Institutional investors

How John Built a $1 Billion Real Estate Lending Platform

How to Build a $1B Real Estate Platform | John Lettera & Richard C. Wilson

Real estate sponsors and fund managers who want to attract institutional investors, and investors who want to judge real estate lenders and deals.

Five points worth keeping

1. Institutionalize before chasing institutions. John never went looking for institutional money. He says institutions find a diligent, successful operator, but only if the platform is ready for them.
2. Spend on audits and administrators. He paid for audited financials, big law firm documents and a large fund administrator before he could easily afford them. After one to two years of audits and monthly NAV, he says the money really started coming in.
3. Fall in love with the deal. John tells investors not to fall in love with the asset. As a lender, he walks away if he dislikes the LTV, the LTC, the ratios or the sponsor.
4. Walk the property in person. He uses technology and AI tools but still wants someone at the property with the sponsor. He wants to see the roof and the utility rooms. He says that if the sponsor is not there, he does not do the deal.
5. Good deals can draw capital. John says he chases the person who sends a good deal, not the other way around. Richard C. Wilson adds that strong deal flow helps a sponsor raise more capital.

Summary

Institutionalizing the platform was what moved Fairbridge Asset Management past $1 billion, according to John, its co-founder and partner. In this fireside chat with Richard C. Wilson, he describes starting with bridge loans in the Bronx and never chasing institutions. They came to him. But he had to add audits, big law firm documents, a fund administrator and monthly NAV reports before the money really started coming in.

John also shares his deal rules as a lender. He walks every property with the sponsor, wants real skin in the game, and avoids deals where a borrower offers equity upside to lower the interest rate. He says a good deal needs no follow-up with investors. He also covers focus, health habits and hiring people he has already seen across the negotiating table.

Facts and figures

• Fairbridge Asset Management manages over $1 billion in real estate, and John says he began with $100,000 deals using his own and his family's money.
• John says he could be anywhere in the country within 24 hours to meet a sponsor at a property.
• John gave an example of pricing a loan at 11% and two points, then being offered 10% with a 10% equity kicker, which he sees as a red flag.

General education only. Not legal, tax or investment advice.

Talk to a securities attorney to explore options around fund offering documents, investor reporting standards and lender loan structuring. Do not use AI to write your own legal agreements.

In their words

Related questions

• How do fund managers use Preqin to find institutional LPs?Fund managers use Preqin as a paid database to build a target list of institutional LPs, filtering by investor type, strategy and region.
• What is the difference between institutional and retail capital?Institutional capital comes from organizations that invest on behalf of others, such as pensions, endowments and large managers.
• What is an operational due diligence questionnaire for fund managers?It is the written list of questions an institutional investor sends a fund manager before allocating capital.

Questions about this video

Put this into practice with the investor meeting follow-up checklist. See all institutional investors resources.