Agree 100%. If you’re an accredited investor putting money into MHP funds I’d pause and do some research. I don’t think you could find other private Multifamily RE funds with a 50/50 split. That’s pretty bad honestly. And the fund sponsors almost always put in 5-15% of the equity raise. I wouldn’t invest with a fund that didn’t have at least 5% skin in the game, but that’s just me.
I have done a bit of research lately and honestly it just doesn’t make sense to put my money into “emerging” MHP funds that don’t pay close to what an established private RE fund pays.
I am not affiliated with this company in any way but check out some of the investments on https://www.crowdstreet.com/ and compare…
I know there’s some folks on here with skin in the game with MHP funds and I’m not trying to be a jerk, but I suggest people do more research outside the MHP space before committing their money. MHP funds just don’t seem competitive unless you’re just looking to diversify your risk.
I’m not very well versed on the syndication side but on the splits 50/50 or 70/30, doesn’t ultimately it all come down to the IRR where MH funds claim to do 15-20 IRR and then say on an apartment syndicate you get the 70/30 but investor is still backing into a 15% IRR?
It’s one of those areas where you have to reverse engineer the terms offered by the syndication to get an apples to apples view on which is the best investment for you. I wish there was a RESPA or TILA equivalent that standardized terms and aim to reduce hidden fees, whether intentional or not. But it’s not hard, you just have to approach them all skeptically until you’re comfortable.
Risk diversification is extremely important. It is not the return that matters, but the risk/return ratio.
Since I chimed in before, let me provide that my return for the abovementioned F&D fund investment was in fact more like 50% return over 5 years after all fees, taxes, etc were accounted for. Above I said I was expecting 100%. In hindsight, the remaining 50-50 split after the preferred return was not as high as I had hoped. Nevertheless, I rolled over into F&D’s final fund. I believe the sponsors put in about 5% of the expected or initial capital raise (I’m not sure which).
Thanks for the additional info. I definitely think risk/return ratio should always be at the forefront of someone’s mind. The returns you mentioned certainly aren’t bad, but if I’m investing in private funds I would want more. I could get 50% in five years playing the stock market with a lot less risk/more transparency. I just think MHP funds right now aren’t competitive with other private multifamily funds.
At this point, I’d be happy if they would at least send a K1. If only they pursued their CPA and managed funds with the same zeal that they pursue new investors, I’d be a repeat investor. Instead, I’m interested in selling our PSP shares.
@Deleted_User_ME
It’s true that a net IRR of 15% is 15% no matter how you slice it. However, the IRR is something that is only known at “the end of the movie”, as Frank would say. In other words, how well things go with the investment and how well it’s managed will determine the outcome (IRR). For the investor, all things being equal, you’d rather have a larger portion of the proceeds (70/30) than a smaller one (50/50).
Another big factor to consider is the risk. In other words, the likelihood that the deal will go as planned. This relates to quality of the sponsor, quality of the deal, and to some degree chance. A 15% projected IRR can equal 25% IRR in the end. Or it can equal 0% IRR in the end. Or even worse, a negative return. Part of doing DD on a syndicated deal is figuring out which one of those we think is most likely. Doesn’t mean we’ll be right of course.
I am also an investor in three MHP funds including Park Street Partners. Agree with comments above. P&L statements are basically useless. I know Jefferson keeps saying the reporting has improved. Three years after the fund started, they still don’t provide quarterly written updates. If the fund is not audited, one would hope you will at least get good P&L statements and quarterly updates to keep investors comfortable. Sadly, I just don’t see an intent on their part to improve contrary to public statements and I am tired of hearing the same promises for a long time. Their focus seems to be on raising more money for their new funds. Three years into the fund’s life, their fund is still behind on paying the pref and no communication on when they will ever catch the investors up with unpaid pref. I regret investing with them. Fortunately I invested a small amount to test the waters but nevertheless a valuable lesson learned. Go with more experienced sponsors that don’t try to learn on your dime and there are several asset classes out there beyond MHP.
Just a clarification. Your newest fund (by the way a small correction. This fund was launched on 8/17/2016 and not 2017) is paying 8% in the recent quarters but has NOT paid the accumulated but unpaid distributions from 2016/2017 time frame. It has not caught the investors up on the 8% overall 3+ years after the fund was launched.
Tx_Investor; I agree with your comments. To this day I have seen no change in the reporting from Park Street Partners. Jefferson and I had a phone conversation after my original post back in March (which was good a good conversation) and I sent him examples of improved reporting. So far, no change at all in content, format or timeliness of reporting.
As stated, the reporting is deficient so it is difficult to compare quarter to quarter, but at one point two fund owned MHP’s appeared to just completely disappear from the reporting information provided (I could not trace their fate in the records anyway). To me, this is a material and significant change. When I sent emails to Brad Johnson and Jefferson Lilly questioning this I received no response whatsoever.
In an update to shareholders some time ago (9 months?) we were told that a fund owned MHP was refinanced and a significant distribution would be coming to the shareholders (Nice!). So far, nothing. And again, they do not respond when asked about these things.
As I have stated before, I have great respect for Jefferson, but I would not put new money into any new fund offered by Brad Johnson or Jefferson Lilly. The reporting has been very concerning from the investor perspective.
I’d love to have a comment, update or correction to my comments from Brad or Jefferson on this forum or by email. Apparently, other investors would as well. I don’t like to use this public forum as a means to communicate issues with the fund but they have failed to respond to direct communications.
Using other people’s money is the game be it for oil, apartments MHP’s etc. They sell the idea and then after they have your money it becomes quiet or give lame excuses!! What really is a person’s recourse? The only person any more that I leave money with is my wife, no partners, or people selling ideas with NONE of their own money invested.
So I reach out and say I need some investors money to partner with and even on this website people relish a questionable quick buck deal and if I reached out probably a million dollars in a week–why not try–snake oil is still being sold. Buyer beware!!! We are past the normal age of operating parks but we are still buying and operating since we are not giving money to people that hang out a shingle that say invest with us—try the casino --their you go in knowing you will eventually LOSE!
I too have a lot of respect for Jefferson, his knowledge and abilities! There is no question on that. But I don’t appreciate them taking the investors for granted after taking their investment dollars. They refinanced a park about a year ago and got about $2M. The fund size is about $14M, so $2M is very significant in that context. There is no communication until today on where that money went. Either they have no clue on what they are doing or they know but they don’t care to communicate. Either way, it raises concerns and leads to erosion of trust. These are talented guys and I want them to do well and be successful. I feel sad to have to say these things but these are facts.
There are very few sponsors in the MHP space and hence very low competition that is reflected in investor unfriendly terms, poor communication, lack of transparency etc. I think that our money is safer in other real estate asset classes where you can find better quality sponsors and with more equitable terms. You are swapping the sponsor risk with asset class risk. I have read in numerous places that in any private investments, the most important factor is the quality of the sponsor. Everything else comes next!
There are numerous classes being sold how to form syndication and use other peoples money and putting down $1,500 or more is normal per session. The time frame to exit is never exact and they tend to use your money for the down payment to then secure a loan and the magic is NO MONEY input from the fund organizer. Very much hype like house flippers and in a down turn your money only will be at risk. If you have money to invest BUY a MHP there are excellent management teams to help you with a great return.
I just wanted to make a note on your comment about “the time frame to exit is never exact”. Sponsors tend to give a range of time until exit, i.e. 5-7 years, because they don’t know what the economic conditions will be at an exact date. Giving a range actually helps to protect investors in case of an economic or market downturn. A sponsor doesn’t want to be obligated to liquidate their holdings when cap rates are high.
Also, sponsors using other peoples money is the whole point of syndication. It’s not necessarily some kind of con, but say there’s a great sponsor out there who only has x amount of dollars and those are all tied up but they keep finding good deals, it makes sense to buy into those deals with investors money doesn’t it?
I wanted to see if I could get current information on how the Park Avenue and Park Street investing turned out for those of you that invested there. I understand there to be some criticism concerning reporting and communication. Has that improved at all? Were the payments made timely and in full as are being advertised now? There is a new funding round for with them that I am considering and I am trying to research the track record. Thanks for the help.
Indeed our investor reporting should have been better at Park Street Partners. We grew quickly and were more focussed on acquisitions (while prices were lower) and operating the parks than investor reporting. This is a lesson learned, believe me.
At Park Avenue Partners (my new fund) we host quarterly webinars with LPs and present complete financials (both fund-level and property-level), MD&A, and then take live questions from investors. These quarterly webinars are recorded and posted in our investor portal so investors unable to be with us during the live presentation can watch the recordings at their convenience.
As regards the unpaid preferred return on Park Street Partners Fund 2 - please keep in mind that a preferred return does not have to be caught up by any particular date (at least that’s not the way any of our funds have ever worked). Rather, our PPM promised that investors would get caught up in a particular way - which is to say that their unpaid preferred return would accrue and would get paid before Brad and I got paid. And we kept that promise.
We have now sold all but two of our properties in Park Street Partners Fund 2. (Contact me if you want to be on the off-market list for the last two properties.) PSPF2 investors have received all their capital back, plus all accrued preferred returns, plus profits - all of which have earned them about a 10% IRR. (And hopefully there will be more profits coming back when our last two properties are sold.)
I’m also happy to report that I’ve raised more money at Park Avenue Partners than at Park Street Partners, and much of that money from investors who were with us in the PSP funds. I say this not to gloat, but rather to respectfully remind readers here that people who are upset are much more likely to leave a review than people who are happy - be it a review of Park Street Partners here on the forum, or be it a review of a restaurant on Yelp. MHU is a valuable forum for open discussion, but the comments here may skew towards those with complaints rather than compliments.
Thank you all for your constructive criticism, and here’s to good investing for all of us,
Park Street Partners’ track record has turned out as follows:
PSPF1: 15% IRR net to investors
PSPF2: 10% IRR net to investors (best guess - still two properties to be sold as of 07/22)
More track record details are available on the recorded webinar available at the top of our website at www.parkavenuepartners.com. Click the ‘Watch our Webinar’ button, then scroll through to the ‘Track Record’ section.
Park Avenue Partners’ track record is:
PAPF1 (the most recent fund) is up on paper 44% according to appraisals from Colliers. These appraisals were done at/around the time of property acquisitions. We’ve since improved the properties’ performance and feel the properties would sell for more today; but starting ‘out of the gate’ with a 44% gain is a nice start. All acquired off-market
PAPF2 (the current fund) has three properties under contract; all have appraised for more than our acquisition price. All off-market
As a relative newcomer to this forum I’m glad this old thread was amended recently as the discussion is still interesting and helpful, both for those who occasionally invest and also those like myself who sometimes sponsor individual opportunities without a formal “fund” in place.
Lots of great experience in this group for sure.
I can add a few comments regarding LP investment returns and overall profit sharing based on recent experience with a new project:
We usually use a simple 3-tier waterfall structure much like the one Brandon described above, with preferred returns first, then a return of both GP and LP equity capital, then a split of all remaining profits based on a sharing ratio determined by the nature of each deal.
We sometimes use a higher 10-15% pref as the first money out where the project-level IRR is estimated to be 20-30% or more.
Sometimes the final profit sharing ratio can be even higher than 50% to the GP and still be a great deal for all investors (assuming no surprises of course). For example, we have an active project where the final profit sharing ratio is 85/15, but in this case the GP is also the largest equity partner at about 75%. Despite the 85% GP split at the end, net LP-level returns are projected at 20%+ IRR over 5 years.
