Notes from IMN
Recently, real estate industry experts from some of the largest private funds came together at the 21st Annual WINTER FORUM ON REAL ESTATE OPPORTUNITY & PRIVATE FUND INVESTING. The conference featured panels on distressed investment opportunities, fund structuring, macroeconomic drivers, acquisition trends, and additional insights from leading industry professionals.
Here are some key takeaways and notes from Tyson Schuetze, Auben Capital Partners’ Founder and Managing Partner, who attended the conference.
Launching a Fund 101
The Importance of Flexibility in Structure
Bradley Phipps from DLA Piper emphasizes the necessity for flexibility in fund structure, noting that capital is rarely raised all at once. This adaptability allows fund managers to respond to market conditions and investor needs dynamically.
Brian Crist of Barnes & Thornburg expressed his enthusiasm for working with newcomers, highlighting the unique energy and innovation that fresh perspectives can bring to the investment landscape.
Understanding Investor Sentiment
Andrew Gindy from Range Equity Management noted the current investor climate is marked by higher optimism despite the challenges faced over the last 24 months in raising capital. Investors are increasingly seeking differentiation and specificity in their investments, recognizing that real estate has evolved into 12 distinct asset classes.
While many want to invest in distressed assets, the market is lacking in truly distressed opportunities. Fund managers need to innovate their strategies while ensuring their offerings remain relatable to investors—this is especially important during difficult fundraising periods.
Regulatory Considerations
Reg D 506(b) and 506(c) offerings are trending towards 506(c) due to the ability to market publicly. “Swap until you drop”
It’s vital to capture all client permissions in subscription agreements. “Swap until you drop.” Define authorizations for account access and structural changes clearly. Staying compliant with regulations is key to building trust and ensuring smooth operations.
Valuation and Structure
Determining the optimal fund structure involves creating a solid valuation methodology. For open-ended funds, detailed methodologies for asset valuation are essential. Advisors suggest exploring various structures that can provide tax advantages and enhance investor appeal.
Trends and Best Practices
The current landscape, where the stock market is at an all-time high, shows optimism but shows a trend towards more in-depth inquiries from limited partners (LPs).
Fund managers are encouraged to be persistent and intentional in their approach to fundraising. If you confuse, you lose. Smaller funds can leverage their agility to attract capital more effectively. Best practices for raising capital include:
- Reporting Transparency: Provide clear and regular updates to build trust with investors.
- Storytelling: Focus on selling the stories behind individual deals rather than just promoting the fund itself.
- Diversified Targeting: Cast a wide net and be open-minded when identifying potential investors.
Collaborative Ventures and Market Exploration
Joint ventures (JVs) are becoming increasingly popular, and firms like Roxborough Group and Langdon Park Capital are leading the charge in aligning mission-driven investments. Understanding who is doing what in the market can help fund managers explore potential partnerships and collaborations.
Leveraging Data and Technology
First Question: Why do we need this? What is optimal solution?
Additional Questions to ask:
- Rent or Sell?
- If rent, do I need to invest more?
- If sell, occupied or vacant?
- As is or with repairs?
Finally, the integration of data and technology cannot be overlooked. Tools like Google Gemini and ChatGPT can help. ChatGPT has a Tasks scheduling function that can update a task automatically. Users are sent push notifications or emails when the task is complete.
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