Ashcroft capital - Paused Distributions

[Evan Mitch]

Anyone else getting notified this morning of paused Ashcroft distributions due to refinancing issues? 

We have been working on refinancing the asset in order to access the equity and create liquidity to earnestly restart the renovations. The new lender we initially signed up with for the refinance notified us that they would not be able to provide the new loan at the agreed upon terms due to current market volatility.

We continue to pursue alternative refinancing options and anticipate having a new loan closed within the next six months. To remain conservative with liquidity and continue increasing NOI through unit renovations, we are pausing distributions beginning this month. Your preferred return will continue to accrue and will be paid at the next capital event, or when cash flow allows.

While distributions are on pause, we are not collecting its asset management fee and Birchstone Residential is collecting a reduced property management fee.

[Carlos Ptriawan]

Quote from @Lane Kawaoka:

You can do that with a subscription of Yardi or CoStar... trouble is it costs 5-20K. A lot higher than your BP subscription and a turnkey rental property downpayment.

I think CoStar know their original mortgage loan but do they know whether payment current and actual NOI/DSCR ? or only the lender knows ?

I checked from LoanCore and it's surprising. Gathering these information is key for any further investment.

Resiclub is also fantastic source of information.
I found out the lowest vacancy was in New Jersey, while highest vacancy at the highest is area  around Austin. 

Surprisingly all the MF trouble is actually not nationwide, but more region specific.

[Carlos Ptriawan]

Quote from @Nicholas L.:

@Carlos Ptriawan

yep, am still waiting for ChatGPT to be able to tell me what the condition of every single sewer line in Pittsburgh is.

This should be doable by installing some IOT device lol

[Jon Zhou]

I just got an email from Ashcroft for a 19.7% of additional capital call of the original invested capital for one of their syndications in Georgia. Anyone else having this issue with Ashcroft? They make it seem mandatory but what are the chance I’m just gonna lose even more money with them?

[Barclay Chan]

@Jon Zhou, is that an individual deal or part of AVAF1? I got one this morning for the AVAF1 (their fund number 1).

[Randall Joseph]

Quote from @Barclay Chan:

@Jon Zhou, is that an individual deal or part of AVAF1? I got one this morning for the AVAF1 (their fund number 1).

 I'm also in AVAF1 and received the same communication.

[Chris Seveney]

Quote from @Jon Zhou:

I just got an email from Ashcroft for a 19.7% of additional capital call of the original invested capital for one of their syndications in Georgia. Anyone else having this issue with Ashcroft? They make it seem mandatory but what are the chance I’m just gonna lose even more money with them?

 Another group I am in someone posted this and it was my understanding based on what they were saying (I am not invested but telling you what they were noting), was that you do not have to accept the capital call, but if you do not and if not enough investors invest in it then they could be forced to liquidate the asset.

If you do not put in more you will be diluted and be behind that new money (but I recommend reading the operating agreement and PPM). That is what is being talked about in one of the other forums I am in. They also mentioned that if this is fund 1 then you probably can expect similar in other funds but that was not fact just opinion.

[Christopher G.]

I'm in AVAF2 and haven't seen any captial call request.  I think since AFAF2 was started later when rates were higher, it might have some better loans???

that being said, I lost a few days with the former Simple Passive Cash Flow now called Wealth Elevator with Lane Kawaoka....capital calls that didn't solve the problem and the bank took the asset back and we lost everything. 

[Barclay Chan]

Quote from @Christopher G.:

I'm in AVAF2 and haven't seen any captial call request.  I think since AFAF2 was started later when rates were higher, it might have some better loans???

that being said, I lost a few days with the former Simple Passive Cash Flow now called Wealth Elevator with Lane Kawaoka....capital calls that didn't solve the problem and the bank took the asset back and we lost everything. 

 How much more Lane request for his capital call? And how long from the capital call until the bank took the asset back?

[Chris Seveney]

Quote from @Barclay Chan:

Quote from @Christopher G.:

I'm in AVAF2 and haven't seen any captial call request.  I think since AFAF2 was started later when rates were higher, it might have some better loans???

that being said, I lost a few days with the former Simple Passive Cash Flow now called Wealth Elevator with Lane Kawaoka....capital calls that didn't solve the problem and the bank took the asset back and we lost everything. 

 How much more Lane request for his capital call? And how long from the capital call until the bank took the asset back?

 There is another chain on that topic, I would add it to that chain to not mix up the two posts.

[Barclay Chan]

Quote from @Chris Seveney:

Quote from @Barclay Chan:

Quote from @Christopher G.:

I'm in AVAF2 and haven't seen any captial call request.  I think since AFAF2 was started later when rates were higher, it might have some better loans???

that being said, I lost a few days with the former Simple Passive Cash Flow now called Wealth Elevator with Lane Kawaoka....capital calls that didn't solve the problem and the bank took the asset back and we lost everything. 

 How much more Lane request for his capital call? And how long from the capital call until the bank took the asset back?

 There is another chain on that topic, I would add it to that chain to not mix up the two posts.

 Little confused about the other post. You said you have not invested with Lane.????

[Bobby Larsen]

Looks like there are two letter floating around, one for Fund I and the other for a specific syndication. Both would need to be evaluated differently and the answer to contributing to the capital call is whether you believe in the financials projections which should likely be viewed with a bit more skepticism. We are in a real estate recession and while I do think we have seen most, if not all, of the pricing declines, markets do not rebound quickly. If anything greater than 100% of equity is wiped out today (values less than loans) then the quick answer is not to contribute because you'll be met with immediate dilution of your new equity.

Also, these Class A and Class B (common and preferred) equity structures can become really messy when times are difficult. It is impossible for a sponsor to act as a fiduciary to both. According to the fund letter, Class B is wiped out and Class A is at 71% of initial investment. My immediate question is: Where will the new equity sit in the capital stack? If new equity has priority over Class A then this capital call is diluting Class A's remaining 71% and Class A should be pushing for a sale. Class B likely won't want that because it means a full loss of capital. Both classes are represented by the same sponsor, how does a sponsor act in the best interest of both share classes? Review the PPM with an attorney to see if Class A has additional control rights. Additionally, how does dilution work between class A and class B if they don't participate in the capital all?

Lastly, I take issue with the "All LPs must participate language" which is likely incorrect but I recommend reviewing the PPMs with an attorney. 

[Christopher G.]

Quote from @Barclay Chan:

Quote from @Christopher G.:

I'm in AVAF2 and haven't seen any captial call request.  I think since AFAF2 was started later when rates were higher, it might have some better loans???

that being said, I lost a few days with the former Simple Passive Cash Flow now called Wealth Elevator with Lane Kawaoka....capital calls that didn't solve the problem and the bank took the asset back and we lost everything. 

 How much more Lane request for his capital call? And how long from the capital call until the bank took the asset back?

33% the first capital call then 20% the second time....bank took the assets back probably within a year or a bit more.  floating rate debt, bad property managers, interest rate explosions...

[Carlos Castellanos]

Thank you all for your contribution to this community. 

Here's the replay of yesterday's Ashcroft Capital's capital call update. Any thoughts and analysis would be appreciated.

https://mailhub.ashcroftcapital.com/share/hubspotvideo/165541408857?utm_medium=email&_hsenc=p2ANqtz-9ZdXHKusNjT350LCP5W9ljDxUcnKNkmLJBSB1HZm9d1Cfc4vuRjIwURjYXmiiSb-jhQcNJ4TYKQINzomuJVxslHxDzaw&_hsmi=304380451&utm_content=304380451&utm_source=hs_email

[Joel Owens]

They talk about NOI growth alot. The question becomes even if improvements are made can the tenants pay it or are they already maxed out with their incomes on rent affordability? If that is the case the renovations won't matter because rent growth won't be realized.

A property is just like a business. How many multiples of potential like left or is it close to being tapped out?

[Joel Owens]

Wow what was shown in the video at 40:44 remaining was astonishing.

Projecting to sell at an exit 4.0 cap to hit a projected 1.6 equity multiple for multifamily and 5.0 cap at highest?

[John Teachout]

We watched the video report which was interesting. We're not in fund I but are in fund II. They indicated in the video that they don't anticipate cash calls for any of their other portfolios. Hope that stays true. My wife and I have already discussed what our reaction might be if we do get cash calls from any of our syndications/funds and while we would look at each situation in detail, it's likely we would refuse. The video was sobering in the fact that if the cash call fails and they have to sell, not even class A investors would get all their principle back and class B would be wiped out. This has helped me to realize that where one's investment is in the capital stack is vitally important. A cash call is somewhat ironic in essentially it's "This investment is messed up and at risk, can we have even more of your money?"

[Melanie P.]

Quote from @Joel Owens:

Wow what was shown in the video at 40:44 remaining was astonishing.

Projecting to sell at an exit 4.0 cap to hit a projected 1.6 equity multiple for multifamily and 5.0 cap at highest?

Projecting to sell when? 2035? Doubt any of these guys will exit under 6 for a long time to come. It's already looking doubtful there will be any interest rate relief this year.

[Chris Webb]

Quote from @Melanie P.:

Quote from @Joel Owens:

Wow what was shown in the video at 40:44 remaining was astonishing.

Projecting to sell at an exit 4.0 cap to hit a projected 1.6 equity multiple for multifamily and 5.0 cap at highest?

Projecting to sell when? 2035? Doubt any of these guys will exit under 6 for a long time to come. It's already looking doubtful there will be any interest rate relief this year.

Yes, I didn't anticipate any rate cuts until at least August, but the inflation indicators are not softening and the Fed knows it. They probably won't cut until we are in recession. 

[Joel Owens]

As my friend that syndicates for 40 years now says ( I look for upside high and lower risk ) deals. If everything has to go perfect or close to perfect on projections to hit a number I pass on the deal. 

[Melanie P.]

In the financial press they're predicting next year for cuts already. Federal Reserve Bank of Minneapolis President said if economic indicators remain strong he could see not doing cuts at all. The neutral rate is rising according to almost every Fed branch, which means when rates stabilize it very might well be in the high 3s or low 4s. This is only a problem for those that are over-leveraged, which includes most syndicators. The GP/LP structure is great for a hit and run but absolutely counter productive to any sort of work outs on the debt.

@Joel Owens I'd be interested in reading the name of the syndicator who has been in business for 40 years and I'm sure your friend wouldn't mind the free promotion. However, claims like "I look for high upside and low risk" are so meaningless that regulators consider them "puffery" since no reasonable person would make an investment based on that sort of statement. Personally, I like rent growth and appreciation in my investments and football games that come down to turnovers and defense.

[Joel Owens]

Oh he doesn't tell investors that or on deals. These are just talks we have from time to time on experience with how a GP thinks when sourcing and evaluating deals.

For value add I only do very fat deals now to syndicate for single tenant. I still make good money but I am also a broker with my own company with clients buying properties. So small deals where GP upside to me is 250k for 7 to 8 months work on single tenant is not great for me as I can make that on one transaction with clients buying to own NNN themselves.

[Melanie P.]

Tell me in numbers the point when a deal becomes a "very fat deal." And if it's so fat, why share it?