Ashcroft Capital AVAF2 Fund 2 Status - Potential Capital Call?

[David Pike]

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.

[Joel Owens]

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.