They Want To Raise…How Much??

Earlier this week, I was invited by a good friend to a special dinner where he would be pitching his latest acquisition to a group of investors. Most of the properties that I’ve seen in syndications have a price tag of $10-$15 million, where the syndicators are looking to raise $3-$5 million from limited partners.

At $50k/ share, they need to sell 60-100 shares for their deals, that could be a lot of people that they need to make relationships with!

Big Numbers!

My friend’s deal was a $120 million hotel in NY, they are looking to raise $40 million (!?) for the deal! With the same $50k minimum investment, they could potentially be working with 800 people!

The work to purchase and manage a large asset is very similar to the work needed to manage a smaller asset, so you might as well go big. I sat at the dinner amazed at the large numbers and the amazing questions asked by the attendees. Here are some of the notes I took from the event.

Hopefully this helps you get a feel of what people are interested in knowing about a syndication deal.

Questions about the deal:

• Supply in the area
• DSCR
• How much of your net worth are you putting in
• Rev/par
• Do you underwrite to recession numbers
• Experience with this asset class/this size
• Do you partner with the management company? Hard to get them out of things go bad.
• What is the expected IRR and equity split between GP/LPs
• Timeline for funding

Comments That People Liked About Past Performance:

• Nice reports
• K1 on time
• Pref paid first week of the quarter
• Past performance and satisfaction

Red Flags That Investors Look For

• Short term loans.
• Non family references 3+ years
• Capital calls in the past
• Losing investor principal in the past
• Unable to answer questions clearly
• Breaking up with partners
• Who they raise money with (platforms)
• Sponsors that haven’t been through a downturn
• History of lawsuits

Notes about Hospitality business:

• The only way you can’t get a loan is the credit market freezes.
• Short term bridge gives flexibility
• Hospitality, is not good for 5 year+ loans

It was a great event, and I love being around people who are smarter than me. I would love to branch into the commercial side of the business in the future. Real estate investing is a people business, and you need to be able to articulate your ideas in a succinct way to get people interested in your proposition.

Raise Money Summit

If you’re interested in learning more about how to raise funds for your syndications, check out the Raising Private Money Summit in Denver, CO, hosted by Adam Adams. Use the code ‘EVERYTHINGREI‘ for a 15% discount at checkout. See you there!

Raising Private Money Summit: https://www.raisingmoneysummit.com/letsgo