All Forum Posts by: David Miller

@Brian Burke Thanks.  That lines up with the typical syndication waterfalls I see.  That said, I have run across syndications that provide for a larger promote if/when all capital contributions have been returned and all accumulated prefs have been distributed...like jumping straight into higher promote splits or using lower accumulated return hurdles on the initial capital contributions for each waterfall (i.e. 70/30 up to 6% cumulative, 60/40 to 10% cumulative, etc.).  Do you stick with your promote splits and cumulative hurdles no matter what?    

@Brian Burke  Thanks for the quick reply. Your comment "But to clarify, the preferred return is calculated on unreturned capital contributions, so if their capital goes down, so does the preferred return" is where I was going.  

If all your investors' initial capital is returned via a refinance (i.e. there is NO unreturned initial capital contribution), do you move straight into your promote splits on the cash flow going forward?  In your example above, that would mean you skip the preferred return and go straight into the 70/30, 60/40, 50/50, etc. waterfall with the investors' portion of the split determined based on their ownership percentage. 

@Brian Burke If you return your investors' initial capital to them in connection with a refinance, are you saying you maintain the same preferred return & promote structure after the initial capital contribution has been returned?  

Jillian Sidoti covered it really well. You cannot unwind what has been done but you can change course going forward. One alternative to consider is making your partners active investors who actually manage/operate/etc. like a general partner - that raises another set of issues to address but it can allow you to sidestep securities hurdles if structured correctly.

Most CRE attorneys charge hourly or agree to some type of range on fees depending on the deal type. It depends on how much work is involved and what types of issues have to be addressed.

You can setup a LLC in one day with the NC Secretary of State. If you are the sole member, it is a disregarded entity for tax purposes.

But I represent numerous developers and builders in this market that do exactly what I described.  As @Jay Hinrichs notes above, the land game is big risk and big reward.  You can pocket millions or you can lose your shirt...in either case based on variables beyond your control.  If you have a tract or an assemblage of tracts under contract in or around Wake County, PM me.  

“Large” tracts in or near Raleigh is a relative term. Often, you have to piece together an assemblage of small tracts. High density buildings (like multistory apartments and condominiums) make small tract deals feasible but the development costs and expertise to pull them off are significant. The players on larger land developments are developers who can entitle the land and sell it to builders or the builders who have the ability to take down the dirt, entitle it, subdivide and vertically build. Between due diligence, rezoning (if applicable), site plan approval, construction drawing approval, offsite easements, permits, etc. it is a lengthy and expensive proposition.

If this is underwritten as a commercial loan, I would generally jump at the chance to lock in a 15 year term at 4.5% with a 30 yr amortization.  If it is underwritten as a residential loan, you might typically expect a fully amortized 30 year term.  Given it is four units, it may be underwritten as resi loan.  That said, in general locking up cheap debt at a fixed rate for 15 years on a multi-family investment property is low risk.  

Ask for it as part of the due diligence documents that seller delivers pursuant to the purchase and sale agreement. It is important - it goes you valuable insight into the actual operation of the property and its actual profitability.