Anyone have any insight into how they just purchased a $100MM+ portfolio as a younger company in this tough market to get debt financing and investor capital? Wonder how these purchases will pan out and if they know what they’re doing. Thought it was an interesting deal.
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Well, the Houston Housing Authority is involved, so very possible there are tax abatements or other government subsidies involved. Generally speaking affordable housing isn't as tied to macroeconomic conditions as market rate - if the Houston Housing Authority needs to hit housing preservation goals, they're going to make sure they meet their mandate, even if that means filling in budget gaps.
I'm pretty sure it's a classic case of founder's dad has a ton of money.
Lots of larger borrowers have larger cash reserves and are awaiting the influx of 2017-2019 construction debt to lease up, delayed due to pandemic. They have cash on hand to be capital rescue as they call it. Many also thought people weren't going to bridge to bridge and had reserves for these properties to come to acq. Which will happen at some time.
Unrelated but I like that he did like 100 shout outs to each person involved in the deal in the linkedin lolol. insurance brokers, tax dudes,etc
People hate on Lone Star and part of it is probably valid, but he's the lesser of the evils when you look at syndicators like Nitya, Rise, Tides, and now Ashcroft. He's been able to come off as looking more sophisticated. If I am not mistaken, they're capital stack is pretty straightforward, long term fixed rate debt with lower LTV and the remaining is LP equity. So I think they're able to weather the storm better than the floating guys (like Ashcroft which is still trying to cling onto rate caps).
Agree with you on this. He seems like a smart guy putting out content that actually makes sense. He doesn’t take our floaters I believe so he’ll be okay. I think this deal just furthers bolsters his credibility being that he’s not entering the affordable space and was able to execute on the deal.
Why do they get hate? They seem different and a little goofy, but as you said, their model is more conservative and now proving to be in a better position than all the high leverage, floating rate boys. I think one of their principals has a self published book as well.
Was thinking of wrong Lonestar. Ooops.
Different company, the OP is referring to Lone Star Capital, a multifamily syndicator.
This is very likely a tax abatement deal where property taxes are waived in exchange for keeping rents below market. There also is also very likely an even more affordable layer where some bond financing was obtained- maybe even subordinate to an agency loan which would price 25+ bps below market. I bet the blended cost of debt is below market rates along with no tax. Great play in TX and I heard is happening in FL too.
Some truth to your comments but you need to give the man respect for his execution. Props that he’s out there actually wheeling and dealing and getting his reps in with a few solid deals under his belt to build his track record. Most people are working for other real estate companies or never go out on their own so I at least respect him trying to create a legit shop which I think he’s been successful doing as a newbie. The kid just jumped in head first. We’ll see how this plays out.
Agreed.
To be fair, it appears he might have a tad more experience than Rise, maybe even tides, and certainly is in a better position.
Never heard of this guy or lonestar capital but seems like the type to have a ridiculous amount of burner accounts lol
I wonder if they have connections with Lone Star Funds? If so that is the answer to your question.
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