All Forum Posts by: Jon Zhou

 Based on this, then it would not be a wise investment if I think of this as a brand new deal. 

After many of the Ashcroft capital syndications paused distributions, I get this surprise email this morning saying all LP investors need to pay additional 19.7% of invested capital call  

anyone have experience with capital calls and syndications? Is there ever a position outcome to these or are we putting more money into a failing syndication?

“Thank you for your patience as we continue to navigate our way through this current economic cycle and unprecedented time in the capital markets. We recognize that this email contains a substantial amount of information, which is why a member of our Investor Relations team will be contacting you shortly to address any questions.

We need to solve for three major factors as it pertains to Elliot Roswell:

1. Allow the multifamily market time to stabilize.
   
2. Meet liquidity needs for the rate cap, capital expenditures and unexpectedly high debt payments.
   
3. Resume renovations which have been temporarily paused.
   

How do we achieve this?

Based on feedback from our existing lender, other potential partners, and the significant capital requirements to potentially buy down the loan to refinance, we determined the best path forward is a successful LP capital call of 19.7%. This will allow us to maintain flexibility to potentially sell the property within 24 months.

This is Ashcroft’s first capital call, and while it’s regrettable to take this step, our primary focus remains safeguarding your investment. Therefore, all LPs must participate 

Elliot Roswell is a strong asset that is poised for a strong rebound in value as markets improve. This is due to the property’s institutional quality and the continued growth within the Atlanta market. Moreover, demand and absorption rates are currently at 25-year highs and are continuing to trend in that direction with a 70% reduction in new construction permits and drop off in deliveries in early 2025.

We will maintain flexibility to sell Elliot Roswell as markets improve and anticipate doing so within the next 24 months. In the meantime, we need to cover rate caps costs and resume renovations so that we are best positioned to maximize your potential return.

Why is a capital call necessary?

• Preserving Capital: If this capital call is not successful, we will have to sell Elliot Roswell in an inopportune market. This would result in selling the asset below our basis and incurring a significant loss of LP-invested equity. Specifically, if forced to sell now it would be a total loss of capital for both Class A and Class B.
  
• Replacing Rate Caps: Our rate cap is expiring this year, and the projected replacement cost is $736k.
  
• Resuming Renovations: Given rising inflation and labor costs, our capital expenditure exceeded initial underwriting. This prompted a temporary pause to renovations. However, resuming renovations is essential to increasing revenue, and a capital infusion allows us to resume both interior and exterior renovations. We will consistently evaluate the cost vs. benefit, adjusting the renovation scope as necessary.
  
• Maintaining Lender Requirements & Loan Covenants: We (Joe & Frank) will consistently support you and our other investors through both favorable and challenging times. We’ve already extended a $2.9M interest-free short-term loan to cover various unexpected expenses, including the replacement rate cap over the past 12 months. While this was meant as a temporary solution, it must be repaid promptly to maintain compliance with loan agreements and ens

I just got an email from Ashcroft for a 19.7% of additional capital call of the original invested capital for one of their syndications in Georgia. Anyone else having this issue with Ashcroft? They make it seem mandatory but what are the chance I’m just gonna lose even more money with them?

I live in sacramento and have been looking on MLS for multifamily properties but there is nothing that is in Class C-/D areas that can cashflow with typical 20% down financing. These are duplexes in south sacramento but as my REI friend says "don't buy a property you are scared to visit at night"

Where are people investing in sacramento that cash flow?  Or it needs to be a value-add/appreciation play?

this is a very good thread, thank you for posting it, I am leaning to holding onto cash until this virus settles down or we see an end in the long term before putting lots of $$$ into a 5-10 year hold syndication that is not liquid.  Main concern is buying an complex valued at $10 million in April, but may be worth significantly less in July if tenants have issues paying, with many states having no eviction clauses.

Anyone else more optimistic and investing this very moment into syndications?

I'm evaluating a deal now, but it is typical for the sponsor to have a "30% of all distributions catchup" fee at selling of the property, this is after investor capital is returned, and a 7% preferred return is given to investors.

The catchup fee is prior to the 70/30 split, and then after a 13% IRR is achieved, the split goes to 50/50

@Chris A. thanks for these updates. Now that you are about two years into ownership can you give us details on your actual profit/cash flow after all the fees with PM, tenant renewal, maintenance?  Are you buying another property with spartan invest?

Thanks for the updates. Will you get another property with MI?

I've invested in multfamily syndications in the past with 8% returns annually but am looking into turnkey again. Seems like with SFH you need need economy of scale and leverage to get better returns.

My concern with turnkey is when there is a vacancy for a few months , how many months of years of “cash flow are you losing? If you cash flow $200/month then 3 months of $800/mortgage without rent is like 12 months of positive cash flow gone? does that sound 

Is it concerning to hear all these negative outcomes. One or two months vacancy with a tenant like that or a foreclosure will cause negative returns for many years. 

Is this something that is spartan related or Alabama related, are there many stories like this with Memphis i