While many real estate entrepreneurs fund their deals on a one-off basis using a GP/LP structure, there are no shortage of real estate private equity funds that invest their (captive) equity directly in stabilized deals or take on the role of an LP.
In later posts I'll discuss the transition from funding deals on a one-off basis to a captive equity model, but first I wanted to touch on one of the most important aspects of managing others hard earned money...communication.
What I hope to elaborate in this post is that managing a real estate investment on behalf of others is as much about effectively managing the asset as it is managing the people invested in that asset. Manage the people well and you'll have a repeat investor for life.
Investors have an innumerable amount of options when considering an investment in a real estate fund.
You need to stand out!
Investor Road Shows / Events
In that your potential investor base is likely large in number and national (or global) in scale, the likelihood of regular in-person meetings with each and every investor is limited. To keep your investors engaged, consider hosting both road shows and events.
Roadshows: If you're invested in primary or secondary markets (for ease of direct travel), consider hosting your investors for a short 1-2 day roadshow. This is especially effective if you own more than one property in a market, as it will allow the investors to touch/feel the property, see what improvements you may have made and gain a better understanding of the submarket / MSA. Chances are they'd never see the property under other circumstances, and a tour will help them understand why the Sponsor believed the asset to be a good investment.
Events: Consider hosting a year-end event that serves as a platform to update your investors on fund performance and allows them to meet your team. A lunch, cocktail hour, dinner or night out (sporting event, etc) allows you to interact with them on a more personal level, while also expressing your appreciation for their investment in your firm.
"The value of 1 minute of video = 1.8 million words." Dr. James McQuivey of Forrester Research
Are you more likely to read a two page performance summary or watch a 2-3 minute video? While the former is important (and likely a required disclosure), integrating short video presentations allows for a more fluid storytelling experience.
Post Renovation: Did you deploy a value-add strategy as part of your acquisition business plan? Consider a before & after video tour once the renovations are complete. Chances are, your investors have watched HGTV and love watching shows on flipping houses.
Performance Review: Your investors will likely get monthly or quarterly reporting packets, but why not a short video touching on the highlights?
While I have not worked with them in the past, Meyler Capital has established itself at the forefront of fund marketing and communication. Be sure to check out the Meyler Capital Blog for tremendous insights on how to effectively market yourself and your fund.
Constant Communication is Key, Not Just 4x per Year
Ad Hoc Updates
Investors should be kept abreast of what's happening in the markets you're invested in. While this would likely be covered in a quarterly update, why not send your investors ad hoc emails as good (or bad) events unfold in your market? Your investors will stay informed outside of the typical reporting cycle and it may serve as a catalyst for further communication between you and your investor. A good CRM or marketing platform will allow you to track the performance of these quick email blasts. An example of each:
Cleveland: Invested in Cleveland? Send your clients a quick note indicating the Cavs won the NBA championship, and intertwine that one blurb with several bullet points on how the overall apartment market and local economic conditions are improving. Reittereate why you're invested there and why whatever event/stat you're referencing reinforces your conviction in that market.
Houston: Texas was and still is a hot investment market. Then, the oil market fell apart and rent growth and occupancy declined as oil-related job losses mounted. While this was the overarching them, many communities bucked that trend. If your hypothetical community wasn't so fortunate, send a quick note on what's happening, what you're doing to ensure the financial stability of your property and explain your overall exposure to that particular market.
A real estate entrepreneur can stand out from the pack in more ways than just the quality of their investments.
Differentiated communication is just one way to stand out.
I'd love to hear your input on how you manage your investor base, or if you've used third parties to help faciltate that process. Drop me a line: Contact Zoran Miling
Thanks for reading,
Masters in CRE