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Nov '24 •
Our Toughest Deal Refinances to Agency - 3 years in the making
This was the most difficult project in our career, and I’m proud of this story of perseverance and ultimately preservation of capital. In a time where there is much negativity towards Syndications and multifamily, this story hopefully gives hope to the operators out there doing the right thing, giving every bit of smarts and execution to protect capital. This story is a save. I don’t know many other operators that would have been able to pull off what we did and the challenges we faced, how we survived and thrived. Our strength as GP guarantors at Sharpline, our track-record, our relationships with Freddie and Fannie were the key. It’s a testament to Sharpline and the commitment of our team as well as the patience and belief from our investors. I want this post to be a reality check and not considered bragadocious but give homage to the people in Sharpline and the many partners (lenders, vendors, consultants, investors) that helped get this insurmountable project to where it is today. Here we go. 3 years ago we bought this as a heavy value-add post covid. We couldn’t get new roofs that were leaking for 7 months, so this inhibited our reposition to improve the property, which kept some of the bad elements at the community there longer than we wanted. Fire property management company 1 , Fire property management company 2 (proverbial jump out frying pan into the fire, scary). Decided to self-manage project. This was in an early stage of our self-management journey about 2 years ago (we now self-manage 1500+ units). We purchase one half of the project with cash and the other with a bridge loan with floating rate debt (our only floating rate Sharpline has ever done, we didn’t buy a rate cap either, not smart) 4% bridge loan. We begin to execute capex plan successfully (we ripped the mansards off #MansardSlayer). The process of reposition took longer than we liked because of construction delays and bad PM companies, but we ultimately had the safety net of the 24 unit townhouse project that was getting higher occupancy that we purchased with cash as part of the syndication. So we refi’d the 24 unit with a local bank and GPs personally guaranteed the loan as we continued to do projects. This allowed us to free up liquid capital to continue executing to get higher occupancy, but we were still not there yet. We were at 65% overall occupancy on 128 units and the community was improving.
Pinned
Sep '24 •
How NOT to Sound Like an Idiot - Series
Go to Classroom area to check it out. I will be adding more an more episodes in the series. https://www.skool.com/multifamily/classroom/1987cf64
3d •
Understanding Underwriting Acronyms - For Newbies and Nerds
(EM, IRR, CoC, and Annualized Return) When I began underwriting, and even many times today, I had to ask my mentor(s) what each of the metrics meant on our underwriting tool. Why were they so excited about cash on cash (CoC) for one deal, but more focused on the equity multiple (EM) on another? Why would they discuss annualized return more often for some equity groups and CoC or EM for others? I still ask a lot of questions about this today even after underwriting $300M+ worth of multifamily (this may seem like a lot to some people, and a tiny amount to others, just the way multifamily investing works). A few things I have found about these deal metrics (and even some other metrics I won't go into on this post, trended and untrended yield on cost (just got taught this one recently)) is the following: 1. They tell slightly different performance and health metrics about a deal 2. They matter more to some sponsors, LPs, and private equity groups than others based on their risk tolerance, desire to redeploy their capital, and expectations for their equity (whether it is from them or the decision makers behind the scenes). 3. They compliment one another. Much like doing your blood work when you go to the doctor. You wouldn’t check your cholesterol only and call it a day. You normally pull a comprehensive blood panel to ensure you’re functioning well from head to toe. For each metric mentioned above I am going to break down what it tells me about a deal, how it is objectively calculated, a quick example, and what people are looking for when this is their key metric. While you read this, if you think of questions that go unanswered please throw them in the comments and I will do my best to answer them or write about them in future posts. 1️⃣ Cash on Cash (CoC): Cash on cash is calculated as annual cash flow: Cash on Cash (%) = (Annual Net Cash Flow / Total Invested Equity) * 100 Example: You invest $1M in a multifamily deal (for the ease of calculation we are going to assume you are the sole investor, and discuss NET cash flow as a 1 time number even though distributions are often paid monthly). Over the first year the NET cash flow is $80k (meaning this amount is freed up to be distributed to investors/yourself, or reinvested into the deal).
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Feb 27 •
What it took to close this 121 unit deal
We just closed on a 121-unit in Fort Worth. Here are some things that a spreadsheet doesn’t tell you. Lender requirements can shift late in the process. We were initially expecting agency debt, but last minute requirements changed and the proceeds no longer worked for the deal. So we pivoted to bridge. Good thing we had already modeled bridge from the start. You may have to restructure entities to align with lender expectations. We formed a new borrower entity late in the process and updated the org chart to match what the lender required. That meant new documents, new approvals, and making sure everything flowed correctly from a legal and ownership standpoint before we could close. Multiple legal teams get involved. Lender counsel, borrower counsel, title, everyone reviewing language and redlining documents. A lot of back and forth. Signature pages get revised. Loan agreements get updated. You think you are done, then another comment comes in. Title items can surface that have to be cleared before anyone wires money. In our case, there were legacy items that had to be resolved before we could get clean title. That meant coordination and making sure everything was cleared so funding could happen. None of that shows up on a spreadsheet. Getting this deal to closing was a different animal. Glad we got it done. Now the real work begins.
5d •
Partners in the Community
Hi Team, I am looking for people that would like to partner together to tackle some deals. GP experience, LP's, capital raisers My buy box is Multifamily 24unit+ (Value add, 1975 or newer, light to med.Renovations, Target 18%+ investor ROI) in Utah, Nevada, and Arizona. I am open to expanding to other regions; helping others with capital raise, asset management, analyzing deals, pitching deals, and however else I can be a resource to you. Please comment below with contact information and your partnership availability and or needs. Feel free to text or email me as well. Look forward to hearing from you. Talk soon Greg 312-806-4808 greg@w3companies.com
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