What Institutions Want While getting in the door is a big accomplishment, it’s only half the battle. A company must sell itself and tout its track record. To determine a company’s capabilities, potential investors look at its product type, market, size of deals, financial capacity, amount and type of equity, and past financial problems, says Gary E. Mozer, CEO of George Smith Partners, a mortgage brokerage firm in Los Angeles.
Experience also counts. “They want to see that you’ve been around the block,” says Stuart Gruendl, founding partner of BayRock Residential, a multifamily developer in Emeryville, Calif., that relies on institutional capital. “You need to have bought, built, leased, and sold deals successfully in competitive markets with high barriers to entry. Once one has accomplished this, it’s easier to attract premium capital.”
Institutions also may want to see examples of a developer’s work in a specific product type and region. With rehabs, for instance, developers should tell institutions about the property’s financial situation, what they paid, what they did to fix it, and share a picture of what it looked like before and after the rehab was complete, Mozer says. If it was sold, then the company needs to note sale price and yield.
Charlesbank also focuses on rehabs and wants a developer skilled in that niche. “We look for operating expertise and ability to take an asset and make improvements, whether it’s major improvements, cosmetic improvements, or actual development,” Wu says.
Institutions say they normally can tell if a developer meets their requirements after sitting down with him or her. “It’s an intangible thing, but you can usually get an initial feeling for it after talking with them about their history, portfolio, and their properties,” Wu says. “We want to know the challenges, risks, and things they did not expect to happen. Invariably you will hear about the best deals, but you’ll also want to hear about the worst ones, because no one bats a thousand.”
