All Forum Posts by: Russ Olivier

Great info Michael, thank you!  The cap rate in this case is 7% in year 5 (6.75 if they sell in yr 3) ... does that sound reasonable?

Just a quick follow up to this .. first I very much appreciate everyone's comments, all very helpful! I found out that in this case the sponsor would be taking a 15% up front equity in the deal (no other fees) .. but does not ensure all investor capital is returned on an exit/refi as Jeff K was referring to. In other words they would have a 15% stake in ALL equity right up front and would get that no matter what the selling price is on exit/refi. So with that in mind, if the deal looks pretty good and the sponsors are pretty experienced (as far as I can tell) is this something to consider or to quickly run away from? When I say the deal looks pretty good, it's an 8-9% COC and 20% IRR over 5 years (that may not be "pretty good" in everyone's opinion!).

Just realized I said thanks John .. meant thanks David!  Sorry!

Thanks John, very helpful!  After re-reading my post I should clarify though that the Sponsors are getting 15% of the equity up front for sponsoring the deal .. not 15% of the upside.  So if I understand correctly, they could sell the property for the same as the purchase price, and they would still get 15% of the LPs equity.  Is that a common structure?  

Hello BPers! I'm primarily a SFH investor and new to the commercial investing space so apologies if this is a basic question. I am considering investing in a MF syndication and wanted advice on the compensation model that's being proposed. The Sponsor in this case is proposing to get a 15% equity position up front for putting the deal together. They would not charge any acquisition fees, asset management fees, or disposition fees. There would be no preferred return .. they would share in all future cash flows at 15%, with 85% going to the LPs. They also own a Brokerage company and Property Management firm so they would earn fees in these areas as well, but no higher than what other firms would charge as far as I can tell. The Sponsors are putting their own $ in the deal (10% in this case), but that would be treated as an additional equity investment, and they would receive an additional 10% of the cash flows. So my question ... is this a normal structure for a syndication? And what pros/cons are there for deals like this that I need to watch out for? Thanks in advance for any help!