Sponsors Going Under
Which Sponsors are going under?
I have watched virtually every deal that hits the market get over levered the since the pandemic. When are these ultra aggressive groups going under?
- GVA?
- Tides Equities?
- Carroll?
- ZMR?
- Western Wealth?
- Windmass?
- Knightvest?
- Gatesco?
- Ashland Greene?
- CAF Capital Partners?
- Blue Magma?
- S2?
- Bridge Investment Group? This group is big but they have been buying a lot the last few years. How is there multifamily doing? Do they have a lot of exposure to bridge debt?
I assume there are hosts of them about to get wiped out.
How are the crowd funds doing? The deals I saw on their websites were super risky. They needed big IRRs for their fees to be absorbed.
Hopefully all of them.
Sorry but that’s terrible to wish upon someone.
Carroll is trying to sell the platform, believe that was in Real Estate Alert awhile back so not breaking any news. UBS was hired to run the process. Carroll has had a major exodus of corporate employees, particularly in acquisitions / asset management, since January. Only a few people remain in those departments, and I am seeing more of their deals get listed every week.
GVA, ZMR and to an extent WWC have listed some of their assets, particularly the tougher location/quality ones. So clearly seeing writing on wall or trying to monetize early buys to raise cash. I do know ZMR laid some people off several months ago, and it was not a big company to begin with, which shows ZMR at least understands the gravity of their situation
Surprised by your inclusion of Bridge and Knightvest - Bridge will be more than fine, just might take a few lumps like any other top 50 owner that bought deals in 2nd half of 21 and 22. On the debt front, you need to remember they are subordinate to the equity, so sure they may take some losses, but also do have the capability to step into the deal if it comes to that. Knightvest, while an aggressive buyer, I don’t think levered too many deals up past max agency proceeds, and invests with savvy/institutional LPs. Again will probably have some problematic deals like anyone, but they’ll be fine overall.
Thanks for the feedback
I don't know about Bridge and Knightvest other than they have bought a lot in the last few years. Bridge certainly has access to capital. I agree that Knightvest was more cautious than some other groups. However, any groups that is highly exposed to debt funds and CLOs is going be in trouble right now.
Bridge also has a debt strategies team. I believe the above poster is referring to the idea that if the get the keys back on some deals then they will be ready to step in since they are also skilled owner/operators.
ZMR is like a 10 person shop. How are you keeping tabs on their layoffs??
Generally agree with your non-doomsday analysis. Carroll will sell for a lot less than he could've, but will have enough money to settle waiter spitting lawsuits every day for the rest of his life. GVA, ZMR, and the other TRD darlings will get wrecked on a portion of their portfolios but as an enterprise will ultimately come out ahead (unless they have uncapped debt, which I haven't seen anyone suggest).
Hopefully, Carroll so restaurant employees don’t get spit on.
S2 seems to be fine. Everett seems more sophisticated than the carrolls of the world
Highly doubt anything goes wrong for bridge. They are fairly conservative on their underwriting and I think they will be just fine.
Lot of syndicators are scrambling right now. A lot of debt funds are hoarding cash to buy loans out of CLOs that go wrong so they can work out the loan without the transparency of the public market. Once the debt funds stop buying loans out and letting them get worked out via the CLO structure, then I am worrying a lot more.
Which debt funds are trying to buy deals out of CLOs?
You’ll have to dig through servicer or trustee reports, but it really depends on the issuer. I know Benefit Street was quick to pull the trigger on this years ago with a hotel deal in Williamsburg, and I have to imagine they bought out that fraudulent Walgreens portfolio that was in the news.
I would curious to see what is out there on the two Arbor loans they foreclosed out in Houston (only two of them were part of a CLO)
yeah what happened to those Arbor foreclosures? are they sitting on a bank's REO schedule?
How is the Carroll sale going? I assume their equity positions are not worth much or possibly are negative because of completion guaranties.
What other sponsors are in hot water?
How is Windmass doing? They have been pretty active this entire time. I heard that they were doing capital calls and they were getting push back from at least some investors.
Knightvest and S2 will be fine in my opinion. There is a spectrum of GPs and they are on the more sophisticated side.
I don't know the firms in question, so you may be right, but I think it's important to distinguish between sophistication and business plan. You can have an awful business plan and still be sophisticated - in fact, a lot of the firms and guys that seem to get in trouble have this exact problem. They're really smart but they aren't doing anything special and end up believing their own hype, and then lose everything.
Not sure about all those firms, but Nitya Capital will survive and become a part of the S&P 500, this guy is so humble, he must always be winning. Look at his humbleness. There is absolutely no way he goes under during this cycle, such a beautiful humble man this guy is.
boggles the mind that this convinced people to invest.
Tides is in trouble. Carroll will sell for much less than he would've 18 months ago, but will still be rich as balls. ZMR is fine. GVA is fine. Bridge is fine. Crowd funds are fine in the sense that they have none of their own money in deals. They already got fees, but their investors are in trouble. As soon as retail investors start actually realizing zeros, Realty Mogul & co could be in interesting trouble.
I don’t think too many of the crowd fund deals are seeing losses.
And I don't think Tides has given any keys back. Yet.
ZMR is fine, GVA is Fine
Clearly you have no clue what you are talking about. Look up any of their loans as ZMR has a bunch on Watchlists already
ok, honey. you definitely know better than i.
Where are you able to find these Watchlists? Trepp?
Except they won't be doing any more deals - and that is a problem.
Lets say ZMR has bought $2b in deals over the last ten years. At a high 2% fee, that's $40mm of revenue. Quite a bit less after tax, of course. And after the principal accounts for a decade of operations, probably a lot less than that... maybe an average of a million and a half a year? So best case scenario, the founder is walking away with maybe $5-10mm in cash. That's awesome, who wouldn't want that! But to sink 10 prime years of your career and walk away with that, well... it's not much more than one could reasonably have made working for someone else and investing on the side during one of the great bull runs of all time.
In any case, running a solely fee based business is exceptionally difficult unless you are turning over exceptionally high volumes. Doesn't look like these guys were. My guess is a lot of the firms on this list are the same way, in that they brought in a lot of cash really quickly from 2018 or so through 2022, splashed that success around on social media, but don't have the balance sheet or basis to ride through even an extremely short rough patch
Disagree. Most developers are fee businesses. Volume is dictated by product type. Office developers who do leasing/management can do a really low volume of deals because they make their money on the leasing commissions
Also, in terms of this thread and sponsors going under-those who set themselves up properly won’t. Many of these sponsors may own only 1% of their deal after their co-GP. So when it comes time for a capital call - it’s a small amount. They could also tell their LP - it’s your problem. And then the dance begins to see who pays what.
I valued a GVA deal a few weeks ago and i pegged it at 30% below their debt value. Those dudes were uber aggressive. I don't know how they will survive. So was ZMR.
Appleway has a deal on the market in Houston right now it will likely trade way below the debt value. There are so many groups that copied that high levered, quick flip model. How can they make it out?
They have some winners and losers across their portfolio. Likely have enough pre COVID deals that appreciated enough to offset some losses. I know Ready Cap does a lot of their deals, so it will be interesting to see how that progresses
Is ReadyCap the servicer or originator or is it the direct lender? I've been hearing their portfolio will take a massive hit.
- GVA? - Screwed
- Tides Equities? - Beyond Screwed
- Carroll? - Screwed
- ZMR? - Beyond Screwed
- Western Wealth? - Beyond Screwed
- Windmass? - Beyond Screwed
- Knightvest? - Screwed
- Gatesco? - No clue
- Ashland Greene?
- CAF Capital Partners?
- Blue Magma? - Its a softer look used mainly for catalogues
- S2? - Scott "Fixed rate debt is for Suckers" Everett...screwed. Every deal he did with his fund in 2021 and 2022 is upside down. Whats funny is he claims they sold or refinanced everything in 2021 and 2022 yet he raised a $400M fund that literally is going to not make a $1 in profits
All these groups have terrible business models not set up for recessionary environments. Every cycle this happens with groups getting washed out and none of these groups will be any different
- GVA? - Screwed - Yes
- Tides Equities? - Beyond Screwed - Yes, all their equity partners pushing for sales
- Carroll? - Screwed - Yes, Patrick scaled and got a gravy JV with PGIM but his mouth completely tarnished the brand
- ZMR? - Beyond Screwed - Overexposed in Florida, insurance cost are bonkers in Florida and who knows how refis out of bridge debt will go, ship is sinking
- Western Wealth? - Beyond Screwed - Frauds and selling everything
- Windmass? - Beyond Screwed - Garbage assets and in pain
- Knightvest? - Screwed - They are good
- Gatesco? - No clue - same
- Ashland Greene? - They are good
- CAF Capital Partners? - They are good, they have scale and Goldman Sachs JV
- Blue Magma? - Its a softer look used mainly for catalogues
- S2? - Scott "Fixed rate debt is for Suckers" Everett...screwed. - S2 is fine they have scale and house money
Starwood has no succession plan and a bunch of multi are they in trouble
Where are the developers at? Going to be interesting to see what happens to these companies moving forward with all these battle wounds
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