When I was less wise, I invested most of my net worth in multifamily real estate syndications (private placements). This was from 2016 - 2022 or so.
There were some successful exits, with a lot of dispositions in 2020. I took most of the proceeds and reinvested them in new deals, most of which are struggling because of rising loan costs and other problems. With several of these partnerships facing maturing loans this year or in 2025, sponsors are issuing capital calls to either fund value-add programs or buy rate caps for another year.
Presently, LP investments represent about half of my net worth.
It's been devastating to watch the equity in these deals evaporate. In a recent update, the sponsor says they have listed the property for sale (at a price that would wipe out LP's), but are also negotiating with the bank ("extend and pretend").
A different sponsor put together a pro-forma for a capital call to buy rate caps and it's clear that the original equity is gone, but if their best-case scenario works out, we'd recover maybe 40-50% of the original capital plus 110% of the new contributions.
In my mind, I was done with this asset class and don't want to risk any more capital. I have most of the rest of my investments in passive/index ETF's (401k, IRA, brokerage), and I would prefer to continue investing this way.
That said, if providing an additional capital would influence the outcome, maybe I should? I really don't know how to think about this. I have extreme aversion to throwing good money after bad, but maybe I should consider my previous investments a long-term commitment.
BTW one of the sponsors is facing accusations of fraud/misappropriation of funds. That one I am not funding under any circumstances.
There were some successful exits, with a lot of dispositions in 2020. I took most of the proceeds and reinvested them in new deals, most of which are struggling because of rising loan costs and other problems. With several of these partnerships facing maturing loans this year or in 2025, sponsors are issuing capital calls to either fund value-add programs or buy rate caps for another year.
Presently, LP investments represent about half of my net worth.
It's been devastating to watch the equity in these deals evaporate. In a recent update, the sponsor says they have listed the property for sale (at a price that would wipe out LP's), but are also negotiating with the bank ("extend and pretend").
A different sponsor put together a pro-forma for a capital call to buy rate caps and it's clear that the original equity is gone, but if their best-case scenario works out, we'd recover maybe 40-50% of the original capital plus 110% of the new contributions.
In my mind, I was done with this asset class and don't want to risk any more capital. I have most of the rest of my investments in passive/index ETF's (401k, IRA, brokerage), and I would prefer to continue investing this way.
That said, if providing an additional capital would influence the outcome, maybe I should? I really don't know how to think about this. I have extreme aversion to throwing good money after bad, but maybe I should consider my previous investments a long-term commitment.
BTW one of the sponsors is facing accusations of fraud/misappropriation of funds. That one I am not funding under any circumstances.
Statistics: Posted by sillysaver — Tue Aug 20, 2024 11:23 am — Replies 2 — Views 121
