Ep 494: Securing a $40 Million Lifeline- The Year Long Journey to Closing the Elusive MF Deal

In Episode 493 of the Hive podcast, host Daniel Martinez and returning guest Craig McGroutherdiscuss the complexities and challenges of a $105 million tax abatement portfolio deal in Houston. The episode highlights the difficulties encountered due to changes in tax abatement policies by the Houston mayor, leading to a risk of losing a substantial $40 million investment. Despite facing economic turbulence and banking crises, the team managed to maintain investor confidence and eventually closed the deal after a year-long effort. The story showcases the importance of resilience, investor relations, and navigating political landscapes in large-scale real estate transactions. Introduction and Background of the Deal (0:00-1:03): Daniel Martinez introduces Craig McGruther, who shares the initial details of their ambitious $105 million tax abatement portfolio in Houston, emphasizing the scale and ambition behind their biggest project yet. Major Challenge Encountered (1:28-2:00): Craig describes the pivotal moment when, a month before closing, they received a memo from the mayor of Houston halting all tax abatement deals, putting their $40 million investment at risk and highlighting the unpredictability in real estate ventures. Strategies to Overcome the Setback (2:00-3:08): Despite facing potential deal collapse due to the mayor's announcement and banking crises, Craig narrates the intensive efforts made to reassure investors and maintain the deal's integrity, ultimately leading to the deal's successful closure in a challenging environment. The Importance of Investor Relations (5:22-6:01): The segment emphasizes the critical role of transparent communication and trust in investor relationships, illustrated by the team's commitment to keeping investors informed throughout the process, thereby retaining 90% of the equity despite no immediate returns. Text 📱 210-972-1842 Text 📔 "Course" to learn how to make 6 figures on one land deal. Text ✴️ "Hive" to get added to weekly meetings. Text 🍎 "Apple" to schedule a 1-on-1 call with Anthony & Daniel. Text 🛬 "Land" to join The Million Dollar Land Mastermind 🔍 Need Inbound Real Estate Leads. https://www.hiveleads.io/ 🔍 Follow Us on YouTube https://www.youtube.com/channel/UCbulcrC4WbOy5Fzu0eWzNVQ/?sub_confirmation=1 🔍 Follow Us on Instagram https://www.instagram.com/hivemindcrm/ 🔍 Check Out https://www.hivemindcrm.io/ 🔍 Check Out Our Land Mastermind https://www.milliondollarlandmastermind.com/landmastermind 🔍 Pick Up All Event Recordings here. https://thehiveislive.com/recording 🔍 Follow Us on TikTok https://www.tiktok.com/@hivemindcrm?lang=en 📍Join the FB Group https://www.facebook.com/groups/137799891494707 📍 Check us at Join Us! https://thehiveislive.com/ Help support the show. https://anchor.fm/hivmindcrm/support

--- Support this podcast: https://podcasters.spotify.com/pod/show/hivemindcrm/support

Transcript

hey welcome to the Hy podcast I'm your

host Daniel Martinez today we have

returning guest Craig

[Music]

mcgruther he's a monster family expert

and if you hav not seen the episode

please go check it out we cover a lot of

capital talk for multif family and

structures and tax batement structures

and ways increase Andi if you have not

heard it go check it out to few episodes

before this one but today we cover deal

breakdown we cover cool interesting

stories and Craig has a really cool

story for us which I'm excited to hear

if you want to jump into it Craig yeah

absolutely well thank you so much for

giving me as I said the platform to be

here really appreciate it something I

want to actually share with yall today

was a really tumultuous story in the

crazy world that was 2023 real estate so

effectively what happened was we are

we're in the process of a big taken down

our biggest most ambitious project yet

which was $105 million tax abatement

portfolio in the city I'm in right now

which I'm coming from the city of

Houston uh which is a Houston 3 property

tax payment portfolio and the issue was

is that we were in the crosshairs of

many things interest rates were going up

but interest rates weren't really The

Factor on this deal what was the factor

on this deal actually was something

really tough which was doing this tax

payment deal you have to do Partnerships

with the Houston Housing Authority and

whatnot and before about a month before

closing we had raised about $40 million

Major Challenge Encountered.): Craig describes the pivotal moment when, a month before closing, they received a memo from the mayor of Houston halting all tax abatement deals, putting their $40 million investment at risk and highlighting the unpredictability in real estate ventures.

yes I said that correctly $40 million on

this deal and the mayor of Houston ended

up actually saying hey no more tax

payment deals going on right now so

we're here having spent millions of

dollars on due diligence millions of

dollars on non-refundable earnest money

deposit with a memo from the mayor

saying no more tax payment deals for

right now naturally we we're not going

to let this happen without a fight and

without doing everything we could in our

power to make sure that we could close

this deal because we had all of the

investors Equity RIS we had all of our

time emotion and energy po into this

Strategies to Overcome the Setback.): Despite facing potential deal collapse due to the mayor's announcement and banking crises, Craig narrates the intensive efforts made to reassure investors and maintain the deal's integrity, ultimately leading to the deal's successful closure in a challenging environment.

opportunity uh but to hear that in April

about a year ago today that it was no

Moss no more so unfortunately this was

the longest escrow and the craziest

process because we were under contract

under Loi in January of 2023 we got the

news that we were not really allowed to

move forward and transact and close on

this deal in April so we were not

knowing what to do we were in the middle

of you know kind of crazy economic

turbulence we had obviously you at that

point I believe it was Silicon Valley

Bank and Signature Bank go kaput as we

all remember that went away so in the

midst of everything going on this was

occurring and we had basically our

people say hey you can't close the deal

so we did whatever we could we called

the Brokers we called all the people

saying hey we're doing what we can to

work this out your money is at at no

risk here it's just timing and

opportunity cost so we had all the

partners we had the joint venture Equity

Group all that just sit on the sign

lines waiting waiting waiting I had to

basically raise this deal MoneyWise

three times s because the initial they

keep everyone involved in the deal and

then finally so fortuned to say this but

in I want to say in September we finally

got the green light after keeping every

investor Dollar in this deal that's $40

million of equity we kept where they

were getting no return on it while other

deals are going on but we fortunately

were smooth enough and fortunate enough

and had a rep good enough reputation

where everyone did in fact stay in the

deal to finally close the deal so we had

to work with the Brokers on this one

this Houston Housing Authority on this

one and of course the ERS on this one to

make sure this transaction did not go

Belly Up and blow up so it was a really

really crazy story as I said basically

to raed for this deal three times it was

a nightmare it was a mess but we've got

it across the Finish Line I think what

we learned is that we are incredibly

resilient and that our investors really

do appreciate us and they're willing to

let their money make zero dollars for

them during that process while we

figured everything out so we got it done

we got across the finish line but it was

not for the lack of effort or for not

not for the lack of drama I should say

one thing I'm realizing the bigger

transactions you get the more politics

you have to play when you're playing

with the transactions so we we're doing

we're dealing with like a 200 acre

development and we're talking to the

county and the the count the county

commissioner doesn't want to do this and

like oh my goodness well all the back

door deals you probably have to make

right especially in development

especially with land right so we don't

do development we do value ad

opportunities preserving affordability

but I know so many people that have been

in you know Seattle or the Bay Area or

places like that on the west West Coast

or maybe even New York that okay well

I'll do this but what are you going to

give me in return so are you g to give

me some affordability are you going to

give me some of this some of that what's

going on here so it is certainly not the

easiest game to play and to navigate

from time to time but it is nonetheless

if you can make it happen and you the

chops to do it and you have the patience

to pull it off it is certainly worth the

squeeze I am sure after during that how

long was that time period from start to

finish where you like it basically

consumed 20 23 entirely we finally

closed the deal in October so it was

just absolutely brutal we closed the

deal actually want to say no end of

October early November on National 1031

exchange day also known as Halloween

10:31 but we closed it finally then at

that point so that was you know all in

all about a 10 11 month grueling process

keeping investors in line and for those

who don't know about the capital raising

The Importance of Investor Relations.): The segment emphasizes the critical role of transparent communication and trust in investor relationships, illustrated by the team's commitment to keeping investors informed throughout the process, thereby retaining 90% of the equity despite no immediate returns.

world and whatnot you put your money in

there and then it's doing nothing it's

just sitting so we of course aren't

comingling funds it was just basically a

Chase account but I would have to call

people basically every month saying hey

the update is that there's no update but

this is what's going on nothing new to

share but we're here we're working we're

thinking about you this is what's up so

all my investor all all our firm's

investors you know know me very well

have my number and know that if I'm

calling it's probably regarding a deal

but also an update of sorts and

sometimes the update is in fact there is

no update but that is really crucial you

can't just you know go you know Rogue

and go ghost on people you really have

to communicate through the entire

process and that was The Learning lesson

that I think I really held is that you

know stay with it stay committed do what

you're going to say and follow up and

let people know what's going on uh that

was actually my next question was how do

you how did you juggle all this stuff

because I know you have to you have to

alert the capital at least once a month

so I'm sure there's probably a couple

investors in there that were non

appreciative than others well they

understood and and we said Hey listen

you can take you can pull out your money

at at no cost to you and this money is

just sitting here if you want to you

know have it go if you want to return

and you want to invest later we

understood but fortunately basically 90%

of the equity St in the deal from the

initial Outreach which is really

impeccable so it goes to show that we

built something pretty special or people

are willing to stay and not do anything

with their money when you know you could

put it in a hard money account or some

sort of you know CD account making you

know four to six% a year or 10% a year

depending upon the hard money structure

so that you know every investment it's

not only the investment but it's the

opportunity cost associ with it right

because you know what you're really

trying to get is you know an outsized

return with any dollar you invest out

there on a risk adjust basis but going

through that process where people were

making no money on their deals showed a

level of faith that I was very proud of

to say that people put that trust and

faith into us that we would execute and

fortunately we did no it's amazing that

is an amazing story I I think keeping

all the 90% of the capital there shows

the relationship you have with your

Capital Partners I think is huge so I

think you guys are going to be around

for a long time especially with that

let's hope that type of loyalty because

man the the money is desperate to move

and if it ain't moving they're they're

usually pulling and pushing it somewhere

else so absolutely I think it's I think

it's a great opportunity and great it's

great story man I think it's amazing but

congratulations congratulations thank

you if anything but I appreciate you

coming on we're find you online and here

absolutely you can find me at on

LinkedIn just the first name last name

Craig mcgrother on YouTube Craig

mcgrother also search up Rob Beardsley

we do a weekly podcast together just

kind of breaking down the nuances and

intricacies of the multif family real

estate world so if that's something

that's interesting to you find us there

also go to our website if you want to

look at us up too kind of do some

digging we're open books but the website

www.l.com lonar capital real estate

lc.com you can find us there well thanks

for coming on we appreciate you coming

on spending some time with us I hope I

already learned please go check out the

other episode if you're here listening

we talked a lot about cooler stuff in

the episode please go check it out we'll

see you in the next episode thanks for

coming on Craig we'll see you thanks

guys thank

[Music]

you

Ep 494: Securing a $40 Million Lifeline- The Year Long Journey to Closing the Elusive MF Deal

Daniel Esteban Martinez

Craig McGrouther