three years from now. Thus, forcing up rents and net operating incomes and even with rising cap rates the space should become profitable again. Also, you should be able to buy multifamily units at possibly much lower prices one to two years from now as it takes time for any "market to clear", meaning sellers have to come to terms with a permanence of their loss or the banks get scared and call in the loans. Don't be afraid of investing in syndications in the future, they can be extremely lucrative. Spend this time learning more and studying the different CRE sectors. Consider reading the book "Investing in real estate private equity" by Sean Cook. As well as "The Hands off investor" by Brian Burke. Invest the minimal amount into multiple syndications in different geographies once you feel educated on a particular sector, to both diversify risk but to also study different syndicators on how they acquire/manage/dispose of properties, then back the best jockeys over time as you learn more. good luck :)
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
1y
On minimums our minimum right now is 300k per investor per property.
As a syndicator and being in NNN 21 years I value more the long term accredited syndicator investor. I want more the ongoing relationship to scale together versus the spreadsheet investor that only looks at our company as a diversification tactic.
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David Pike
OP
Rental Property Investor · Chicago, IL · Member since 2020 · 11 posts · 13 votes
1y
Just listened to Ashcroft meeting yesterday about Fund 2. They issued a 19% capital call. If everyone participates, the best case scenario is that they lose 75% of your original investment. This is beyond disappointing. They over-paid for and over-levered the properties in Fund 2 not to mention not diversifying geographically.
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John Teachout
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
1y
Yes, they want you to pay an additional 19% to perhaps get back 25% of your initial investment for class B investors. And this potential 25% return on capital requires certain favorable things to happen both with the properties and the market. Ashcroft is trying to keep kicking the can down the road on this failure because once it goes belly up, there's going to be a stain on their wonderful performance history. I don't see a scenario where there will be any return on or of capital. This one is a write off.

If the properties had been better managed, they probably wouldn't be in this situation. I realize that the interest rate debacle caused a lot of the damage but the low occupancy and collections tipped it into failure. There seems to be improvements but it's resulting in "losing less" per month. I just can't see a "realistic" scenario where they pull this out of the dive. They can expect zero additional funds from us.
1 Reply
- Jay HinrichsBusiness Member
  Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
  1y
  Quote from @John Teachout:
  
  Yes, they want you to pay an additional 19% to perhaps get back 25% of your initial investment for class B investors. And this potential 25% return on capital requires certain favorable things to happen both with the properties and the market. Ashcroft is trying to keep kicking the can down the road on this failure because once it goes belly up, there's going to be a stain on their wonderful performance history. I don't see a scenario where there will be any return on or of capital. This one is a write off.
  
  If the properties had been better managed, they probably wouldn't be in this situation. I realize that the interest rate debacle caused a lot of the damage but the low occupancy and collections tipped it into failure. There seems to be improvements but it's resulting in "losing less" per month. I just can't see a "realistic" scenario where they pull this out of the dive. They can expect zero additional funds from us.
  
  not sure why anyone would put up that kind of money for the chance of only getting a small portion of your money back?.. maybe with this Terriff stuff going on interest rates will drop faster than expected and bail these guys out somewhat ???? I guess one can only hope.
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