All Forum Posts by: Robert Shaw

Be realistic in modeling your exit caps and hold period. I have read too many OMs lately with 3-5 years out at 6.5 caps. I personally would move that to 7.5-8 caps in my own models for MF.

Do true value add.

I would consider two classes of shares. One for larger checks, one for smaller checks. Alternatively, one for income, one for total returns.

I'm not aware of any sponsors who has ever said they have enough investors. Even billion-dollar players like Encore have full-time staff raising mom and pop money to invest side-by-side with insurance company money. They will do 8% pref plus 65/35, deliver 20-30% IRR, and have a consistent track record.

If I was starting out, I would personally do 80/20 or better deals depending on size just to build a track record.

With more access professional sponsors and more investor awareness, I see money flowing to the more seasoned sponsors who offer superior returns. Money goes to where it's best treated. 

I have over 20 years in private equity and venture capital. Sponsors have a typical startup mentality. They fall in love with their deals and think it's the best thing since sliced bread, and consequently, their short-sightedness led to their demise. In PE, we constantly do post-mortums on deals we've passed, and track their performance years later. It's our experience that greedy founders don't the next round of funding because the valuation was too high in the first round. 

It's the same in JV and syndication RE investing. If you treat each deal like a lottery ticket, you will lose. What's important is to build relationships because when you need money for a project and can't raise capital, you're losing money.

There are so many deal finders on BP willing to work for free and get their foot in the door. There are even more experienced sponsors on crowdsourced platforms with 75/25 or better deals. Why would an investor take a chance on you? Do you have 30 years of development reputation?

So alas, you think you can get away with 50/50 or a debt deal because you see mom and pop investors out money into 12-20% IRR deals and you think heck I can do that. What you fail to realize is there are varying degrees of risks investors are willing to pay for, depending on their own interpretations and return expectations.

I can tell you that just because there are investors out there willing to settle for a low return on a core+ product, it doesn't mean that will continue to be the case, or that they will invest in a less experienced sponsor. Even if they do the first time, they will unlikely do so the next.

When you place an order the modular company will want 50% down. If your bank will release funds on that schedule then great. The banks I have talked to for 150-300 units won't finance modular. You basically pay and they deliver. You also have site work guys on top of that to work out a draw schedule.  

If you're just starting out, don't buy new kitchen equipment. Pickup old ones from auctions. You can also save money by looking for former restaurant spaces with ADA restrooms and kitchen with ansul system.

Spend some time to tweak the business model, and save more money. $135k isn't enough to weather the storm in the restaurant business. Budget for 6 months of operating losses.

On the concept - if it's easy, then there is no barrier to entry. A better-capitalized operator can copy your concept and do one better.

Think hard about the value proposition. Who are your target customers? What are their price points? What are their alternatives to your restaurant?

A restaurant is not a corporate gig. It's, in essence, a factory. Who's going to run the back-of-house? Front-of-house? What will you do if a cook doesn't show up?

Space is the least of your concerns - how will you market and how much you can spent to market is the real question. Once you have a following then you can think about expanding into a real space.

Keep in mind prefab can't be financed, but is a higher quality product 30 units aren't enough to drive economics. Not including site work, my guess is $100psf, similar to stick frame.

Not enough information to assess. Are there park owned homes? Metered? Water? Paying mkt or below mkt rent?  Since it's 100% occ, how do you drive additional value?

I think you need to read the PPM and operating agreement. Preferred returns are accumulated and not necessarily distributed on a monthly or quarterly basis. Also your assumptions are too vague - is this core, core+, value-add, opportunisitic? Each has its own risk profile, return requirement, time to exit, etc.

BTW, if you're buy and hold, I don't think syndicated investments are worth it. Just buy the best CoC you can find.

The low income housing I've looked at doesn't work without subsidies. 

Land during entitlement process is not bankable.