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  • Larry Ragman
    replied
    Originally posted by White.Beard.Doc View Post

    The depreciation was allocated to the capital partners because of the unequal capital accounts of each of the partners. We had sophisticated legal and tax advice on the structure of the partnership with 2 different classes of shares. Our “preferred” shares required greater capital contribution and allocated greater depreciation. Our partner’s share class allocated preferential control over management decisions.
    Thank you for the insight.

    Leave a comment:


  • White.Beard.Doc
    replied
    Originally posted by Larry Ragman View Post

    Congratulations and thanks for sharing. This sort of partnered joint venture investment seems ideal for your situation. Still, I am sure it was hard to let go for the first one.

    One observation that may simply reflect my ignorance, but it is my understanding that the depreciation cannot be assigned to one partner and instead has to be allocated in accordance with percent ownership. Presumably you got professional tax advice and I am wrong, but could you say a bit more about how you justified the allocation of the depreciation to only one partner?
    The depreciation was allocated to the capital partners because of the unequal capital accounts of each of the partners. We had sophisticated legal and tax advice on the structure of the partnership with 2 different classes of shares. Our “preferred” shares required greater capital contribution and allocated greater depreciation. Our partner’s share class allocated preferential control over management decisions.

    Leave a comment:


  • Dont_know_mind
    replied
    Hopefully the property syndications do not experience liquidity issues if there is a recession.

    Leave a comment:


  • Larry Ragman
    replied
    Originally posted by White.Beard.Doc View Post
    We did our first joint venture RE partnership on a large multifamily building in the summer of 2021. I think of it as a step towards passive RE investing, something that I would like to pivot towards as we get older and think about divesting from our direct RE investment properties as we begin to anticipate retirement in the coming decade. We went in half and half with another couple that we know quite well. They are full time RE investors and they own a property management company. We brought the capital and they brought the sweat equity. I was very anxious going into this investment because it was a large amount of cash and we were giving up a lot of control to our partners. In general, I am not good at giving up control.

    I am happy to report that it has worked out quite well, better than I ever imagined possible. I would love to repeat such a deal if we can find something that looks similar.

    So far, in less than 18 months, we received 131% of the cash invested back in our bank account. How did we achieve that? We did a value add and a refi on the property, and that gave us a 100% return of the cash invested. The other 31% of the cash that came to us was in the form of 2021 income tax savings. Our partners agreed to allocate all of the depreciation to us because we put up the capital and we needed the depreciation and they did not. An overly conservative estimate of our equity value today, after receiving 131% cash back to us so far, is 65% of our original investment, with our partners also holding equity value equal to 65% of our initial investment. A more aggressive, but still reasonable estimate of our equity value today is 155% of our original investment, and same for our partners. Despite the cash out refi, the property continues to pay us steady quarterly income. Total return to date in less than 1.5 years, after receiving all of our invested capital back, is 96% to 186% depending on the cap rate used to estimate the current value of the income that the building generates.

    I attribute this high level of success to about five factors that simultaneously aligned and worked well with this deal. Our excellent liquidity and solid balance sheet allowed our partners to negotiate exceptional financing terms with a local commercial bank, along with the fact that we signed a personal guarantee for a recourse loan. We bought a 35% vacant building for a huge Covid discount, and we lowered the vacancy rate temporarily to 0% and more recently to 2%. The management of the building was poor before and is excellent now. We added multiple high value improvements to the property. We have held tenant appreciation parties and have created quite a desirable community among the many young nurses and doctors in training who live in our building, which is ideally located close to one of the top tertiary care centers in the country. Overall, we have attracted amazing, high quality tenants who always pay the rent and who take excellent care of the property. In return, we strive to provide responsive, high quality care to our tenants. So far, so good with our first adventure with a RE partnership type deal. Best. Investment. Ever.​
    Congratulations and thanks for sharing. This sort of partnered joint venture investment seems ideal for your situation. Still, I am sure it was hard to let go for the first one.

    One observation that may simply reflect my ignorance, but it is my understanding that the depreciation cannot be assigned to one partner and instead has to be allocated in accordance with percent ownership. Presumably you got professional tax advice and I am wrong, but could you say a bit more about how you justified the allocation of the depreciation to only one partner?

    Leave a comment:


  • White.Beard.Doc
    replied
    We did our first joint venture RE partnership on a large multifamily building in the summer of 2021. I think of it as a step towards passive RE investing, something that I would like to pivot towards as we get older and think about divesting from our direct RE investment properties as we begin to anticipate retirement in the coming decade. We went in half and half with another couple that we know quite well. They are full time RE investors and they own a property management company. We brought the capital and they brought the sweat equity. I was very anxious going into this investment because it was a large amount of cash and we were giving up a lot of control to our partners. In general, I am not good at giving up control.

    I am happy to report that it has worked out quite well, better than I ever imagined possible. I would love to repeat such a deal if we can find something that looks similar.

    So far, in less than 18 months, we received 131% of the cash invested back in our bank account. How did we achieve that? We did a value add and a refi on the property, and that gave us a 100% return of the cash invested. The other 31% of the cash that came to us was in the form of 2021 income tax savings. Our partners agreed to allocate all of the depreciation to us because we put up the capital and we needed the depreciation and they did not. An overly conservative estimate of our equity value today, after receiving 131% cash back to us so far, is 65% of our original investment, with our partners also holding equity value equal to 65% of our initial investment. A more aggressive, but still reasonable estimate of our equity value today is 155% of our original investment, and same for our partners. Despite the cash out refi, the property continues to pay us steady quarterly income. Total return to date in less than 1.5 years, after receiving all of our invested capital back, is 96% to 186% depending on the cap rate used to estimate the current value of the income that the building generates.

    I attribute this high level of success to about five factors that simultaneously aligned and worked well with this deal. Our excellent liquidity and solid balance sheet allowed our partners to negotiate exceptional financing terms with a local commercial bank, along with the fact that we signed a personal guarantee for a recourse loan. We bought a 35% vacant building for a huge Covid discount, and we lowered the vacancy rate temporarily to 0% and more recently to 2%. The management of the building was poor before and is excellent now. We added multiple high value improvements to the property. We have held tenant appreciation parties and have created quite a desirable community among the many young nurses and doctors in training who live in our building, which is ideally located close to one of the top tertiary care centers in the country. Overall, we have attracted amazing, high quality tenants who always pay the rent and who take excellent care of the property. In return, we strive to provide responsive, high quality care to our tenants. So far, so good with our first adventure with a RE partnership type deal. Best. Investment. Ever.​

    Leave a comment:


  • VagabondMD
    replied
    Just for the sake of completeness, there was also a sizable Trion distribution of 17.5% of the initial investment which hit my bank account on 12/28/22.

    Leave a comment:


  • goldenchimpy
    replied
    I appreciate you guys keeping this thread going. Every time I start thinking about real estate I come across this thread and remind myself of the value of simplicity.

    Leave a comment:


  • G
    replied
    Originally posted by childay View Post
    I take it you wouldn't again?
    hahaha!

    After getting rid of my rental property, this is really the only investment hassle I have--multiple state tax returns, reliably the last of the K-1s, no idea if/how I'm being screwed--and it represents less than 1% of my NW. It is the Pareto Principle on steroids!

    Leave a comment:


  • childay
    replied
    Originally posted by G View Post

    Continuing to record the saga, for those of you considering investing in syndicated garbage like this.

    No communication for a bit; CityVest uploaded the Pathfinder Q2 update (dated 8/1/22 by CityVest). That document states: "cumulative distributions to date are $45,443,000 (75% of capital)."

    Still at 55% of capital. Obviously CityVest gets a cut, but the numbers are apparently anybody's guess.

    I wonder if Pathfinder gave a distribution sometime in the last 5 months of 2022. I guess some day CityVest might trickle out that information. Maybe they will even show their accounting?

    For now, waiting.​
    I take it you wouldn't again?

    Leave a comment:


  • G
    replied
    Originally posted by G View Post
    Just looking at the Pathfinder update from July 2022 where they mention a return of 75% of capital. I added up my numbers and distributions from Cityvest are 55%. It'd be nice to see the expense breakdown.
    Continuing to record the saga, for those of you considering investing in syndicated garbage like this.

    No communication for a bit; CityVest uploaded the Pathfinder Q2 update (dated 8/1/22 by CityVest). That document states: "cumulative distributions to date are $45,443,000 (75% of capital)."

    Still at 55% of capital. Obviously CityVest gets a cut, but the numbers are apparently anybody's guess.

    I wonder if Pathfinder gave a distribution sometime in the last 5 months of 2022. I guess some day CityVest might trickle out that information. Maybe they will even show their accounting?

    For now, waiting.​

    Leave a comment:


  • Tim
    replied
    Originally posted by VagabondMD View Post
    Breaking News!

    Medical properties distribution - approximately 2.8% of my initial investment on 2/14/20. I have now received a total of about 9.8% of my initial investment back. Additionally, we seem to have established a pattern (?) of quarterly distributions for the last 12 months, which are modestly increasing in size each quarter.

    Still anticipating the Trion distribution in January. Hopefully, it will be January of 2023...
    Only 90.2% to go. Then the real fun starts. Profits!

    Leave a comment:


  • VagabondMD
    replied
    Breaking News!

    Medical properties distribution - approximately 2.8% of my initial investment on 2/14/20. I have now received a total of about 9.8% of my initial investment back. Additionally, we seem to have established a pattern (?) of quarterly distributions for the last 12 months, which are modestly increasing in size each quarter.

    Still anticipating the Trion distribution in January. Hopefully, it will be January of 2023...

    Leave a comment:


  • VagabondMD
    replied
    Originally posted by HM7 View Post

    LOL. How about Jan 2027, when the fund ends?
    I think the 2022 Q3 distribution should be available by then.

    Leave a comment:


  • HM7
    replied
    Originally posted by VagabondMD View Post

    January of what year?
    LOL. How about Jan 2027, when the fund ends?

    Leave a comment:


  • deanyar
    replied
    Originally posted by HM7 View Post

    deanyar , i thought that was because cityvest entered late in the fund behind other investors. Now that we are 2 years in, i would think that catch up is not an issue at this point.
    Yeah - you're probably right.

    Leave a comment:

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