Capital Stack - Investor Insights from #RGXInvest & #RGXVentures

All investors should know these insights so they understand the risk and rewards of various capital sources!

Obviously, Risk is something all investors need to take it very seriously and mitigate/manage in the best way possible when making an investment decision, whether it’s investing in Real Estate or a technology startup.
With that said your decision varies based on where you are in the capital pool and your investment objectives and risk appetite, i.e., are you in the Preferred Equity pool vs. Common Pool vs. Senior Debt, etc…
There is no perfect silver bullet/formula, but few general rules to consider in a real estate deal…
  • #1. The bigger the sponsor/General Partner skin in the game the better for the other investors (Limited Partners)
  • #2. Having little less debt in the capital stack is obviously safer for other investors (common or preferred) vs. huge debt (ex. 90%+ debt is risker vs. 60% Debt) and you typically see construction lenders prefer to fund 50% to 65% debt vs. agency/other lenders willing to finance up to 80% in stable apartments as they prefer to see more equity from investors to mitigate their risk!
  • #3. If your project is solid [sub-market/returns/sponsorship team/etc] you can easily attract bigger check equity players like family offices, RE Private Equity’s to fill the gap between the senior bank debt and capital raised from Limited Partners, that’s one of the best ways to protect your investors like family offices / PE’s won’t cut the bigger check unless it’s a solid deal.
I personally feel “co-investing” alongside LP’s is going to make big difference for LP’s…We have a 506(c) fund where we are co-investing +/-10% of our own money in three exciting Austin mixed-use/multi-family build to rent projects!
Sorry, lengthy post – but wanted to make sure to give our thoughts so Limited Partners can use these as few data points in making their own decisions as many LP’s don’t get to see what goes on in a sponsor mind in picking the right projects.
LEARN MORE

WHY RGX?

RGX Ventures is an Austin, Texas based subsidiary of RGX Invest. Founded in 2015, RGX Ventures has consistently delivered above arrange returns for our investors through carefully vetted and thoroughly researched investment opportunities.

RGX Ventures established the REIT Group Curated Fund (RGCF) to capitalize on high growth, highly desired markets like Austin, Texas by developing mixed-use communities that appeal to those seeking a work, live, play lifestyle. RGX Invest’s Fund purpose is to reduce risk for investors by also acquiring distressed assets and value add communities throughout carefully selected geographic areas. This diversity of asset class and location reduces risk in the fund, in much the same manner that adding real estate investments as part of your portfolio hedges against the volatility of cryptocurrency, the stock market and inflation.

FOR MORE DETAILS