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Transcript:
00:00
So let’s talk about your funds share with us. So we get the big, sort of a little bit of the big picture view. But let’s share with us some of the actual structure of it. And then your investment thesis in terms of the type of assets you’re going after. And, you know, the type of investments you’re going after. Yeah,
Chris Bounds 00:18
it’s an open ended 506 C, on $100 million total raise. As far as type of assets, so workforce housing, which we define that is the median income, meaning a certain percentage of the average rents. So as long as it fits that little box, it doesn’t necessarily have to be like affordable housing or subsidized housing by by no means like, those can be included. But the one we’re doing we just closed on in San Antonio 327 units, Class A, it’s a Class A property in San Antonio, because of the you know, it has some certain parameters that does have some affordable housing, housing. In it, then that actually classifies as a workforce housing the way we’ve defined it. So we’re targeting workforce housing assets, both debt and equity. Equity is the primary focus debts more on the short term, like gap funding, gap loans, hard money, loans.
Otherwise, equity is the is the bigger focus. It’s just we’re we’re much more cautious on who we partner with. But from a long term perspective, and that’s been my fashion with folks for years. And I’m sure you’re the same way it’s like, I mean, when you get in this business, there’s a lot of people think single family and multifamily the same thing. And in some, some instances, there’s a lot of similarities. But it’s a business. And there’s a lot of moving parts. In the when you’re buying a business. When you’re when you’re getting the multifamily you’re buying a business. And but you don’t know what you don’t know. And the problem with multifamily is the things that you don’t know that cost, you can cost you big.
And if you don’t have the foresight to mitigate those risks in advance. It’s not that you can’t might not be able to, you know, you don’t traverse through those rough waters. You may not have the time, you may not have the time, or you may not have the liquidity and definitely the experience. And at the end of the day like that, that can be a painful lesson to learn. So we focus on experience operators and partnering with them to provide them with the equity that they need to get good deals. A little bit not quite as strict on the short term debt funding, but definitely on the equity funding. We’re pretty strict on who we partner with.
02:44
I see. And just for clarification, what mobile home parks be. Yeah,
Chris Bounds 02:50
it can be any residential housing, I mean, not luxury, but pretty much so single family multifamily and mobile home parks, multifamily is the primary focus. Not really excited about single family, we have one single family in the in the fine, I just I had a rental that probably would have sold but it made sense for the fund. As far as the returns it was producing, and it has long term benefits. So we seeded that into the fund. But by and large multi multifamily as the primary focus but mobile home parks, I just haven’t looked. I haven’t been looking for those types of opportunities. But I mean, we both know people who are doing really well in mobile home parks. I’m interested I just haven’t really been looking at them.
03:33
Right. So let’s I really want to focus our interview today a lot around fun. So I’m going to ask you questions just to dive deeper into this whole fun war. And so what have you decided that you know, you’re gonna make your fund you’re not only focusing on actual acquisition, and I as well as an L, you know, I guess you coming somewhat of a GP position some you come in as an LP position. Some you come in as a debt lender, like what have you decided you to do all of those things versus just one specific strategy?
Chris Bounds 04:16
Yeah, well, we are doing one one, if you want to consider debt, a completely separate strategy, then then you can say to the reason why we added the debt is if we have smaller balances and small can be relative when you talk about $100 million, fine, but I definitely want the ability to monetize those balances and we come across opportunities all the time, just hey, I need $100,000 You need $500,000 You need 1.5 million for 30 days, 60 days, whatever. We want to be able to keep the returns going not just have it sitting there in the bank. But the the reason why we structured it the way we did is for going after a GP position I’m not necessarily you talking to LP and GP which really, in legal documents were just really like class a Class B isn’t really GP LP.
But keeping since most people know what we’re talking about, the fund is structured in a way where we’re always in a GP position. And if we’re in an LP position, we’re in both. And there’s two really important stands. So if you’re doing a fund of a fund, or thinking about doing a fund of a fund structure, there, and you do not have a broker dealer license, and or you’re not a registered investment advisor. And this is not legal advice, this is just paying lots of money to get legal advice. You have to thread a lot of needles. So there’s, there’s all these laws, you have federal laws, security laws, you got state security laws. So there’s, you’re really trying to thread these needles and REG D is an exemption, it’s a certain exemption that you’re following on how you do these things, and you don’t have to register with the SEC. And again, this is just how I understand and what attorneys have explained to me whatever it but the other thing with broker dealer and RA, there’s a lot of complications. And there’s a lot of ways that I see these deals, you know, pitch to me, I’m like, I don’t know if that’s compliant, I just want to make sure I’m compliant. So where I’m where I’m going with it is I don’t get anything above and beyond my font, like everything is enjoyed within the font, I don’t get any kickbacks. It’s not that I couldn’t, I mean, you can generally do a lot of things as long as it’s disclosed properly in your legal documents.
But it is important to make sure that you’re compliant with broker dealer Ra, because those can be pretty costly penalties. If, you know, if you’re not compliant, and you know, something happens. And then you know, the SEC is all over you. So we thread that needle very carefully. And finally, make sure making sure we’re following the proper exemptions, or were exempt properly, which includes just don’t get any kickbacks. That’s why we sit on both sides. If we’re going to be an LP, we’re also in the GP cannot be passive. And that’s just because I’m not a registered investment advisor. If you are, hey, you can do things differently. And I’ve talked with folks who they’ve gone that down that path, you just typically either want to be an RA, or you don’t. And this may be a little too high level on on what most folks would be interested in. But I do encourage anyone that’s interested in Fund of Funds structure where you’re investing in other people’s deals. You have to understand these are the questions you want to ask a securities attorney because you just want to make sure you’re compliant the SEC doesn’t care. If you’re a billionaire, you’re a millionaire or you just got started and you’re trying to grind it out like they’re gonna come down with they will absolutely come down on you like a hammer if you violate these things.