Investor Resources

What disadvantages do syndications have for investors and sponsors? One reason we pivoted away from single syndications and more towards a fund approach is that all your eggs in one deal was risky. A deal could go great, could be a home run, or the deal could go the other direction and suffer, putting investor capital at risk. 

We found that if we were running three or four of these at the same time, we were always concentrating on the one that needed the most attention, usually the more distressed property. We let the other ones, the successful ones, just kind of go on, it wasn't fair as a whole. So that's where we adopted the fund approach, pooling revenue helped support the lagging properties and strengthen the stronger ones. 

Another disadvantage for real estate syndications is there are a lot of sponsor groups that are either incompetent or flat-out scams. You hear all the time in the news, a new one pops up and it's a Ponzi scheme. That hurts our industry, but it goes back to finding a good operator, with a good track record. Talk to their investors, and see if they've paid out, and if so, on what schedule. 

We fight that every day. We hang out hats on transparency and trust. It's frustrating to see those groups out there with these huge followings of people, and we know that they're not doing the right things such as diluting investments and taking giant acquisition fees to keep the lights on. Keep that in mind when you are researching an investment. 

The other thing for me is syndications are illiquid. It's locked up for periods of time. It could be three years, it could be five, it could be ten, it could be fifteen, and that syndication or that deal is at the mercy of the market. So, when you put your money in, it may be at one valuation, and when you take your money out and the property is sold, it may be at a completely different valuation based on market conditions.