Sheng Li

Nov 29, 2018

I would not touch this sponsor with a ten foot pole. I invested in the Vitae student housing deal.

 

The deal was closed in late March 2017. In Q2 2018, it started to skip quarterly distributions. The sponsor blamed the over-budget utility cost (due to cold winter in Texas) and capex among the reasons. In the financial reports, the utility cost has been consistently 20-50% over-budget each quarter, I don't see anything seasonal, and the actual capex was much lower than budgeted.

 

Then comes the 2018Q3 report. Voila, out of nowhere, for the first time we see the actual loan terms of this deal, which is blatantly different than the terms advertised before closing and can explain a big part of the underperformance.

The terms listed on CrowdStreet website and in the email before closing was 10 years, 4.5% interest rate. The proforma was based on 4.5% ir.

The actual term is 3 years, 4.75% ir. And the sponsor is trying to refi into 5%+ !

 

I only invested in one deal from this sponsor. But there is a track record listed on CrowdStreet (on the page for this sponsor's Growth Fund IV deal), each CS deal from this sponsor with enough history is underperforming.

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