Raising Capital for a RE Multi-family strategy: Feedback wanted
Hello all, I've been introduced to an owner of multifamily properties in Arizona, Nevada, and Florida. Over the course of 35 years in business, the owner has bootstrapped herself having developed a portfolio of 1200 doors in 9 multifamily properties, all of which she not just owns but also manages. She estimates that her portfolio is worth around $200 million, and net of leverage and co-investor interests, her stake is around $60 million.
I have reviewed her investment record under NDA, and reviewed new deals with her. What I've observed is that she has demonstrated the ability to acquire assets at attractive going in cap rates, and through a series of value added strategies, grown the cap rate over time. Coming from theI do, I look at her performance and would characterize it as demonstrating a good record of strong risk-adjusted returns.
Thus far, her modus operandi has been to self-fund her growth. Her interest is to raise capital and significantly increase her net worth and the size of her company. Her objective is to raise $100 million of discretionary capital to invest, with the intent of this being the first of her raises.
Here are some questions I have.
1) Does anyone have feedback on what the optimal way to raise capital might be? Open-ended fund, sale of shares in a private company, etc? I welcome any and all feedback.
2) Her primary concern on raising capital is what she is told will be an $8-9 million tax bill due to sale of the properties. My take on this to her is that we would make a transfer of assets conditional upon raising the money, and so the liability is only incurred if capital is successfully raised, and she is not being asked to transfer the assets and hope we can raise money.
3) Should we not be able to use her existing portfolio to seed the company/fund, anyone with feedback on the probability of success in raising capital for a investor of this type? can you raise money off of a prior track record like hers?
Feedback welcome, many thanks!
I'd welcome feedback.