All Forum Posts by: David Miller

If there is secured debt on the property, a master lease agreement with an option to purchase *may* be treated as a "transfer" of the property pursuant to the mortgage/deed of trust which triggers a default and acceleration of the outstanding balance owed.  Be careful.

@Wiley Strahan I just PM'ed you.

If you are working with a CRE attorney that knows what they are doing, $1500 is a bargain for a custom PSA and organizing a LLC with operating agreement, resolutions, etc. That said, just sign the PSA in your name and include language allowing the PSA to be assigned to an affiliated entity controlled by you. If you get through due diligence and are actually going to close, you can setup the LLC closer to closing and assign the PSA.

Preferred equity is junior to mortgage debt but senior to owner or “common” equity. Typically, a preferred investor (after all debt has been repaid) receives the agreed upon “preferred return” on their capital invested and then the remaining distributions go to the common equity holders (ie owner and any non-preferred investors). Preferred equity involves an ownership interest in an entity but is typically not secured by the property itself. If you do not intend to give your investor an ownership interest in your entity that owns the property, then your investor is a mezzanine lender. Talk to your attorney about this structure before taking any action. I am not your attorney.

This is a preferred equity structure, which is functionally like mezzanine debt, so your lender will likely want to ensure you pay your debt obligations before your equity obligations. The bank may treat your equity obligation like debt service and, if so, it could be part of your DSCR for underwriting purposes. But they will be more concerned that your debt obligations on their loan have payment priority over your equity obligations and they will want to ensure their mortgage/deed of trust lien on the property has priority over any lien related to the preferred equity.

Raj Kumar I am having trouble sending you a PM. PM me. I do a lot of work in the multifamily apartment space in NC. Let’s talk.

You do NOT have to be an accredited investor or a sophisticated investor to partner with a sponsor on a syndication - assuming you can convince him/her to let you assist. Beg, borrow and steal to get in the door. Leverage every relationship you have and build as many relationships as you can. You will only be offering sweat equity at this point and you may get little, if any, financial return assisting a sponsor on the first deal(s) but it is often how you enter the commercial real estate game. Investing passively on a syndication is another great way to get exposure to the documentation that goes into a deal - on the underwriting side, debt/equity, legal disclosures, closing documents, etc.

There may be site specific or submarket specific factors that justify paying this price and cap rate is not the end-all, be-all justification to price an asset, but in general a cap rate in the 4s for a c class multifamily property is ultra aggressive.

While a tenant estoppel is a best practice, customary practices vary across different markets. For example, if you are buying a 300 unit multifamily apartment complex, getting estoppels from every tenant is highly unlikely and in many cases not practiced. The same might be true for a single family residence, in part because residential leases (unlike a lot of commercial leases) often do not require tenants to produce estoppels upon request.

Talk with your attorney. Even if the the ROFR is valid, I would want to know if the seller has made any representations, warranties or covenants in the purchase contract that would result in a breach and, if so, what remedies are available to you. If there is a breach, I would hope the contract gives you as buyer the ability to seek reimbursement of your actual out of pocket expenses (in addition to a return of any deposits made).