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All Forum Posts by: Bryan Hartlen

Bryan Hartlen has started 28 posts and replied 277 times.

Post: Looking for Loans and Lenders

Bryan Hartlen
Posted
  • Investor
  • Phoenix, AZ
  • Posts 282
  • Votes 136

Not a lot of details but LimaOne offers MF bridge loans nationally. 

Post: Limited Partner terms?

Bryan Hartlen
Posted
  • Investor
  • Phoenix, AZ
  • Posts 282
  • Votes 136
Quote from @Evan Polaski:

......

But YOUR investors may be wanting a 15+ yr hold.  In this instance, you would likely want to structure the deal differently.  Maybe it is a lower pref, but a GP split.  Maybe there are terms in there that let you start sharing upon refi.  

I know of many groups that are a 5-6% annualized distribution rate and don't market IRRs.  Why?  Because their investors don't want to sell.  They want near indefinite holds and just keep the cash flow coming forever.  They also don't front load the tax savings, like many syndicators.  Because this is a deferral strategy, and their investors don't want the huge tax bill at the end.  They want to keep offsetting their distributions year over year, not burn it off early and then have to pay taxes on their distributions into years 5-20...

Evan, that's something we'll have to consider.  Our current network of investors would be hesitant to make an indefinite commitment of capital. But we have discussed a plan that would allow investor's to optionally "roll" their initial investment into something different once the property has stabilized. The legal logistics to make that work assuming some investors would want to roll over and others would want to be cashed out, is not something we've tackled yet. 

Post: Limited Partner terms?

Bryan Hartlen
Posted
  • Investor
  • Phoenix, AZ
  • Posts 282
  • Votes 136
Quote from @Justin Moy:

...

I've also seen it be more common for equity to readjust at certain hurdles. Common would be 70/30 investor / GP split with anything above a certain IRR or equity multiple readjusts to 50/50. Personally I don't care for that structure but it's becoming more common.

Thanks Justin - why don't you like the tiered structure?  Seems like a good way to drive more returns for the GP for exceptional returns (after fulfilling the proforma baseline).

Post: Limited Partner terms?

Bryan Hartlen
Posted
  • Investor
  • Phoenix, AZ
  • Posts 282
  • Votes 136
Quote from @Chris Seveney:

....If you need to raise funds from investors not in your network you may need to offer sweeter terms than having a deep investor base to get them to invest in your deal over other deals

Chris, our first objective is to make sure we offer our previous investors something that is competitive with the market.  But you make a good point that we've been mulling that over... our raise may be beyond our current investor pool's available resources.  

Post: Limited Partner terms?

Bryan Hartlen
Posted
  • Investor
  • Phoenix, AZ
  • Posts 282
  • Votes 136
Quote from @Gerardo Waisbaum:

Hi Bryan,

Based on our experience and the expectations of our LP investors, we have structured our deals with the following criteria:

Minimum IRR: We aim for a minimum IRR of 15%.
Average CoC Return: Our target average CoC return is 20% per year for 5-year plans, resulting in a total of 100% over the holding period.
Minimum Preferred Return: We offer a minimum preferred return of 7% to our LP investors.

Regarding depreciation, we actively share the depreciation benefits, including cost segregation, bonus depreciation, and other tax strategies, with our investors.

Good luck!

Thank you Gerardo.  Do you include the depreciation benefits in your IRR or CoC projections or is it let as an unquantified bonus?   

Post: Limited Partner terms?

Bryan Hartlen
Posted
  • Investor
  • Phoenix, AZ
  • Posts 282
  • Votes 136

Hi all. We’re putting together an opportunity on a mid-sized MF apartment. We’d like to structure this as a GP/LP opportunity. This will not be the first MF deal we’ve done, but it would be the first one we’ve structured this way and new for our private investors. I’m looking for your thoughts and opinions on what you’d find compelling as an offering in terms of the following:

- minimum IRR

- average CoC return

- minimum preferred return

- preference for share or operating cashflow compared to equity share (how much cashflow split, if any, would you forego for a larger share of equity split? Or visa-versa?).

- would a share of the depreciation expense be interesting?

Thank you for your thoughts and opinions.

Post: Analyzing MF asset with assumable loan

Bryan Hartlen
Posted
  • Investor
  • Phoenix, AZ
  • Posts 282
  • Votes 136

@Scott Moore we tried this recently but we assumed that the assumed loan would stay in first position and that we wouldn’t find another lender willing to be in second position (or wouldn’t be allowed by the first position lender)… so the balance would have to be covered by our members capital raise and would be paid out according to those terms. When we entered the assumable loan, we kept the current principal, rate and payment amount by tweaking the term, and set the down payment to 0, so the cash flow numbers would work.

Post: Questions on Preferred Rate of Return in Syndication Deals

Bryan Hartlen
Posted
  • Investor
  • Phoenix, AZ
  • Posts 282
  • Votes 136

@Brian Lucier I haven’t built a syndication but my understanding is that….

preferred returns are like simple interest. In your example you’d pay the investors $8k per year. Distributions can be monthly, quarterly (or however frequently you specify). As you noted it’s paid first from any cashflow (after expenses, after debt service) and before any cashflow distributions that are offer shard between LP and GPs.

Post: Question about lease agreements.

Bryan Hartlen
Posted
  • Investor
  • Phoenix, AZ
  • Posts 282
  • Votes 136

@Matt Waggoner I’d recommend consulting a lawyer but 

- you should be able to do this. Our property management company signs leases on our company’s behalf all the time. I don’t know if this is because they are Legal registered agents (hence check with a lawyer)

- would also suggest you make sure you are aware of the risks you are accepting when/if you want our properties that are in your personal name and not an LLC.(check with a lawyer if you're not sure of the risks).

- if you can swing it, you may want to consider keeping tenants on MTM for a couple months until you’re sure you want them long term. 

Good luck!


Post: Valuation Methodology - Multi-Family Portfolio - Mostly Furnished/STR/Mid-Term

Bryan Hartlen
Posted
  • Investor
  • Phoenix, AZ
  • Posts 282
  • Votes 136

@Kevin Morgan I'm no expert so treat this comment accordingly… but I think you answered the question yourself. You're selling a business so use the STR/MTR cash flow. As long as you include the unique capex costs for the furnishings in the pro forma I would think the model should hold. Prior to this year's market adjustments, we had seen some lenders loan on the NOI of STR income streams (which put the property's value well above traditional LTR comps). So I think the logic holds.