All Forum Posts by: Joel Block

I started in multi-family units straight away. My background is similar to yours, I started at Price Waterhouse and learned the real estate syndication business by doing tax work for a giant Wall Street syndicator. I knew immediately that was what I wanted to do so I went for it. You can do it too. JGB

The first deal or two, you may have to use more of your own resources, but as you get better at this, other investors who have less experience and skill than you will want to entrust their resources to you. That is where the money is. If you can be the quarterback and get investors to give you the capital to manage, you can take interests in properties for little of your own money but with dramatic upside. That's how the big boys do it. JGB

Putting your money into hard assets is a good idea but I would not choose gold. It is already too highly priced. Paying down your mortgage, unless the interest is very high, may not be the best use of your cash. Distressed assets where you can add value are your best bet.

Please register for the call. We typically send the link to the replay to all who register. Thanks. JGB

As the CEO of a private equity company that acquires distressed real property, and as a member of the company's board of directors, we have very clear guidelines from our attorney about how we raise capital. I can share what I know about my company, but the facts and circumstances are different for each situation and I am not qualified to comment on the situations of other operators. I notice many people on these boards, offering definitive advice without thoroughly understanding the issues. We all need to be more careful. Raising capital and licensing requirements are complicated areas of the law. Please be careful in discussing these issues. I am always available for a one-on-one discussion about these issues but an attorney might be the best person to comment. Joel Block

Thanks for posting this. JGB :cool:

It's hard to know what the right amount of participation is for the person who is responsible for putting together the deal – or for someone else who assumes responsibility for the debt. It is a function of how well you sell the value that you add. In the case that you have described as much as I recognize that you feel that you are the cornerstone of the deal, an investor will give you very little credit for signing the mortgage and assuming that responsibility. You indicated that only 60% of the deal has been guaranteed and that 40% more remains. Remember, the last dollar, like the last yard in a football game, is the most important dollar - and it's the one that's worth the most. The first dollars are worth the least.

There are two ways to think about the participation for a promoter. The venture capital model assumes the promoter or inventor brings value to the transaction for example, because the inventor has contributed intellectual capital of some type. The investment makes it possible to monetize the patents or marketing plans. The real estate model is used when the additional value is forced into the asset, either through appreciation, management adjustments, and other factors.

The model to use depends on what should happen on liquidation. In a venture capital environment, on liquidation, there's probably not much to liquidate because in many cases, the intellectual property of a failed venture is close to zero. In real estate however, there's intrinsic value, whether the promoter adds any additional value or not. That's the reason that promoters do not take a substantial percentage of the current value of the transaction. Rather, they take a substantial percentage of the upside that they help to create. Most promoters take real estate fees as they are earned and success fees based on the upside generated in the property in the future.

Signing the note is not worth all that much, and the investors might expect you to do this. And remember that on liquidation, your note will not be the first money to go down the drain. On liquidation, the equity is going to go first and a personal guarantee on 60% debt is not likely to be attacked if you're buying the property right. We sometimes structure in a “Guarantee Fee†for a few points a year, but it doesn’t really affect our back end percentage.

I wish you the best of luck with this transaction and hope that my insights are helpful.

Joel G. Block :cool:

Ray is a colleague and a friend. He is sophisticated and sharp as a tack. I would carefully study his materials and look to him for advice and counsel whether in the book or personally. JGB