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Global Investors Podcast
GI35: The Power of Partnerships When Syndicating Multifamily Properties with Carl Suverkrop
February 19, 2020
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The Power of Partnerships When Syndicating Multifamily Properties with Carl Suverkrop (Youtube)

Carl is a principal at Trident Multifamily and is a full-time real estate syndicator. Originally from South Africa, he immigrated to the US in 2015 after a successful sale of his electronic security business. Carl has been investing in multifamily real estate since 2014 and with his partners at Trident Multifamily, sponsored the acquisition of 3 assets in 2019.

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Announcer
Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles Carillo, combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carillo.

Charles
Welcome to another episode of the Global Investors Podcast. I’m your host Charles Carillo. Today, we have Carl Suverkrop. Carl is a principal at Trident Multifamily and is a full-time real estate syndicator. Originally from South Africa, he immigrated to the US in 2015. After a successful sale of his electronic security business, Carl has been investing in multifamily real estate since 2014. And with his partners at Trident Multifamily sponsored the acquisition of three assets in 2019. So thanks so much for being on the show.

Carl
Great. Thanks. feels great to be here. And yeah.

Charles
So you’re a Real Estate Agent as well. So what was your professional background prior to starting with your partners Trident Multifamily?

Carl
So yeah, that’s a I’ve got my license I’ve never practiced, it was kind of wells hitting in terms of the residential and acquiring assets, but I’ve never really practiced for anyone but myself. And so that was not my profession prior to to syndicating. I was still in security and doing security for apartment communities. So in Dallas, Fort Worth area, doing security evaluations, looking at all electronic, you know, cameras access control, it was really just a transfer of my knowledge from my business in South Africa to now the industry where I wanted to be, you know, spending my time so it was a, I guess a soft entry with the skills already had into the industry I wanted to be in. So help me get into some good, good connections and good networks, here in the US.

Charles
Why did you choose multifamily as your is your investment vehicle when you start it?

Carl
For a couple reasons, I love business, I love businesses, and I love real estate. And to me, commercial real estate and multifamily it’s a really simple business which you can understand and you can directly influence how it performs. So, you know, I’ve dabbled in the stock market, you know, trading out and doing all those types of things. And at the end of the day, you know, there’s the education and the time required to really understand, you know, investing in Apple today. I don’t know what Bill what’s going on an apple out of to be, you know, looking up, it’s just it’s very onerous way, Real Estate, to me is a much more simple model where you can affect change and get an easier handle of what’s going on and that type of thing.

Charles
So you definitely have much more control over it then investing in many other asset classes. Most of them are the ones that are kind of like pushed on us, I guess, especially if you have a job you didn’t have a job so it’s not really pushed on you with the 401k and stuff but so what types of assets and markets does your does try to focus on? Where are you guys looking?

Carl
So we’re looking Texas, Arkansas, Missouri, Kansas, Oklahoma. So that’s how sort of footprint I’m in DFW. Mike van partners in Springfield, Missouri, and Rodney Miller is an Oklahoma City without geographical layout. We can kind of service all of those areas pretty well. And in terms of what we’re looking for is cash flowing assets. That’s really what what we’re looking for in properties and all of those markets which make it a little tough in DFW at the moment we’re definitely playing in the in the C class assets. So you know, that is just super super competitive and to find anything that cash flows and yo one that’s pot left out needs to cash flow in year one, especially in DFW is just extremely tough, but, you know, across our footprint, we’ve managed to find quite a few markets where we can get really good cash flow from assets.

Charles
So what is, when you’re when you’re evaluating a deal, what are the main factors obviously, you said cash flow in the first year. What are the other factors that you have to you have to check off before you guys actually bring up property to a letter of intent stage.

Carl
We have a lot, a lot is verifying how comfortable we are in terms of market comps. And for me is the just the income, you know, obviously a 90% of these properties, we get a brokers offering memorandum. And they have a wonderful performer with, with the income growth just being astronomical. It’s like, yeah, let’s deal cash flows, you know, you wanted to cash flow deal. Here you go. And, you know, for me, it’s not realistic for a deal to increase income by 20% in what you know, in the first year, like that’s, it’s just not going to happen. So, typically, we we want assets that will go into agency debt, or at least qualify for agency debt. So our last deal we did, it could have qualified for agency debt at a phenomenal cash flow.

Charles
Can you explain it? Can you explain agency debt? Sorry.

Carl
Okay. So, Fannie Mae, Freddie Mac typically want to see a trailing three month occupancy of more than 90%. And the property needs to be stabilized without too much deferred maintenance, in terms of the mechanics, the roof that it needs to be a not distressed property, and that occupancy needs to be above the 90% mark. What we look for is a deal that is there. So, operationally it’s performing well, and then we can decide what we want to do. So our last deal, we could have gone the agency route, but we’ve decided to do a bigger rehab on the property and we wanted to financing a lot of that rehab. So we did go with a bridge loan on that deal. But the principle was that the asset was performing well, you know, there’s this couple times when people use different debt, bridge debt, we’ve used it in this case, because we wanted the cap X dollars, rather than we needed to use it because the property was distressed then at low occupancy, and no one else would give us money that was

Charles
That’s usually that’s usually the story with the Bridgestone.

Carl
Correct, correct. So we want to make sure that we’ve got well occupied properties in areas that have got great demand.

Charles
Right. And just so listeners for the the agency debt so those Fannie and Freddie their government, their government agencies, concert agency debt, and they’re backed by the US government, they’re very favorable interest rates. So it’s kind of the gold standard for multifamily and other into other classes, but for for any type of commercial developer or rehab or syndicator, they want to secure that at some point. And when Carl is talking about doing bridge loan, when we’re talking bridge debt, it’s going to be a variable. And they can, they can reset at different times. So it’s a little riskier, but it allows you as they were saying, they’re going to do a much more value add they’re putting more money into it, they’re they’re making a more aggressive of a rehab on it, and now greatly increased the the property and then of course, you guys will then refinance out I imagine or sell it, and you’ll go to an agency debt loan. Is that right?

Carl
Correct. Yes. Yeah.

Charles
Awesome. So you guys are very conservative. I mean, I speak to syndicators all time and sometimes they’re not anywhere near as conservative as you guys are when you’re underwriting and when you’re, you’re looking at deals. How does your company protect against a slowdown? So there’s a pullback in the economy a pullback in the market of properties in.

Carl
So, typically look for fixed rate financing, so just stay with coming back to that bridge, what we did on that is we’ve purchased a cap, which is pretty much almost like an insurance you pay up front and it caps what that variable interest rate with the upper end of where it would go. So that was one thing we did there. The other thing, again, is finding great demand and cash flow. So that’s what again, thinking about a business and again, a love business is a business cannot operate without cash. So a lot of people or a lot of people that I’m seeing, are saying I don’t worry about the cash flow, I just want appreciation just just whatever’s gonna give me the biggest return in three years. You know, if it’s all on the back end, I’m okay with that. And to me, that’s scary because if it’s not cash flying, it means that you know, the, during that three year window, and the property doesn’t have access cash. So when things slow down resets, whatever we want to call. If there’s less income coming into the property, there’s already there’s no buffer. So all of a sudden, we don’t have we’ve got less income. There’s no cash flow, who’s, you know, that’s got to come from somewhere, right? The property still get off, right? So for us, we let we make sure we’ve got properties that on year one, will as close to a minimum of 10% cash on cash, and ideally higher than 10% in year one, so that and typically it should improve, you know, as we progress, but we like to see a double digit cash flow from year one. So that way, at least things calm down, or we’ve got that buffer, that the business can still sustain itself, because, you know, no business cannot can operate without cash flow. You know, if you don’t know cash of the Bank, these living businesses, you know, you’ve already taken a big line of credit in terms of the mortgage, you can’t work a deal with a local bank and get more operational capital. It’s just it starts getting messy. So we like to make sure that our deals have got a good strong cash flow base to them. And that way as things need to be, you know, things slow down, we’ve at least can take we’ve got some buffer on that cash flow.

Charles
Yeah, no, that’s great. It’s also great with having the cap on the bridge loan know, something I should have mentioned as well. It’s something you can purchase. So that’s a way of really hedging risk over the next I guess, two or three years, which is a normal rehab process, period. So what is what is your role at Trident? Are you and acquisitions underwriting? Is that correct?

Carl
Yes. So acquisitions underwriting is pretty much what I do. I’ve got three screens set up here and just a bunch of calculators that you’re, you know, running the numbers. And then moving forward in terms of asset management, I handled most of the operations. Mike handles most of the capex. So, you know, I’m a bigger project working right now, that part of the asset management kind of falls under Mike but in terms of operations, you know, as I am the one who’s put the numbers together, I need to be accountable for the properties performance and make sure my managers know that they’re accountable to me to these numbers and you know, if we need to change something, we need to react, you know, just constantly having a look at the the effects of changing parameters in terms of the operations, so, operations and the asset management, and the operations and the acquisition.

Charles
Yeah, because the asset management portion that whole project management portion in the beginning when you’re doing the cap x is very time intensive because obviously you’re not in a lot of times you might not be ending with the right the contractor that you thought when you started and stuff like down this very you’re going to the site you’re making sure stuffs done, you’re looking over the shoulder of the property manager making sure that the rehab is going you know what I mean you’re doing enough units but not too many units and it’s a very kind of scientific process for keeping it money coming in but also the units been turned over and reprinted.

Carl
Hundred percent it is a and that’s actually what was sitting down yesterday is looking at the turn of all the units and coordinating you know lease expirations with you know, offering a couple of residents to stay month to month because we’re not ready to rehab the unit yet all the contract dissolved, you know, not lined up. So it is a real that would I want to say some logistical nightmare and coordinating move outs move ins react.

Charles
Yeah. So yeah. And then trying to like as you’re doing it now of smart like staggering the leases with the month, the month that gives people so it’s weird dates when they’re moving out different months than what they were before. So you don’t have 10% of your people coming up on February 1 or March 1 and then you have to do something now. But how did you find the rest of your your current your current business partners?

Carl
So we joined a mentor program here in DFW and luckily enough we were in that program together. But it really it wasn’t it was through the program, but it was it was through a networking event and an affiliated to the program. So we kind of touched base, but we hadn’t really dug into you know, getting serious, and you know, just a meetup where we learn more about each other and You know, I guess we’ve been chatting for four or five hours, and all of a sudden we thought, you know, we’re all kind of looking for the same thing. When we Dig Dug down, and we thought, you know, you’re in Springfield, you know, I’m in DFW, you’re in Oklahoma City, like, this is a pretty good ground that we covering because I see a lot of people partnering with people in their city, which is phenomenal and great. And, you know, it’s good team, but sometimes it kind of limits your scope of it. In terms of all let’s look at a new market, you know, these are these properties, you really can justify investing not where you live. And for us we did when we put that piece together hope man, you know, Mike’s got a really good handle on our console and Kansas City. So you know, those are some some great markets that we really have, you know, I’ll drive for Mike.

Charles
Yeah

Carl
Really like Tulsa for a number of reasons. And, okay, it’s a longer drive for me but that’s about two and a half from Mike and, and one and a half from Rodney, Wichita, Kansas, we’ve been been looking at at a few assets up there and really interested in Wichita, and that’s about an hour and a half or running lives on the north side of Oklahoma City. So it’s about an hour and a half, two hour drive for him. So we really able to cover a lot of ground and that’s where we, we thought, you know, we were looking for the same thing. And we just clicked well, but yeah, through networking and spending time with people not expecting to find, you know, I don’t think any one of us came into expecting to aggressively find a partnership. We’re just you know, our agenda was to learn more about people before, who can i partner with? And we learn about each other. And it was there often for men, this would be a good, good group to partnership. So found a partnership by not looking for partners. Yeah, that makes sense.

Charles
Yeah, no, for sure. Because we met at a networking event. And then we’ve seen each other at UCLA we see each other two or three times a year at different networking events. And when you’re speaking to new investors, and they’re probably where you were years back, how do you explain to them? What do you suggest them to do when they’re looking for partners? What do you suggest them to do that maybe you guys did differently? Or you would change if you went back?

Carl
Well, you’ve got to get out there. You’ve got to network and you’ve got to tastefully Be honest with your skill set. And, you know, just be you’ve got to be able to share what what you’re good at what you what you can bring to the table in a realistic fashion, you know, because ultimately it’s all going to come out in the wash. But you just need to be, you know, real honest with it, this is where I’m at, this is what I want to do. But let people know that and the more people you know, or the more people you let know about that the sooner or later people you know, prior to Rodney and I and Mike connecting, I had a bunch of people say, you know what, I know someone who you should connect with and I’ve had quite a few people that I met with and got connected with. So, you know, the partners I ended up with were not, you know, the first people that I connected with and had connected with quite a few others and it just it didn’t. Yeah, I’d kind of been through dated a bit before I kind of figured out you know that this one feels right. So, yeah just tastefully share with what they’ve run what you want to do, what your objective is and what you can bring to the table and you know, there’s more people than you know will start coming out the woodwork.

Charles
Yeah for sure. No, I definitely agree with that being upfront with what your skill set is and what you’re lacking is probably another good part two, because some people are people people and some people are numbers and so it’s you got to kind of figure out the rest of your team so what mistakes cuz we were talking earlier about deals in DFW, which is in Dallas, what mistakes do you see other syndicators or real estate investors right now making in our current market cycle other than picking up those deals that don’t cash flow for?

Carl
So the product I haven’t revealed yet it’s kind of my ace in the hole is my wife has been in the industry for 20 years. She’s a regional property manager of a 2500 units for a big one of the biggest management companies in the US. So operationally, I’ve got a lot of assistance and help into you know how properties operate she operated to through 2008. She was actually in a in a lease up property in 2008. So she’s being operationally through through a storm. And the biggest thing that I see people and just my opinion on maybe right or wrong or indifferent, the biggest thing which turns me off is when I see how much people all syndicators are projecting growth in income. You know, I’ve seen quite a few deals lately where people are projecting a gross income growth of 15-20% a new one. And I, you know, every store, every property has a story. So it may or may not be possible. But I think people are being very aggressive with how much that they can increase just total income of the property via through rents, be through other income. I feel that the the projections of how much income or how much how much more income you can bring into the property, I think are very rosy. And given this time period, and we need to be, I think, pretty conservative with how much we think we can increase total income into our property.

Charles
Yeah, no, I see it as well in Florida as well because we have like Tampa, for instance, 7-8% rent increases last year. over the whole NSA and people we see documents going out and ppm and stuff like this, and they’re saying 15% in one year, just like you’re saying, and so that’s not only you know, you’re telling, you know, it’s completely, it’s so aggressive where you’re saying that you’re gonna build that much value into a property, we’re able to add 15% and where so many Americans almost 80% of Americans are paycheck to paycheck. That’s someone that’s going $1,000 now to almost 1,200 right 1,150 and even higher in certain income in 12 months, which is just I mean, you’re going to have turnover if every tenant you have in that property even if you’ve renovated three units they’re not going to stay so you know, you look for a whole new client base whole new tenant base, and that’s not that easy. No,

Carl
Yeah, and you know, realistically I’m yet to find anyone who’s taken over property in the first three months have gone like a dream and you know, the the T three collections from prior to buying it, have just continued to ask month of a month in the first 90 days, you know, the first 90 days always discovery period. And, you know, normally, you know, done the due diligence, it’s pretty manageable but needless to say, you cannot put your foot down or most times it’s very difficult to put your foot down in the first 90 days and start running up the those increases. So now we’re looking at a 15% increase crammed into nine months, you know, is realistically what the what the timeframe slot looking like and it just I don’t think it’s feasible. But again, every property has a story. So

Charles
Yeah, for sure. And it’s also that in that first 90 days, like you’re saying, that’s when you’re finding out what the actual because you know, usually you get your leases graded and stuff like this before you before you purchase a property. So the property manager is four people are listening is giving you a grade just like you would in school of how good the tenant is. And that’s great. You have an idea of what you’re going into, but then it’s also it doesn’t shake, you don’t know until you buy it and you find out that this person’s been paying late later than they have, they haven’t been paying a late fee. So you’re like, well, now I have to add that to who’s getting evicted. So you can’t shake it too much, because you can’t have you know what I mean?

Carl
Exodus and the next minute you’ve dropped 20%.

Charles
Right at that point that first 30 to 90 days, you’re just trying to keep everything manageable as you start systematically renovating units and doing work that has to most likely be done to the property that’s been neglected. Right? So you know, the main stuff that you’re not getting rent increases on you know, roof, you know, parking lot stuff like this, that you’re not you can’t raise people’s rent because their roof isn’t leaking. So I mean, stuff like this, but Well, it’s very interesting. Well, thank you very much for being on how can people learn more about you and your business?

Carl
Yeah, so look me up on Facebook, LinkedIn, and tridentmultifamily.com. My email is [email protected] And but yeah, connect with me on any social media, Facebook and LinkedIn or our website, we’ve got interested investors go there and we’ll pick you up as that comes through.

Charles
Yeah, it’s got all the flow if you go to the website, it’s also has this whole process of how they do it. So it’s very interesting, which I don’t see too many websites. So I will put all those links and also try and multi families links and emails in the bottom in the notes. And I’ll look forward to see you next month at a glance in Colorado. So I look forward to seeing you there. And thanks again for being on.

Carl
Thank you very much, Charles. Appreciate it.

Charles
Talk to you soon.

Carl
All right, bye.

Charles
Hi guys, this is Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in investing in real estate and you don’t know where to begin, set up a free 15 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com.

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Announcer
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of harborside partners incorporated exclusively.

Transcribed by https://otter.ai

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About Carl Suverkrop

Carl is a principal at Trident Multifamily and is a full-time real estate syndicator. Originally from South Africa, he immigrated to the US in 2015 after a successful sale of his electronic security business. Carl has been investing in multifamily real estate since 2014 and with his partners at Trident Multifamily, sponsored the acquisition of 3 assets in 2019.

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