All Forum Posts by: Paul Azad

I know a retail syndicator who takes a percentage of the property (15% about) on every deal as their interest/payment up front, they then buy an additional 10% with their own money so they have 25% skin in the game of the properties, They take no fees, no acquisition/disposal/asset management, no cash split, no preferred distributions etc, but their property management company does manage the property for the 10 years of the loan, for about 3% fee which is less than the big CBRE/JLL etcs charge i think, usually 5-6%. They are the general partner but get the same exact distribution every month and profit at end that any of the limited partners receive per percent ownership.  This style approach seems to be a better alignment of interests than what many other syndicators do which makes for very conservative underwriting. The limited partners have been very happy and keep investing in other projects w this syndicator since 1990's. They do syndication model and not buy whole projects themself to acquire larger projects beyond their own capital reserves and thus have grown faster than doing by themself. 

I know a Multi-family syndicator who uses the typical model with fees/preferred distribution w a cap/profit splits etc and he took way too much risk in his analysis/underwriting and has lost multiple large >60 unit properties this year, but he had no ownership or skin in the game, so his investors lost everything and one told me she may also have a tax due even though she lost all her investment over a couple of years, her accountant is working on that.  hope most people don't get burned too bad over next few years with real estate values going down and high rates

Hi Chris, but in #6 above you say 60% return which over 3 years is approx 20% per year. I seriously don't understand something which I'm sure is very simple to everyone else, but in the real estate world, I often see people use the arithmetic annual average as above, but in all other investments, stocks/bonds/finance/banking, I see the geometric average annualized return which for above would be 16.9%, to go from 500k to 800k in 3 years. Is it common practice in real estate just for simplicity sake/rule of thumb measurements, or is there something obvious to others that I am missing? To double one's money from 100 to 200 in 10 yrs , Real estate would say that's a 10% yearly return when it is actually a 7.2% annual return due to compounding effects (rule of 72). Is this done due to inability to re-invest cash flows ie dividends? I'm sorry but would really appreciate any explanation you can offer.

obviously for original poster, if project drags out or more costs then annual return quickly falls below recent S&P 500 13% return last 20 years

This seems reasonable, rates have been brutal, just bought a retail property at 6.9% 10 yr fixed, but if the numbers work, they work, my parents had cash flowing single family properties in 80s with mortgages at 18-19% :) good luck

This is a very educational thread about the risks and fraudulent people out there, thankyou, Why not for a younger/less experienced investor interested in the lending space, just buy a handful of the lending REITs, aka BDCs- the business development companies, like Blackstone lending, BlackRock, Goldman Sachs lending, Ares Capital, Hercules Capital etc? There are dozens of these publicly traded and SEC governed. They lend money in 1st position to growing companies and even to REITS, they can be bought/sold for free on your phone, they pay from 10-14% yearly dividends, and their stock prices have been slowly trending up last 4 years? been getting 16-20% total yearly returns on these including the dividends? If the FED ever cuts rates, which they may not be able to if GDP growth stays so high, then you can sell the BDCs before they fall too much? (I use a trailing 10% stop loss)

thanks Steven, i hope the higher recent rates don't trigger a recession, people already having tough time with inflated prices, and consumer is very strong but worry part of that strength could be artificial from the 1 trillion still in their bank accounts from the stimi-checks, which is falling fast

Steven, are you concerned that since GDP remains strong and inflation has come down gradually since the 9.1% print in June '22, and that largest voting block in America, seniors, is quite happy with getting interest on Treasuries for 1st time in a long time, that maybe the FED won't cut the overnight rate from current 5.25% level much or at all?

and 2nd in multi-family do you see trouble ahead for all these Floating Rate 2yr/3yr loans taken out at historic low cap rates in 20-22, that may require big cash injections to re-fi? thanks i'm trying to learn more and more about CRE

thankyou for all the thoughtful responses, trying to learn all i can about passive commercial RE investing. 

thankyou so much Joel i appreciate it, been looking at some prospective syndication deals in commercial retail/shopping centers and also at some mortgage loan funds too, one offering 8% preferred, fixed rate with no profit share of anything above that with a few year lock up period, trying to figure out how to compare apples to apples within the commercial retail/shopping centers syndication is confusing as well with the different terminology and the different splits structures etc

Beautiful property Blake, and great growing area, i drove through a few years ago, amazing scenerey and perrenial vacation spot, would you feel comfortable sharing the structure of the syndication for the investors, fees, projected IRR, or time weighted avg returns etc from a potential passive investor perspective? Best of luck, would love to stay there if ever passing through again.

What are the typical returns , ie total return, or time weighted average return, or IRR, on syndicated commercial retail real estate investments you have made in past, and what area of the US have you found the best returns in?