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Updated 24 days ago,
Ashcroft Capital AVAF2 Fund 2 Status - Potential Capital Call?
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.
*the fund losing $580k/month so $7M/year
To really be able to assess if debt service will be 1.0dscr by the end of 2024, more information is required. However, the 1.0x dscr that they are referencing is a DSCR with interest rate caps that will need to be repurchased. Factor in the cost to repurchase those rate caps, and that's the true DSCR on the current debt or look at the DSCR based on the equivalent fixed rate debt interest rate.
If you’re looking for high level feedback, I would say that it is extremely likely that fund 2 is heading in the same direction as fund 1. Whether to sell today or wait till “tomorrow” would depend on if there is any equity remaining and if you are class A or class B, assuming fund 2 was structured the same as fund 1. We’re likely in an environment of higher for longer interest rates so just be cautious of anyone saying they’re waiting for more favorable capital markets in the next 12 months.
Quote from @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.
Wow this is the Ugliest table i've seen in years. Ashcrack seems to be running the ARK innovation fund of CRE-Multifamily, with every property underwater and no hope for profit anytime soon, and with highest risk loans they could find on the planet to purchase with, I guess Tony Soprano wasn't lending then.
US unemployment near all time lows and GDP stable so that means FED FUNDS rate is not constrictive so they may not need to cut rates for years, and US GVT spending quite a bit more than willing to tax, so long bong Issuance going up (2 trillion issuance projected this year) so more supply = rates go up =CAP rates go up
Capital Calls seem very likely
Quote from @Paul Azad:
Quote from @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.
Wow this is the Ugliest table i've seen in years. Ashcrack seems to be running the ARK innovation fund of CRE-Multifamily, with every property underwater and no hope for profit anytime soon, and with highest risk loans they could find on the planet to purchase with, I guess Tony Soprano wasn't lending then.
US unemployment near all time lows and GDP stable so that means FED FUNDS rate is not constrictive so they may not need to cut rates for years, and US GVT spending quite a bit more than willing to tax, so long bong Issuance going up (2 trillion issuance projected this year) so more supply = rates go up =CAP rates go up
Capital Calls seem very likely
Even if rates drop, those occupancy levels are awful. What is the cause of such low occupancy rates?
- Chris Seveney
Nobody knows where debt will be 12 months from now. The beliefs range from huge drops to huge increases. Most likely they're slightly lower than they are now but not meaningfully. To assess what Fund 2 should do, you really need to understand NOI growth over the past 12 months and forecasted NOI growth. Rent growth has flatlined and will probably only moderately increase over the next 12 months so it really comes down to NOI growth from renovations and whether it will outpace the 3-4% negative return on cost that the properties are currently seeing.
- Rock Star Extraordinaire
- Northeast, TN
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Quote from @Chris Seveney:
Quote from @Paul Azad:
Quote from @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.
Wow this is the Ugliest table i've seen in years. Ashcrack seems to be running the ARK innovation fund of CRE-Multifamily, with every property underwater and no hope for profit anytime soon, and with highest risk loans they could find on the planet to purchase with, I guess Tony Soprano wasn't lending then.
US unemployment near all time lows and GDP stable so that means FED FUNDS rate is not constrictive so they may not need to cut rates for years, and US GVT spending quite a bit more than willing to tax, so long bong Issuance going up (2 trillion issuance projected this year) so more supply = rates go up =CAP rates go up
Capital Calls seem very likely
Even if rates drop, those occupancy levels are awful. What is the cause of such low occupancy rates?
If you read the reviews of some of these places on Google it's apparent the management is poor in many of them and maintenance and capex has probably been ignored for a long time. Some of the buildings like the one in Orlando are in very high crime areas as well.
- JD Martin
- Podcast Guest on Show #243
Does anyone have Any insight into how fund 3 is doing compared to the other two?
Quote from @Dany Namou:
Does anyone have Any insight into how fund 3 is doing compared to the other two?
Looks to me like Fund 3 is a new fund that they are raising capital for. So probably no acquisitions yet.
Quote from @Scott Trench:
Quote from @Dany Namou:
Does anyone have Any insight into how fund 3 is doing compared to the other two?
Looks to me like Fund 3 is a new fund that they are raising capital for. So probably no acquisitions yet.
So as a general example 2 funds aren't doing well and you go open a 3rd fund? Sounds like the government the current programs aren't working so lets open up new programs under new names and forget about those other ones.
- Joel Owens
- Podcast Guest on Show #47
HL Menken "No One ever went broke underestimating the intelligence of the American public."
Putting aside AshCracks utter disdain for the LP investors, anyone willing to invest with them, FUND 3, given their current/recent track record needs to visit with a psychiatrist and also an elementary school math teacher to start with.
Prediction, FUND 3 will be fully subscribed in record time
@Paul Azad
I have no idea how their funds are doing but in speaking with people in the space several GP’s are trying to push a fund right now to survive the next 3-5 years and raise capital before they lose most of the LP’s funds as once that happens raising $ will be near impossible
I am not saying this is the case in this instance and cannot comment on the above, just sharing some common industry knowledge on what some are doing
- Chris Seveney
@David Pike For what it’s worth, I was on a call this evening with a very experienced real estate investment company who stated they don’t expect any material reduction in interest rates for extended time period.  Based on their long-term track record, I would think their opinion is as good as any and better than most. So if this company is correct and Ashcroft is banking on refinancing at lower rates in the next year or two, that may be an iffy proposition. 
@Justin R.
As do I but I suspect I will not be once the dust settles in the next 2-4 years
- Chris Seveney
@Scott Trench
@Bobby Larsen
@Chris Seveney
AVAF3 is doing ok so far. DSCR is 1.26 in May. Distributions are coming through. There are 3 properties in this fund. Occupancy is 90+ on 2 and 89% on 1. The debt on AVAF3 was fixed terms.
We're in fund II and at the moment if we get a cash call, we'll likely decline as I'm thinking it will be throwing additional funds down the well. I don't want to lose our investment but I also don't want to lose our investment plus additional funds. We're in 5 funds/syndications and only 1 of them seems to be doing well. If they all pack in, it will be a huge loss for us but we won't go without food.
- Rock Star Extraordinaire
- Northeast, TN
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Quote from @John Teachout:
Damn, I hate to hear that for you. I had been thinking about posting in here to see if anyone had any updates and apparently you have. I was reading some Reddit forum posts where their DSCR on Fund 2 is down to under 75% which is just crazy. More or less everyone in the forum that was in Fund 2 had the same opinion as you, that they are going to be wiped out from the cash bleed. I saw in a news release where they had bought in another property in Winter Garden for 85 million or thereabouts - does anyone know what fund that purchase is in - is it a new play altogether?
- JD Martin
- Podcast Guest on Show #243
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.
- Joel Owens
- Podcast Guest on Show #47
Quote from @JD Martin:
Quote from @John Teachout:
Damn, I hate to hear that for you. I had been thinking about posting in here to see if anyone had any updates and apparently you have. I was reading some Reddit forum posts where their DSCR on Fund 2 is down to under 75% which is just crazy. More or less everyone in the forum that was in Fund 2 had the same opinion as you, that they are going to be wiped out from the cash bleed. I saw in a news release where they had bought in another property in Winter Garden for 85 million or thereabouts - does anyone know what fund that purchase is in - is it a new play altogether?
With interest rates where they are at and no end in sight for any relief, I am curious what is going to happen to some of these deals that were holding out hoping for lower rates.
- Chris Seveney
- Rock Star Extraordinaire
- Northeast, TN
- 15,665
- Votes |
- 9,780
- Posts
Quote from @Chris Seveney:
Quote from @JD Martin:
Quote from @John Teachout:
Damn, I hate to hear that for you. I had been thinking about posting in here to see if anyone had any updates and apparently you have. I was reading some Reddit forum posts where their DSCR on Fund 2 is down to under 75% which is just crazy. More or less everyone in the forum that was in Fund 2 had the same opinion as you, that they are going to be wiped out from the cash bleed. I saw in a news release where they had bought in another property in Winter Garden for 85 million or thereabouts - does anyone know what fund that purchase is in - is it a new play altogether?
With interest rates where they are at and no end in sight for any relief, I am curious what is going to happen to some of these deals that were holding out hoping for lower rates.
Unfortunately, I suspect we know what's going to happen to them especially if there is any downturn on the lower economic rungs because of tariff wars or similar. Personally I'm glad I'm not in any syndications right now, but that doesn't mean that us sfh dealers don't need to keep our eyes open too. We will probably hold the line on any increases this year just to lower our likelihood of turnover until we see how some of these policies are going to unfold.
- JD Martin
- Podcast Guest on Show #243
