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Commercial Real Estate FAQ With Dr. Forrest Bryant On Commercial Property Investors & Due Diligence

In Terms Of Real Estate Independent Sponsors Or Investment Funds, What Do You Look For In A First Meeting To Screen Them For Your Investors?

The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.

One wants to look for real estate independent sponsors or investment funds that do their due diligence, that have experience working in the field, and that know what they’re doing before bringing them to your investors. Those who have those due diligence reports, that have the track record to show they’re worthy of investor trust, will often be the most successful partnerships for investors new and old alike. On top of trustworthiness, they should be looking at and working with the same types of deals your investors are looking for. 

Richard Wilson: In terms of real estate independent sponsors or investment funds, what do you look for in a first meeting to screen them for your investors? I know you get approached by a lot of people, so what do you kind of look for first to screen them. 

Dr. Forrest Bryant: Yeah, you know, this is something we – it’s always under development, and we’re always getting better. We’re way better now than we were three years ago when we started but you know really I’d say it’s three things. It’s track record, performance track record of the sponsors, that’s number one. Check size is important, and that might not be something that is relevant to other wealth managers or allocators, but for us that’s a big one. And I think also just the relationship with other family offices. 

So, let’s see – so, performance track record, it’s important for us to work with sponsors that have been doing this for a while. So, we want to work with somebody, we’ve got some of our family office sponsors that have been through multiple real estate cycles and they’ve been in the same area for 40 years or 50 years doing the same thing. That’s somebody I want to invest with if they’ve done it at a high level. You’re going to have some bad deals and how you handle that and how you handle that with your investors is really important. So that performance track record is important. 

Check size is important because a lot of times we do – it’s always fun to be at my desk, you know – investment offerings of all different flavors and varieties every single day and we have to go through a kind of screening filtering process to find out which ones make sense. So and example of what that means for our community is, you know, if somebody’s minimum check size is $1 million, that’s probably not going to be a good fit for our community because we’ve got – our doctors to kind of give an example most are between $2 million and $20 million net worth, so we don’t have $200 million families, it’s kind of on the smaller side. But we’re powerful as a multi-family office because we can write bigger checks to bring to an investment but they might come in $50-100,000 checks. I’ll always, a lot of times I’ll when we have new investors come in I’ll talk about, we have investors that can write a $500,000 check but does that make the most sense for them? Might make more sense to write 5 $100,000 checks to five different investment offerings versus putting all of those eggs in one basket. 

And then also the family office connections are huge. Working with other family offices to see who they’re working with and that track record. You know, I know if I’m working with another family office and we’re trading best practices and who we’re investing with, if they tell me that they’ve invested with this particular sponsor for, you know, the last 3 to 5 years or longer and everything is going smooth, I know that they’ve done their due diligence and they’ve got a track record. So that really immediately pushes them way up in my book. You know anybody that’s gone through family office due diligence, RIA due diligence, broker due diligence, and has passed that you know. 

To answer that question, if somebody hasn’t been through that, and they don’t have a third party due diligence report, and they haven’t invested with other family offices, you know, come back when you do, is probably a good way to address that. 

Richard: Sure, sure. 

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Richard Wilson