Counting Institutional Dollars So you think you’d like some institutional dollars for your multifamily project? Here are some things you need to remember when working with pension funds and other investors:
1) Have a Plan: Institutional investors are very cautious about where they put their money, says Jeffrey Allen, managing director of SSR Realty Advisor Inc.’s Multi-Housing unit. Because of this, firms must come in with a detailed investment plan, as well as quarterly performance reports.
2) Have a Track Record and Tout It: Institutional investors are cautious by nature. A solid track record can ease their concerns and make them more receptive to working with you.
3) Communicate: Once the investors decide to use your firm, keep them in the loop, even with bad news. “The key is to do it quickly and tell them how you are going to fix the problem,” says Lorenz Menrath, senior portfolio manager for SSR’s Multi-Housing unit. “Don’t present the problem without a solution.”
4) Offer New Options: With good communication, firms can always be aware of investor’s needs. This allows them to develop different kinds of funds or investment opportunities when a new need arises, such as an investor wanting to take on more risk with its portfolio.
5) Eliminate Surprises: Though no one wants to be surprised with bad news, institutional investors are especially touchy about it. “Doing what you say and not providing surprises is very important,” Menrath says. “If you say you will give them a 10 percent return and deliver a 10 percent return, they are happy. But, if you deliver, an 8 percent return, they are very unhappy.”
The MetLife Advantage Real estate is an entrepreneurial business by nature. And in this competitive environment, where firms must act quickly when they see a property they want, it’s easy to see how a bureaucratic corporate parent may hold them back when making deals. However, Jeffrey Allen, managing director of the Multi-Housing unit of SSR Realty Advisors Inc., says he has not had this problem with SSR’s parent company, MetLife. “We have not been hamstrung by our institutional pedigree in buying product,” he says. “In terms of design and execution of investment strategies, they take no interest.”
This does not mean MetLife won’t help out when needed. In fact, the company provides extra dollars when needed, such as with the CalPERS fund. “Where co-investment is required, we have a parent company that demonstrates a capacity and willingness to co-invest in our funds,” Allen explains. “It’s hard to raise a fund if you don’t have the ability to co-invest in it.”
The parent company also provides some back office support for SSR, including human resources, information technology, payroll support, and accounting. While some people might find it cumbersome to have to go through MetLife to hire a secretary, for example, the set up works well overall for Allen. “It’s one element of the business we don’t have to worry about,” he says. “We can really focus on what we do best–real estate investment. MetLife has sophisticated human resources and information technology systems that we can take advantage of.”
In the long run, MetLife’s greatest benefit to SSR may just be its name and reputation. “MetLife believes very strongly in its enterprise,” says Fred Leiblich, SSR’s president. “It has a 100-year view on its name and brand and it is very sensitive about doing the right thing for its clients.”
