Raising capital from family offices

Ultra-Wealthy Investor Q&A: Family Office Deal Preferences and Crisis Pricing

Ultra-Wealthy Investor Q&A Webinar

Capital raisers, sponsors and family office founders who want to know how wealthy investors were thinking about direct deals, pricing and structure during a crisis.

The 5 big lessons

1. Offer both direct and fund options. Richard says 60 to 80% of ultra-wealthy single family offices prefer direct deals. For institutional investors the split is closer to 80/20 toward funds. If a sponsor is large enough, Richard suggests offering both.
2. Reprice real estate for the crisis. Richard describes a retail deal priced at about 70 million that still looked like a pre-crisis price. He also describes three hotels pitched at a seven percent cap rate on a 22 million NOI they were not earning. Richard's view is that investors may see little reason to act now without a discount.
3. Lower the amount you must raise. For renewable energy, Richard suggests looking for a corporate partner that can supply infrastructure. A company that planned to raise 20 million might only need to raise six or eight million with that help.
4. Return of principal appeals to investors. Richard says investors like income and like getting their money back off the table early. He notes this is usually not offered by sponsors.
5. Keep planting seeds during a downturn. Richard does not expect wire transfers six weeks after starting a conversation. Investors still want to get to know the team and the market. Those who wait for things to return may be three to nine months behind.

The short version

Family offices lean toward direct deals, according to Richard C. Wilson. He says 60 to 80% of ultra-wealthy single family offices prefer to go direct, while institutional investors flip that ratio to 80/20 in favor of funds. His advice is to offer both a direct model and a fund once a sponsor is large enough, and to give fund investors co-investment opportunities. Many sponsors talk to a securities attorney about how to structure this.

The Q&A was held in April during the lockdown. Richard reports that deal flow was up 25 to 33 percent and that sophisticated investors were already holding cash. He says real estate sellers who had not repriced for the crisis drew few responses. He also covers family office models, gross revenue royalty deals, and why capital raisers should keep building relationships during the pause.

From the source

• Richard says deal flow was up 25 to 33 percent, and a request for teasers drew about 250 responses, with about 17 looking like a match for clients.
• Richard says he has done five gross revenue royalty deals and is negotiating a sixth. Many sponsors talk to a securities attorney about how such royalty structures work.
• Richard says investors he speaks with had put 10 to 25 percent of their capital back into public equities by April.

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

Talk to a securities attorney to explore options around fund and direct structures, co-investment arrangements and revenue royalty structures. Do not use AI to write your own legal agreements.

In their words

Related questions

• What is the difference between single and multi-family offices?A single family office works for one family and is built the way that family wants.
• How do I find the decision maker at a family office?Start by meeting the family through advisors, events and the people who manage their investments.
• Do family offices co-invest alongside other investors?Yes, many family offices invest alongside other investors, and they often feel more comfortable when another respected investor is already in the deal.

Questions about this video

Put this into practice with the family office fit check. See all raising capital from family offices resources.