All Forum Posts by: Kris Benson

@Hament Raju Mahajan a fair question to ask.  Disclosure we are a Self-Storage syndicator but I think the same rules apply to both asset classes.

@Brian Burke and @Omar Khan both make great points regarding the risk of growing too quickly.  It's all about the underwriting.  

Without a plan for the market correction in your debt assumptions things are going to get sticky. The key component you should be able to dig into is the LTV. If/When the market corrects and your debt comes due this is where the risk is for the operator/investor. I have seen some scary LTV (80%+) that are basing their debt service coverage ratios on consistent rent growth. That is where LP equity is at risk. Market corrects, rents go down, NOI drops, value drops, loan comes due. Now you have no options for refi or sale and this is where operators got into trouble in 2008 and it will happen again based on some of the deals I have seen this year.

I think you also need to evaluate with this type of hyper growth what infrastructure is in place to support it.(3rd party management, accounting, etc.)  No matter the asset class the people who are behind the desk everyday have a huge impact on the returns and performance of the project.  A vertically integrated operator is a significant advantage in my opinion when it comes to managing day to day operations.

The key is making sure the operator you are partnering with is somebody that you can trust.  I am sure it has been said on these forums before BUT:  A bad operator can ruin a good project and a great operator can make a bad project manageable!  

Do your homework, engage due diligence groups like 506 group or @Ian Ippolito group.  Honestly with the amount of information and resources on the web there has never been more transparency into our business.  The good operators welcome it!

Good Luck!

Kris

@Brandon Yuan its a fair question.  There certainly is a cost to the broker but a local/regional bank typically has a portfolio allocation limit that may limit what they can offer you no matter how good the property is.  A broker just allows you to access multiple lenders and only preparing one underwriting package.

We are working with Talonvest right now on a project and expect to get 8-10 term sheets to evaluate. Now this is a smaller loan ($7MM) on a stabilized asset with a low LTV so the lender risk is very low. If you can get access to enough local banks to support your acquisition pipeline that would certainly be a cheaper option plus you own the relationship without the middleman....

Hope that helps.

Kris

@Brandon Yuan we have used many brokers who specialize in storage.  Their interest may be dependent on the size of the project.

Talonvest and SkyMar capital are two brokers to look into.....

Kris

@Matthew Turcotte I would echo Michael's comments. We are typically seeing 3-5 year terms on our bridge loans and 7-10 on longer term CMBS vehicles. If you would like to be connected with our broker network I would be happy to pass their names/contact info along.

Reach out via email and I will make the introduction.

Best Regards,

Kris

@Luis Barberi I would highly recommend you look into due diligence groups like @Ian Ippolito group.

Ian can speak much more intelligently about it but I would google The Real Estate Crowdfunding Review and the 506investor group.  Both I believe will give you insight into what you are looking for into other investor's experience.

Hope that helps feel free to reach out to me if you are looking for more info....

Kris

@Michael Lee I read that statement 3 times from Cardone's book and I still don't understand what he is implying.  As a syndicator we can structure our deal in many different ways but I would look for options where the syndicator and the investors incentives are aligned.  Although there is a fee structure, the good syndications are where the investor makes their money first and the operator shares in the profit.  Would like to see what his last chapter says....

@Account Closedbrings up a good point.  Make sure as an investor you understand what the horizon of the investment is and if the hold time is projected or that has been outlined specifically in the subscription documents.

In my experience an operator is not going to "lock" themselves into a  time period to sell as it would open up significant risk if the market were to correct in that timeline.  With our syndications we try and give ourselves the opportunity to capitalize on market conditions and create a financing structure to allow us flexibility to hold the project long term with minimal risk.

As an investor the liquidity is one of the downsides to these types of syndications. You have to be comfortable that you will not need that money for at least the projected hold time. It could be longer depending on market conditions. If you need the liquidity you have the option of a REIT but typically with significantly less upside. As always it comes down to your goals as an investor.

Kris

@Brian Burke makes a great point.  I only have experience on the syndication side of things but the reputation of a operator is what allows us to scale.

Websites like BP bring a level of transparency to the real estate investing marketplace that will only improve in the coming years.  Crowdsourcing of due diligence with groups like @Ian Ippolito forces operators to deliver or their reputation will keep groups/investors from reinvesting.

I don't think its syndication vs turnkey, I think its the quality of the business/people you are dealing with.  If I am willing to send you my money and I can't get a response in a timely manner BEFORE I invest in a project what do you think will happen if something goes wrong in the project?  

As a passive investor your success is completely tied to the quality of the operator no matter turnkey investing or syndication.  If your gut is telling you something about the person you are dealing with you are probably right......

Kris

Good Morning,

@Ilona Kovacs let me preface my statement by saying I am a partner in Reliant Real Estate Mangement which is a vertically integrated self storage operator so my opinion is biased.  BUT  Self Storage in my opinion can be a tremendous asset class to participate in right now.  I would want to know more about what your goals are and specific risk tolerances but feel free to reach out to me directly and I would be happy to discuss my thoughts.

@Ian Ippolito  and @Ronak Shah I appreciate the thoughts around our lack of web branding.  We are in the midst of a revamping of our entire online presence at both the individual site level and at the Reliant Real Estate/Investments level.  If you have any questions about our business or our investing track record please reach out to me directly and I would be happy to share with you our investor presentation.

Have a great day.

Kris 

A lot of fantastic points being made in this thread.  As a investor who invested in syndications with my own money to supplement my income and now as the investment officer in a self-storage owner/operator who syndicates our projects I think I have a unique perspective of both sides of the coin.

@Andrey Y. as an investor I think you need to be thoughtful of your portfolio allocation as @Omar Khan says.  Apartments are "sexy" and have had a fantastic run.  There will be a correction in apartments I just think you need to align with operators who believe that and underwrite their opportunities accordingly.  I invested in a fair amount of commercial multifamily personally and I can tell some of the most sophisticated operators have had challenges finding value in multifamily right now.   

I 100% agree with your thoughts on how much time do you want to spend on becoming an expert in commercial real estate and invest direct.  If you believe in the 10,000 hour rule than you know you only have so many 10,000 hour blocks in your life.  Do you want to dedicate 10,000 hours to creating successful real estate investments?  If not than syndication is a reasonable option to partner with real estate experts who have put in the time and share in the benefits of these asset classes.

The critical part of this is the sponsor/operator of the deal.  In my experience investing in syndications my time was spent in vetting the sponsor.  Track Record, references, site visits, office visits, etc. to see if this was someone I would work for/with.  Sponsors are great when everything is going well with a project but when things turn sour you find out what type of person you have partnered with.  Is that sponsor going to do everything in their power to make it right when the poop hits the fan?  That's what I wanted to know.

The other part about this was the relationship.  When my money making years are done and I look back on my experience I want to have built relationships with people I really liked working with.  The money is nice but what will really matter is the time.  I can't get that back.  Can I build a long term relationship with someone I truly enjoyed partnering with?  That has steered me away from many investments that looked good in the pro forma.

Kris

Good Afternoon BP Community!

I am interested in some feedback from the group on the best real estate conferences  to promote our investor platform to accredited investors/equity groups.  Events like the IMN conference this week in RI are a great example of the types of events I am interested in.  IMN Conference

@Brian Burke @Joe Fairless any ideas?  I have not spent too much time on the conference circuit and I am interested in engaging at a higher level.

Thanks in advance for the help.

Kris