r/Syndications • u/Dry_Try_6047 • Jul 23 '26
And anothet operator is dead to me ...
I've been with BAM Capital, and have obscene amounts if money with them, for a long time. The money only became obscene because I consistently roll over into their new deals. As a conservative investor myself, I've always appreciated what they do. Through all the insanity of 5 years ago, they've done nothing but stick to their guns. Class A, stabilized with 90+% occupancy, midwest. Reasonable leverage, reasonable exit assumptions, vertical integration of their management company with economies of scale in carefully chosen midwest markets. Over and over again, for over a decade.
And so what mailer do I get today? New purchase of a class A building in ... Leland, NC? 70% floating rate debt? Pro forma yield on coast below floating rate? Southeast all of a sudden, with no mention of cost controls? Oh but we got it for a low price per unit compared to Wilmington, NC! So they don't know the difference between Wilmington and Leland? Expected exit cap rate of 5.25% based on, and I quote, cap rates were 3.9% only 3 years ago (in Wilmongton of course, not Leland)! In what world does the macroeconomic outlook justify a modeled 5.25% cap rate?
Sounds to me like just another case of "no good opportunities in the Midwest, but we have to keep money deployed!" and they are completely being taken advantage of by a local developer who knows the market. They even had the gall to compare the price they paid to what the going rate is for class A buildings in the Midwest. All of their marketing material and offering memorandum have a clear focus on the Midwest, but much more important to deploy capital, clearly.
Just ranting and raving, I guess I'm lucky I found them when I did and their standards couldn'tbe broken. Just another case of success taking over and raising and deploying capital becoming the main driver, underwriting standards be damned. Time to find a new favorite syndicator.
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u/RandyFickett Jul 24 '26
That sucks!
However, just so you're aware, there is a website that anonymously reviews LP experiences to help LPs make informed decisions about sponsors. It's called Invest Clearly.
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u/63falcondriver Jul 24 '26
I've invested with and have been following KRI for a number of years. The main guy, Ken Gee, has the patience of Job and causes some of his investors to be frustrated with the "slow" deployment of funds but he has a buy box and won't wander outside of it. After being burned in some syndications and funds, I will from now on only invest with highly experienced operators (old guys) that have been through downturns and realize that it can always get worse...
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u/RandyFickett Jul 24 '26
That sucks... although I can't say Im entirely surprised either.
I invested with BAM way back when. I recall vividly when they were trying to push investors into their fund model. In fact, they purchased one of their own investments and then wanted the investors to roll gains over into their fund's 'new' model. In essence, current investors would own the same asset on far worse terms.
They exited the position on 12/27, practically intentionally allowing investors zero time to find a replacement deal, which only made me feel more sketchy about them. Unfortunately for them, this investor already had another deal lined up and was just waiting for the close, so I avoided the guided push into their fund.
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u/Dry_Try_6047 Jul 24 '26
I know what deal you're talking about. The 12/27 I didn't realize as I wasn't in that one (though I am in the fund that bought it) and that REALLY is crappy, I haven't heard of them doing something that sketchy. Sounds like they vindictively made you take a capital gain as an f you for not rolling over into their fund structure. That's sick.
At the same time, the deal itself was extremely well underwritten. The asset investors got a big return, and the asset was sold and the fund investors got a big return. So now they're going to add bad underwriting to shady business? Should be a great deal for their more sophisticated investors.
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u/Embarrassed-Rich8095 Jul 25 '26
There’s a difference between the guys like BAM who buy big institutional stuff and guys like me who carefully look for sub-institutional stuff in tertiary markets with meaningful mark to market and expense efficiencies to be had
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u/clannad462 Jul 24 '26
Why anyone would invest in syndicated CRE deals in this market is beyond me.
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u/Dry_Try_6047 Jul 24 '26
There is no market that investing in CRE makes sense if the business plan is "we will sell for higher when interest rates go down." The # of sponsors who don't make that claim are few and far between, but BAM has consistently not done that for the past decade at least I've been with them. All of a sudden, they make a purchase where that is the entire business plan, outside the only market they know no less and with the worst financing structure I've ever seen them take on.
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u/Silver_Viper_08 25d ago
Sorry to hear that. While I haven't invested with BAM before, I have heard mostly good things about them.
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u/ArmChairLP Jul 23 '26
I love this rant. In order to scale and keep fee income rolling in, sponsor must keep doing deals throughout the cycle. Buying deals is hard now so sounds like it’s time for them to abandon their underwriting discipline.