UPC High-Level Sponsor Vetting Checklist

Sponsor

15

Background and Compliance

  • Conduct a thorough background check, including SEC violations.
  • Investigate any past capital calls or paused distributions, understanding the circumstances around these events
26

Experience and Track Record

  • Confirm the current Assets Under Management (AUM) and verify if they’ve gone full cycle on at least 5 deals.
  • Examine the sponsor’s track record: number of exited deals, average return on these investments, and if they’ve met or exceeded expectations
37

Background and Compliance

  • Assess if they are vertically integrated with in-house property management and construction capabilities.
  • Evaluate the size of their team, preferring a team of 10+ to support various company aspects.
48

Investment and Distribution Policies

  • Determine their cash flow distribution frequency (monthly or quarterly) and the timeline for distribution after investment deployment, with a preference for 3-6 months.
159

Local Presence and Investment

  • Check if they are local to the deals they acquire and if the sponsors have significant skin in the game.
2610

Portfolio Health

  • Review their current portfolio size, any past foreclosures, defaults, and their approach to mitigating these risks.

Deal, Property, and Market

371011

Underwriting and Due Diligence

  • Determine their cash flow distribution frequency (monthly or quarterly) and the timeline for distribution after investment deployment, with a preference for 3-6 months.
481112

Financial Metrics and Projections

  • Analyze the buy-in cap rate versus the exit cap rate, preferring an exit cap rate
    increase of +10 basis points for each year held.
  • Compare existing and pro forma operating expense ratios to overall market
    averages.
591314

Operational Efficiency

  • Evaluate the Economic Occupancy of the property, preferring deals with
    90%-95%+ occupancy rates.
  • Identify the fees taken by sponsors.
6101314

Asset Class and Condition

  • Determine the asset class being acquired, with a preference for A or B class, and the vintage of the property, preferring properties built in 1980 and newer.
710111415

Location and Market

  • Confirm that comprehensive market research has been conducted and that the property meets or exceeds market expectations.
  • Check the property’s location in terms of state, city, neighborhood, landlord-friendly policies, and crime grade.
8111215

Walkability

  • How walkable is the property?
  • Is it close to restaurants, hospitals, major job hubs, Starbucks?

Capital Stack/Debt

91314

Loan-to-Value and Interest Rates

  • Verify the current Loan-to-Value (LTV) or Loan-to-Cost (LTC), preferring to stay
    below 70%, and whether the interest rate is fixed or variable, with a preference for fixed rates for at least 5 years.
101314

Interest Terms

  • If variable interest, check the term and whether a rate cap was purchased.
    Inquire about any Interest-Only terms on the loan.
10111415

Debt Service Coverage and Equity

  • Analyze the Debt Service Coverage Ratio (DSCR) and investigate if there is any
    preferred equity in the deal.