Real estate capital raising and syndication
Diversified Commercial Real Estate Investor Mandate: Jim Interview
Diversified Commercial Real Estate Investor Mandate Interview
Real estate sponsors, operators and brokers who want to understand how a middle market single family office buys property and works with partners.
What stood out
- Target the middle market gap. The firm buys assets between 10 million and 75 million dollars. Jim says this size is too big for the little guy and too small for the big guy, so there is less competition.
- Chase yield, not property type. The firm covers office, industrial, residential and retail. Jim says it looks for pricing inefficiencies and yield instead of favoring one product type.
- Minimize risk as a family office. Jim says the firm tries to minimize risk instead of maximizing return. It has a three to five year horizon in mind but no hard barrier on timing, since it invests its own capital for the long haul.
- Partners can share the upside. The firm buys directly or with operating partners. Jim says the firm is open to rewarding partners who bring a transaction that is under control, and the terms vary by deal. Local partners also provide management and leasing.
- Ask how the sponsor makes money. Jim suggests asking why an investor will make money with this sponsor versus another one. Jim says every deal needs a business plan, and investors may want to ask the questions they would ask in their own business.
Summary
A Chicago single family office buys middle market real estate between 10 million and 75 million dollars in assets. Jim says the firm grew from 0 to 450 million in four years by focusing on deals that are too big for small buyers and too small for large ones. It invests in office, industrial, residential and retail across the Southeast, the southern Midwest and parts of the West.
The interview was recorded in late March 2020, during the early virus lockdowns. Jim covers retail, including strip centers and a 200 million dollar grocery portfolio, and why the firm tries to minimize risk instead of maximizing return. He also describes how outside partners have joined deals as operators or promote partners, and which questions investors may want to ask a sponsor before committing money.
Facts from this talk
- Jim says the firm grew from 0 to 450 million dollars in assets in four years, mostly through single deals.
- Jim says the firm has been active in 10 to 12 US property markets and likes cap rates of six and seven percent instead of four percent.
- Jim describes the firm's past real estate yields as well above money market fund rates at the time. Past results do not predict future results.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Diversified Commercial Real Estate Investor Mandate Interview. Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around promote and incentive fees, operating partner agreements and sponsor investment structures. Do not use AI to write your own legal agreements.
Quotes from the session
"A great question people should ask is, you know, why are we going to make money with you versus making money with somebody else?."
"I think the best advice is, you just can't give somebody your money and hope for the best."
"It's too big for the little guy and too small for the big guy."
Related questions
- How do I raise capital for a hotel purchase?Many hotel buyers fund the equity through joint ventures with family offices and wealthy individuals, then add debt on top.
- How do I raise money for my first apartment deal?Start with the deal, because a good one is far easier to fund than most first-time sponsors expect.
- How do I find passive investors for syndication deals?Start by putting out useful content so passive investors come to you, then double down on what gets the strongest response.
Questions about this video
What deal size does Jim's family office target?
The firm targets middle market assets between 10 million and 75 million dollars. Jim says it buys both single assets and portfolios.
Does the firm work with outside partners on deals?
Yes. Jim says the firm buys directly or with operating partners. It is open to rewarding partners who bring a transaction that is under control, and the terms vary by deal.
What kind of retail does the firm prefer?
Jim says the firm prefers strip centers and destination retail such as drugstores and dry cleaners. It also owns a portfolio of about 200 million dollars of grocery.
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