Q&A: Real Estate Syndication
Hey guys - this group was very helpful to me 10 years ago when it was 2008 and I graduated and was looking to be an analyst from a non-target school in Texas. I started as an an investment analyst for a REPE fund. Fast forward - I found my niche in real estate syndication and have now: 1. Successfully raised capital for 27 private real estate offerings (12 fund offerings and 15 single asset offerings), which 7 have since gone public. 3. Personally raised ~$600 million of investor capital for real estate investments over the last 8 years. 4. Instrumental in successfully issuing debt on the Tel Aviv Stock Exchange, raising roughly $180 million to realize equity investor's double digit annual returns on multiple commercial real estate developments. I am glad to give back and try to help my up and coming monkeys. So ask away - I'll answer just about anything, and will reply as time permits.
Neat background. Seems you've had some great success.
For those of us looking to peel off and do our own thing for the first time, how to you recommend tackling the fundraising process for a single asset deal? What are some words of advice for one attempting to execute on their first deal with no personal track record but a strong execution track record at their firm? How do you structure the syndication with respect to promote, fees, etc... Overall approach/legal/admin considerations would be greatly appreciated.
Bump
GuyBalls,
The question about fees is a deeper question than perhaps we can fully answer here - however in general you should be less expensive than market. Market today is an 8% pref with a 70/30 split over the promote. There are a number of other fees you can charge including acquisition, disposition, asset management, development, debt placement, property management, construction, etc.
On your first deal I would suggest making it very known to your community what your intentions are, and have 3-5 deep pocketed relationships who believe in you and would potentially write an equity check. They will drive the fee structure more than this conversation will - trust me.
" What are some words of advice for one attempting to execute on their first deal with no personal track record but a strong execution track record at their firm? "
Find a compelling story with strong economic tailwinds and know more about it than anyone else.
Example - a large firm has plans to relocate to a bedroom community of a large city, but it is not common knowledge. You (or someone you know - I recommend having a partner with really good CRE experience on your first deal) have approached every owner of every apartment complex in the area and found someone willing to sell at a price below market and replacement cost. You contacted the relocating company and have a signed agreement to turn 1/4th of the complex into corporate housing at 75% over market rents.
if you have never done a deal do not try to raise a fund
What would you recommend as the best path then?
Build the platform with a programmatic JV relationship and then transition into a fund sponsor?
Hey- thanks for doing this. Very cool background.
A few questions that come to mind:
Can you give a brief overview of your career? How did you go from UG in Texas -> Analyst -> Your own syndication? What happened between Analyst to now?
How was your experience with raising capital? I have heard a lot of mixed things about this aspect. Did you feel the need to go back for an MRED/ MBA?
What are your next goals? Are you happy in your niche or do you want to increase scale/ scope?
How did you get connected with the Tel Aviv Stock Exchange? I've always had an unusual interest in bond offerings there (for no real reason).
Malta,
Can you give a brief overview of your career? How did you go from UG in Texas -> Analyst -> Your own syndication? What happened between Analyst to now?
How was your experience with raising capital? I have heard a lot of mixed things about this aspect. Did you feel the need to go back for an MRED/ MBA?
What are your next goals? Are you happy in your niche or do you want to increase scale/ scope?
How did you get connected with the Tel Aviv Stock Exchange? I've always had an unusual interest in bond offerings there (for no real reason).
Thank you for doing this. I’m 3-5 years in at this point but my question is more focused on helping the younger people on this forum: how did you end up landing a REPE role straight out of UG? What sort of internship roles did you have to make them more comfortable extending you a modeling heavy role straight out?
Ecander,
I networked well. I was one of 3 people out of my non target school to get a job in PE directly out of UG. My only internship was with a Texas wealth manager - I should have had more and better internships.
Thank you for doing this - couple of questions:
For a fund offering, how many years of experience does an emerging manager need before they are taken seriously by LPs? 10-15 years?
Can you opine on the start-up costs for a fund? My best guess has been $1M-$2M to pay all the legal fees that will be reimbursed at the first equity closing.
Is there any appetite in the marketplace for equity partners to co-invest at the sponsor level to cover start-up costs? If so, how much equity do managers typically give up in exchange?
For a fund offering, how many years of experience does an emerging manager need before they are taken seriously by LPs? 10-15 years?
Can you opine on the start-up costs for a fund? My best guess has been $1M-$2M to pay all the legal fees that will be reimbursed at the first equity closing.
Is there any appetite in the marketplace for equity partners to co-invest at the sponsor level to cover start-up costs? If so, how much equity do managers typically give up in exchange?
Odds this turns into another LongShort2019 post?
Considering he was asking about an analyst position at Fortress 2 years ago... pretty high. https://www.wallstreetoasis.com/forums/fortress-real-estate-interview
2012 was 7 years ago, and the forth comment down says that he already had 4 years of experience out of school, which adds up to a 2008 graduation.
2012 was more than two years ago my friend. I was a phone monkey at that time and trying to figure out which career path I would take.
Also went to a nontarget in Texas. Will watch this thread for updates. Thanks in advance.
Was there an asset class you felt most comfortable with first that you focused your initial fund on? Mentioned above, but how long did you work for an employer before branching out on your own? What percent of your LP's were/are connections that you had prior to your career in real estate vs connections that you made after years in the industry? I know many syndicators often rely on their personal network for a first fund before developing a more capital intensive network.
Was there an asset class you felt most comfortable with first that you focused your initial fund on?
Mentioned above, but how long did you work for an employer before branching out on your own?
What percent of your LP's were/are connections that you had prior to your career in real estate vs connections that you made after years in the industry? I know many syndicators often rely on their personal network for a first fund before developing a more capital intensive network.
So, how do you feel about the Tel Aviv Stock Exchange? I've come across some RE companies that are funded through the Israeli bond market and they sketched me out as they're I/O for the first like 2 years and then hyper amortize for 3 years. The thought is that in year 3 you have to refinance a portfolio cash flow based loan because the assets can't support the amortizing payments. Just seems really risky, especially if you have a negative economic outlook.
Investors are loosing their shirts, or at least taking big hits.
Anything that relies on a hard refi date is tough. I would never be involved in that or invest in it, personally.
Big fan of AMAs with no answers...
There was some time between when I wrote it and it was published. Sorry for the delay.
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