Quote from @James Hamling:
Quote from @Nate Marshall:
Quote from @Christopher G.:
Quote from @Mark F.:
Quote from @V.G Jason:
Great job. Call out these terrible acts by terrible folks.
The syndicator is just a letter off from the word Lame. Spill the beans, the world is too public.
Careful what tree you bark up, you'll get the wrong dog. Fold you like a pretzel if you try on it.
@Lane Kawaoka. Dunno if it tagged him but the guys at Drunk Real Estate (@J Scott) talked about this topic a bit in their latest podcast episode regarding LPs or random strangers calling out GPs on Twitter/X. There's a big difference from calling out scammers and fraudsters verses calling out failing syndications. I saw nothing wrong with what Giles said as he was shedding light on the lack of communication. If i was an investor in Lane's syndication and he pulled that, I sure as hell wouldn't be scared. Linked to his profile in this post as well.
I invested 5 figures into a failing note syndication (AHP) and theres a thread on BP. The sponsor has posted updates in it, albeit it bad ones. Glad Scott is addressing this head on and sorry to hear it came to this.
https://www.biggerpockets.com/users/wealthelevator
This is like financial PTSD. I 'learned' about syndications and had a few discussions with him back in 2019 and did 4 deals before I told myself that I needed to diversify and invest elsewhere. 3 of those 4 deals have failed, with 100% LP capital lost and the 4th one, though the latest correspondence was positive, is now in a capital call event because of the loan.
This GP's ability to move fast and replace bad apartment managers, read where the market is going, and engage (call every LP and explain the situation during a capital call) has led to millions of investor capital being lost. I was a novice investor in 2019-21 and thought the deals all made sense but didn't understanding where cap rates were and where the market was, I feel like the GP team should have known like many other GPs knew what was coming. I'm sure the GPs also lost millions but they also make a lot due to acquisition fees. It's extremely frustrating but perhaps/hopefully it has made me a better investor?
There are only a handful of GP's and sponsors I would suggest anyone invest with.
Let's flip this to a more positive note;
What are the hallmarks of a GOOD GP/Syndicator? Other than the obvious "makes me $$$$".
Because I too am hearing of Syndicators/Syndicated deals imploding all over the place and LP's singing similar tune of getting f'd where I wonder how, just how this could be at scale. Because exactly 0 of my deals have imploded over last years...... And yes, plenty of these are at scale. My opinion is the sheer volume of R.E. know-nothings who jumped into space over recent years, the people blindly throwing $$$$ at every good slogan and sales pitch without real D.D. done on the operator themself to confirm they had the chops to do what selling there gonna do.
So, what is a "Good" GP/Syndicator look like today?
For me, a "Good" Sponsor looks something like this:
- Fees more or less result in a solid full-time salary for sponsor, not millions in upfront compensation: Fees are structured such that the sponsor earns a good living while managing your money, but does not make a killing until your money is returned. For example, I'd like to see a sponsor making $150,000 - $300,000 in base salary income from their combined portfolio of projects, if they are managing my money full-time. Any more than this, and I feel that I am paying for their luxury lifestyle before getting returns delivered. Any less than this, and I worry they will "Side-Hustle" because the income isn't enough to appease the ambitions of the aggressive, high ego personalities that are drawn to GP work and Syndications.
Obviously this range can vary, but "bad" to me is a sponsor bringing home $2.5M - $10M+ per year just in acquisition fees.
I want my GPs to buy their mountain home, fleet of luxury vehicles, and fly first class or private, of course! ... Just AFTER they've made me money... not WITH the money I JUST gave them.
- Full-Time Focus: Related, Sponsor works on the deal or a small, closely related subset of deals full time. Sponsor does not have 30 disparate projects competing for their attention. I am paying them for full-time focus on my deal, and the very best they have to offer. Sponsor is relatively "hands-on" with a concentrated pool of investments.
- Concentrated investment thesis and focus: I am paying a sponsor high fees relative to a REIT for concentrated expertise in a narrow niche. For example, I like to see sponsors who JUST do one thing, and do it well. Perhaps that's Multifimly in Houston, Texas. Or Self-Storage in Atlanta, GA.
I am personally not interested in paying a sponsor high fees to diversify across the entire continental United States in random opportunities across multiple asset types. I will do that diversification myself by giving my money to those who I perceive to be experts in specific asset classes, and do not a single sponsor to do that.
- Sponsor is transparent and realistic. Sponsor is self-aware and humble. Sponsor does not pretend to be the second coming of Warren Buffet: Sponsor does not tout a "Track Record on Full Cycle Deals" that is marred by no recent exits and obviously struggling current portfolio in public advertising. Sponsor is realistic about current market conditions, and is humbling themselves on current portfolio, while also realistically appraising current environment as a potentially better buying opportunity than the peak 3 years ago.
- Sponsor learns from mistakes. Sponsor takes personally accountability. When and if sponsor's company is discussed hundreds of times on an online forum, and they are obviously out there raising capital and publicly promoting their business, they are not pretending not to notice hundreds of negative discussions on BiggerPockets and failing to engage entirely. They are actively participating and easy to reach.
Notice that I'm not saying "Sponsor who makes me money" or "Sponsor with great track record". Track record, unless it goes back 30 years, is pretty meaningless to me in today's climate. *Almost anyone with a pulse could put up good returns in the 2010s. Half of sponsors are now getting crushed when the going is getting tough, and those previous track records don't really mean much, compared to the things I list above.
