All Forum Posts by: John Sayers

Originally posted by @Ned Carey:

Why is a contact for deed riskier? Is it lower underwriting standards?

CFD is often used when a buyer may not fully qualify for a conventional loan. That alone could potentially add risk.
Also, the property seller (or CFD holder/owner) still retains legal title to the property as far as I know. Ownership only passes to the buyer after the final payment is made. This makes the risk profile quite different. Unlike a reg mortg, the CFD owner can be on the hook to local muni's, taxing authorities etc.  Things a traditional lender is not liable for.

With liabilities and risks being different and higher to the lender, all other things being equal, I'd take the conventional notes if they all get priced the same.

EDIT: now saw Chris reply minutes ago, so what he said LOL

Originally posted by @Mason Moreland:

@Shafi Noss and @Alon Kostetsky

I am in the business of developing vineyards, but in my W2 work I help solar, wind, and oil & gas developers get off the ground (land leasing/acquisition, permitting, and environmental consulting).

Most small-to-mid-size solar companies are essentially flippers. They speculate by buying or leasing up prospective land along ideal transmission lines, develop an engineering plan and permit the facility, then flip the whole deal to a larger developer who will go on to construct it.

Then you have your larger operators (who I typically work with) who do everything end-to-end with the help of outside consultants and go on to operate the facility. I think there is actually a great opportunity to syndicate these developments. Right now most big operators are large private equity, extremely large private firms, or publicly traded/national energy companies.

The key takeaway here is the scale at which utility-scale solar and wind takes place. You are talking minimums of >2,000 acres with ideal sun/wind characteristics (hundreds of thousands in upfront leasing costs there), and millions or billions in construction costs. Wind especially. There is a reason you see more small companies flipping smaller projects! The big players with snatch some small to medium size projects up as well. Not saying it's impossible though, you just have to have the right team, enough capital, and some creativity.

Thanks Mason for the insight.

Portal side - I see these used by multiple entities:

IMS-Investor Management Services, SyndicationPro, Update Capital, and Juniper Square

Not a recommendation, just FYI.

Curious...As what occupancy rate does it break even?

Funds are attractive to some purely for the easy button effect.  Like art, funds can be awesome and great, or more of a blob of colors used to obfuscate what underlies it.

I am not against funds and actually have some private funds in the portfolio.Fund paperwork can give sponsors a lot of free reign, so it can good or bad, depending on one's plan. For some investors, it is a perfect fit of easy, like buying a stock.

Easy to be set-it-and-forget-it.

Easy on the paperwork volume.

Easy to invest once and get multiple asset diversification.

Easy to also get complacent as investor, and worse, as sponsor.

Easy to get information lost in layers of aggregated data.

Easy for managers to tweak standards when pressure to put idle fund assets to work.

Easy to get invested into cities and states not originally intended to invest in, or not desired at all.

Easier to cloud NAV calc (e.g management fee not taken from cash and instead taken by diluting the NAV).

Easy to look a lot more like wall street vs RE.

Easier to generate more fee income with less net work.

Easier to be tempted to pay distributions not from income. One of the biggest fears of some.

Easy to do a lot of things. Some very good for all parties, some not so much.

For the investor side, it all depends on one's risk tolerance, goals, due diligence effort level desired, trust, and how freely one lets another invest your funds however (almost) the other party likes; constrained usually only by a loose set of paperwork. If the investor runs from Wallstreet, REITs etc, then some funds are maybe too similar for comfort. The inverse investor would love it.

For the manager, funds can bring flexibility, scalability, more income, more investors, more options on everything; maybe more pressure, scrutiny (not a bad thing) etc.

Can self-certify a LLC etc. See https://www.irs.gov/credits-de...

"

Q10. What is a QOF?

A10. A QOF is an investment vehicle that files either a partnership or corporate federal income tax return and is organized for the purpose of investing in QOZ property.

Q11. How does a corporation or partnership become certified as a QOF?

A11. To become a QOF, an eligible corporation or partnership self-certifies by annually filing Form 8996 with its federal income tax return. See Form 8996 instructions. The return with the Form 8996 must be filed timely, taking extensions into account."

Thanks. Crazy. (Think you duplicated the same chart by accident.)

Originally posted by @Matthew Laurin:

Has anyone invested with Nighthawk equity and realized a good ROI?

 Likely already known info for you, but maybe not for all. 

If no one speaks up as having any experience, and you are looking to invest, you can ask him for his track record of ALL deals, with basic performance numbers (ROI, MOIC, IRR, AAR etc.) for both LP and deal level, and the original pro-forma goals per each; including unsold items. For the held properties, get the performance numbers to date, and also maybe the current occupancy, EO and/or EV. The portfolio performance record should be a fairly small doc that any seasoned GP/syndicator should have on hand. It will only give a piece of the picture, but while hunting for some references, it may be useful data to see if you are even still interested, or not.

The thing is...some won't share and some won't show all deals, nor all key performance factors; BUT, some will, so asking can't hurt. It gives insight either way. The reference information is great to get, so keep asking around.

Some good points of consideration presented by the group that can benefit various investor levels.

For sure in some A/B deals the wording is more risky for B than in another seemingly similar A/B deal where B is not grossly at a disadvantage in a storm. Some identical looking deals on the glossy presentation level can quickly unravel during closer review of the contractual details and become drastically dissimilar on downside risk ratings. I've seen the addition or removal of 5-10 words significantly change the risk/reward proposition. Both accidentally (oops wrong version) and sometimes intentionally.

I don't mind complex items, but KISS is still preferred here; especially useful when a bump occurs. Some say that complicating a deal is a warning flag, others shrug and call it sophisticated instead. Some are truly sophisticated and some just the word incorrectly. It's up to the investor to decide.

IF project goals are met, then as @Arn Cenedella  noted; "It increases the return for Class B investors who can tolerate higher risk, have less need for immediate cash flow and are looking to grow their nest egg."

I have observed that quite a few investors don't seem to fully comprehend that there is much of a risk delta, if they see one at all. Particularly for when results are a bit lower than projected. Comparing deals only on projected numbers would clearly seem risky, yet done quite often.

When the splits showed up, and considering the "boost" concepts above, one might expect the boost to the investors with upside equity to have instantly increased how the deals stood out in comparison to other traditional non-split deals in the same market & time. Especially from the same sources; in general of course. The format however didn't really seem to make the deal projections stand out as any better for B per-se (COC, MOIC, IRR etc).

Why no glaring perceived boost? Of course there are a multitude of good reasons for that, including the obvious one that hotter market = thinner deals; so the now thinner deal consumed the boost factor.  When rent bumps etc stayed the same, some other factors observed that ate up boost also included, in some cases, one or more of the following; inching higher fee percentages vs prior deals; some with additional fee types vs prior deals; some with higher promote percentages. Overall, the boost, for various reasons, seemed absorbed one way or another as markets, economy, demand and structures changed. All reasonable or normal stuff.

Ultimately alert investors should understand that as risks go up and if rewards stay flat or simultaneously decrease, that there are many variables for that; some controllable, some not and some are equitable absorbed and some not quiet as much. The minor nuances to some, are critical to others.