Looking to start a Micro PE / Flip Fund in RE with a few partners and looking to find some resources on thinking about structuring the vehicle and raising capital for each acquisition.
Any experience on this from anyone currently in institutional PE RE or doing this on a small scale would be incredibly appreciated.
@CRE" @earthwalker7"
Hi Venturepapi, just trying to help:
If those topics were completely useless, don't blame me, blame my programmers...
interested
Interested from a purely academic and theoretical perspective, not because I have the means to do so.
Seems like an ok strategy for country club money, but why would an institution give you capital? All of what follows assumes that you already have a great 10+ year track record of one off deals.
Raising a fund is such a fucking bitch (for the GP and LPs). This strategy seems remarkably inefficient from a capital allocation standpoint. Think about it from an LPs perspective... a) they need an allocation to CRE, b) they have $xB to put into that RE strategy, c) they have to decide that they want to put capital into a "micro" strategy, d) they might not even call you back if they don't think they can allocate $20mm into your strategy, e) they have to decide that YOU can allocate that capital into good deals and that you are capable of actually deploying the capital you raise within the investment period, f) then they have to DD each manager they consider allocating capital to (typically via consultants which are expensive), g) then they have to balance the risk inherent in your strategy against all of their other portfolio construction considerations.
Now that is just a few reasons why the fund model wouldn't work for an institution, but that is not to say it couldn't work for HNW folks. If you're just building out a track record you want to start just doing one-offs, then programmatic JVs , then maybe consider a fund. Saw a stat recently that of funds in the market, only like 10-20% were actually successful in raising their targeted amount. It's a tough fucking racket.
Ya - I think I did a pretty bad job of explaining but you really hit the nail on the head in the last paragraph, thats exactly what i'm trying to do.
I have yet to do a single syndicated deal with country club money and HNW folks but thats pretty much investor profile i'm attempting to target.
I'm trying to lean on the institutional world for how it might work and bridge that process/work flow for residential development - distressed properties and severances.
I've never heard of a "Flip Fund" or "Micro PE" can you describe the concept in more detail?
Generally raising a fund is a pain in the ass and to go through the motions to raise a small fund is probably not worth it when it's easier to just throw together documents on deal by deal basis.
Presumably they're looking to buy contracts at below market values and then flip them?
Micro PE is basically buying small companies
If all you want to do is assign contracts to people, you don't need a fund for that. Just cobble together earnest money from your network.
In this market, I feel like it would be extremely difficult to convince a seller to sign a contract with a buyer who's end goal is to flip the contract and not execute. Given how competitive the market place is right now, it is already like pulling teeth to win a deal even as a qualified buyer.
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