List of Syndicators/GPs to AVOID?

[Forest Wu]

Hi! One of my last posts was asking about syndications/PE opportunities. Unfortunately, I've come across quite a few people who are really upset with how their syndication experience has been. Quite a few people have lost a lot of money. I think it'll be very helpful to increase transparency on those operators who have betrayed their investors trust or simply are poor performers. So let's do the following:

1/ List the GP / syndication that you've had a terrible experience with

2/ At a high level (and as much as you're comfortable sharing), provide a reason for why the GP / Syndication should be avoided from your experience (or an acquaintance's experience)

3/ Any lesson learned to help future investors

Let's help each other avoid future mistakes and bring hold GPs/operators accountable. 

[Scott Trench]

@Gino Barbaro 

As always, it will be a case by case basis. 

This thread is about GPs to avoid. Many LPs thanked their sponsors for good returns with millions of dollars in guaranteed fees, and tens of millions in carried interest. To those sponsors, LPs shouldn't say "thank you." They should say, "you're welcome." 

GPs solicited investors by promising huge returns and citing their track records. Some did this very publicly. Then those GPs "earned" fees just for buying the buildings... the same buildings that will now result in many cases in total wipeout for their investors. Some of them are now asking for more capital to bail out these buildings and have very real risk of losing that too.

LPs absolutely have a right to be mad, and a total or near total wipeout of invested capital in the last 3-5 years absolutely invalidates a decade of performance in many, but not all, cases, in my view, especially in the 2010s, when almost anyone with a pulse could make money in multifamily. 

However, what matters more to me than whether a fund or deal is wiped out, is how the sponsor handles it.

"Good" in the context of losing, to me, looks like this:

 Sponsor honestly appraises the situation, and provides a blunt assessment of where they made a bad bet, failed in due diligence, operated poorly, or were totally irresponsible with leverage and timing. Sponsor realistically and honestly susses out this from market challenges, which of course are real.

Sponsor tells investors that they are committed to operating their current business and stewarding investor capital. Sponsor recommits full-time attention to their job, which is to oversee the tens of millions, hundreds of millions, and/or billions of Assets they deploy. 

Sponsor is regularly seen on-site at every property in their portfolio, regardless of personal cost. 

They raised the big bucks, and things aren't going well. Are they going to be on vacation? Are they going to start up the next fun side project or fund? Or are they going to go to work and do everything they can to make their investors whole on their CURRENT deals?

I'm in a deal that's gone south as an LP. My sponsor is doing "Good" in the context of losing.

We all knew what we were getting into. We knew the bet. He executed it. It's his full-time job. It's all he does. He lives within an easy drive of every property in the portfolio. 

Doesn't change that I am getting flushed on the deal. But, I may/will invest with him again. He operated it well. Executed the plan, keeps the units occupied. Just supply and interest rates crushed us. I expect many investors will not be happy, but they also won't publicly roast him for fleecing them.

Other sponsors aren't doing "good" in the context of losing. They will get roasted. 

Some deserve it.