All Forum Posts by: Barry Dameshek

Zach, I spoke to Wells last year and they were offering them. However, maybe it's only within certain states like CA because of the elevated property values. Hard to say. Farmers is also available but probably restricted to CA or western states. They will also be more expensive. 

Andrew, these are all salient points. I agree completely that buying anything these last few years would have to make even an average GP money (although in many parts of CA that's become more difficult unless a substantial equity contribution is made). 

I intend to check on what their response is to the higher cost / lower rent increase / market decline scenarios.

Thank you for the feedback.

Hello. I am considering investing in a multi-family private placement opportunity, 300+ units, $40MM+. It is a value-ad deal in which all units will be renovated along with the common area, bbq area, name rebranding, etc. Among other questions are the following:

1- Is a projected 8.7% ROI and 18% IRR (post sale in 5 yrs.) a reasonably attractive return?

2- In the event of a higher vacancy rate than projected, what should an investor's realistic expectation be with respect to the GP's adjustment to the monthly distributions? What about the reverse -- if rents turn out to be HIGHER due to a strong market? Would investors presumably benefit?

3- They are projecting renovation costs of $7500/unit. Is that reasonable?

4- If renovation cost / cap-ex turns out to be higher for some unforeseen reason, can the GP require investors to kick in additional capital? Can that occur at any time? What happens if an investor refuses or just doesn't have the liquidity available at that moment?

5- What metrics or levers are typically in place to ensure investors see larger distributions if cash flow exceeds the projections?

6- Renovations for all units are expected to take place over 24 months. If that's a reasonable timeframe, what happens to the tenants who are still on lease or have renewed? I should note that in the conference call the GP indicated leases are coming due for all tenants over the next 12-24 months.

7- Do GP projections tend to be conservative or aggressive (regardless of what they say there)? I'm sure most will say they are conservative otherwise that would be alarming to some investors. I'm curious to hear from both sides on this question.  

Thank you in advance for your input.

Michael, thank you for the reply. With respect to the returns the next question that comes to mind is what metrics or levers are typically in place to ensure investors will benefit if the cash flow exceeds projections? In other words, at what point does a typical GP to determine there is "excess" cash flow that should be distributed accordingly?

When I work with borrowers seeking financing, their projections are usually conservative. I know every investor group is different just as every transaction is, but do GP's tend to take the same approach with projections -- under promise and over deliver? The risk of being too conservative could make many investors shy away if they feel the projected ROI is too low, so this could prompt some GP's to take the reverse approach to entice as many investors as possible.

I wanted to take a moment to respond to all of you above who took the time to answer my questions in great detail several months back. This is actually the first time in 10 months I've been back on the site, prompted by another opportunity with the same investor group I was asking back then. I didn't proceed with that deal because I just felt my research wasn't through enough, but I'm seriously considering a new opportunity with them now. In my limited due diligence I haven't come across anything negative. I'll continue to ask questions and we'll see what the response is but all indications seem to be that the reputation is clean and their intentions are positive.

I do have some new questions on the new deal:

1- The new project is a multi-family deal, 300+ units, $40MM+ in the southwest. It is a value-ad deal in which all units will be renovated along with the common area, bbq area, name rebranding, etc. Is a projected 8.7% ROI and 18% IRR (post sale in 5 yrs.) a reasonably attractive return?

2- In the event of a higher vacancy rate than projected, what should an investor's realistic expectation be with respect to the GP's adjustment to the monthly distributions? What about the reverse -- if rents turn out to be HIGHER due to a strong market? Would investors presumably benefit? 

3- They are projecting renovation costs of $7500/unit. Is that reasonable?

4- If renovation cost / cap-ex turns out to be higher for some unforeseen reason, can the GP require investors to kick in additional capital? Can that occur at any time? What happens if an investor refuses or just doesn't have the liquidity available at that moment?

5- Renovations for all units are expected to take place over 24 months. If that's a reasonable timeframe, what happens to the tenants who are still on lease or have renewed? I should note that in the conference call the GP indicated leases are coming due for all tenants over the next 12-24 months.

Thank you in advance for your input.

Marc, thx for the reply. They've put together a very professional looking offering with a lot of data but of course I recognize it's incumbent upon investors to do their own due diligence. All indications are they've done fairly well since inception a few years ago but I have no real verifiable evidence of that other than what I've been told. They appear to have successfully figured out how to raise capital but obviously that provides no insight into their ability to manage properties or anything else. I'll continue to peel back the onion as much as I can but I suppose it raises another interesting question: what details are considered appropriate to ask for (I.e. references, prior investors, transaction details, etc.)? Not to sound paranoid but how do I go about verifying THEIR investment in this deal, as well as the others? With all the recent ponzi schemes in the last decade it's hard to feel completely comfortable with any arm's length investment. Thanks. 

Hello. I'm relatively new to BP. While I am currently invested in a few multi family properties, I'm considering my first private placement deal where I'm one of several investors. It's a large deal for roughly 250 units that appears to offer attractive returns as well as a five year exit strategy. I'm considering it to diversity my holdings and to be involved in something that would be well beyond my reach otherwise. On paper everything seems to make sense about the deal. The questions for me are more about trusting the people involved, trusting the projections and getting a grasp on whether everything is as it's being presented. How does an investor on this type of deal verify whether others have actually made their capital contributions? How do you verify if the financials are accurate? I've read up on the General Partner's respective bios (two people) and have spoken with one of them who has an active R/E podcast and has been on BP previously. He certainly understands the business but the track record isn't terribly lengthy simply because the company is relatively young as are the principals. Among other items, I've requested and received a copy of the PPM (Private Placement Memorandum), partnership agreement, the unexecuted loan approval with the lender and have had Q&A's with one of the GP's via email.  While the GP is investing in the deal as well, it's just above the minimum amount of $50k. If anyone can offer insight on the best ways to evaluate this type of deal AND how to determine if the general partner is solid, please advise. Do I need to consult an attorney to review the PPM and partnership agreement? I look forward to feedback from those who have participated in this type of deal or have some knowledge. Thank you.