All Forum Posts by: Peter Lee

Anyone have an idea of what is a typical management fee for self storage facilities?  Looking at a 40k sf building and shopping around for a prop management company.  

Also wanted to get thoughts on whether getting a company that operates upstate but not in SoCal but would be a bad idea.  The principals said they could train the person that is local and manage them from afar but wanted to assess how feasible that is.  

Thanks in advance.

@Greg Dickerson that's a good idea

so currently,

GP- 5% equity - 30% profits

LP - 95% equity - 70% profits

proposed

GP - 5% equity - 30% profits

GP - 35% equity (raised through additional investors by GP) - 26% profit (if that previous 70% is split pro-rata)

LP - 60% equity - 44% profit (if that previous 70% is split pro-rata)

@Greg Dickerson so you would adjust the 70% profit to be split pari passu amongst the non GP- investors regardless of who brought them in?  You don't think since now the GP is supplying almost 50% of the equity they would have more leverage in the deal?

If you had value-add deal which is currently structured at 95/5 equity contribution between LP/GP with a flat 70/30 distribution structure (no waterfall) after debt service. Now if say the GP then contributes 40% of the equity instead of only 5% by raising additional equity on his own how would you say the deal would change?

What kind of deal structures have you seen?  I have a lot of colleagues in the institutional value-add space and they always buy the property outright to keep things clean but really like this idea.

Curious as to whether anyone has approached an owner of an underperforming apartment complex and in-lieu of trying to buy the property, one offers to put up the money to do the necessary improvements and the project management work.  Maybe there are owners out there that are either undercapitalized or too lazy to do the improvements to bring a project up to market rate.

The idea would be that the existing owner would see an improvement in his cash flow and the developer coming in with the capital to do the improvements would see a return on their money and possibly in a manner more efficient than if they were to buy the property outright because of increased leverage.  The developer would also get some equity in project in event of exit.

Thoughts?

I also asked what might happen on exit after the project is stabilized and not unexpectedly he said that the lines were a bit gray. He said since I have a full time job, the hold period is going to be 3 yrs, and that the project is already built and will have a light value-add component he thought it wasn't unreasonable to classify it as capital gains although it wasn't a bulletproof argument. He mentioned the decision really depended on my risk tolerance.

Met with an accountant and he said that if I close on the property then sell the project to the LLC that I form with my LP, it could be classified as short term cap gains. And like others have mentioned my stance was really dependent on my risk tolerance.

@Dave Foster Thanks Dave, I'll take a harder look at TIC. Appreciate all your sage advice.