Canary in the coal mine: an early indicator of potential danger or failure. Real estate example…
Property:
Apartments built in early 1980s
Purchase price:
$111M
Acquisition:
2022
Leverage:
75%
Syndicated equity:
$21.5M
Equity placement fee:
$1.9M
Sponsor acquisition fee:
$2.2M
Going-in cap rate:
3%
Assumed exit cap rate:
4.4%
Sponsor promote:
50% over a 10%
Underwritten investor returns:
18.5% IRR, 1.7x multiple
One-off deal? Not at all.
This syndicator put out $1.2B near the peak of the market 3-4 years ago.
Look out below.