Takeaways From Our Biggest Equity Raise To Date
We recently closed on a 192-unit apartment deal in San Antonio, and learned a lot of lessons. This deal constituted our largest equity raise to date. We raised nearly $6.5mm, all from private investors. As I reflect on what we accomplished, a few realizations about raising that money stand out most to me, and I wanted to share them here.
This remains, and always will be a relationship business.
I hesitated to even include this, as every article I write seems to talk about the importance of relationships in this business. But in in thinking how we raised the money, the first word that jumped out is again relationships. My mentor is constantly reminding me that we are in the relationships business more than anything else. That's certainly true in the context of how we raise equity.
Here’s a good example: One of my former bosses from my corporate days is a great guy that I’ve remained friends with for many years after leaving his team. He invested in our deal, but he also introduced us to his uncle (who invested), a college roommate (who invested) and a former mutual colleague (who will likely invest in our next deal). That's a common story of which we have multiple examples. Relationships we have developed over time--not even relating to real estate or investing--provide dividends to our business. Our past and current relationships spark conversations that lead to successful outcomes for everyone.
Your marketing materials matter.
Again, I realize I’m hammering the same points here. Relationships and marketing. It’s my background, but it’s also a foundational part of our business and success. Specifically here I’m talking about how we present the Investment Opportunity—our Investment Summary, Investor Webinar and Online Investor Portal.
We spend a lot of time building out our investment summaries. They usually end up being about 40 pages. Its important for them to tell the whole story of this asset and our business plan, including details on our team, our track record, the market, comps, etc. We receive a lot of feedback and comments that the investment summary is “one of the best I’ve seen”, is “beautiful”, etc. And these comments from seasoned investors who have seen lots of decks. I take pride in that—but more than anything I know that it helps investors get comfortable with our offering, with us as operators and it shows that we are professionals who take pride in everything we do.
As part of our equity raise we also host an investor webinar, where interested investors can call in, listen to us talk about the deal, and then ask questions they may have. We record this as well, so that folks who can’t make it are able to review it at a later date. This allows investors to hear from us directly, providing some color and background to supplement the Investment Summary, and specifically answer questions for the whole group to hear. We walk through our presentation several times, just like I used to before making a big presentation in the corporate world, and it comes off as polished and professional.
The last piece of our marketing puzzle is our online portal. As we put together our investment offering and PPM, we create a unique website where potential investors log-in to review the materials and ultimately can sign paperwork to finalize their investment participation. We have found that having an online portal gives investors a sense of security and reinforces for them that we are professional, tech savvy and sophisticated.
You notice a common theme in those three steps? The word professional. Its important that everything we do--our communications and interactions, our documents, our systems--are dialed in. We want potential partners and investors to have the utmost confidence in us and know their investment will be overseen by professionals.
It ain't over 'til the fat lady sings.
I briefly mentioned this in our previous article, but feel like it warrants being said again. During this equity raise, we had two different outside groups, both broker/dealers, pledge and agree to place substantial equity in this deal. Both groups failed to perform. Yet we still closed and raised the necessary capital. How?
We never stopped hustling, as we use our existing investment opportunities as a chance to grow our business. Work on our business, while we simultaneously work in the business. When we have a live deal, it’s the perfect opportunity to start building a relationship with new potential investors, for future deals. So we hit the pavement hard. Coffees, lunches, calls. Sun up to sun down—we think the best way to get to know us and how we operate is to look at a live deal. Because we were out there networking and focused on growing our business, when it became clear neither group was going to perform we were still in a position to perform and close with the necessary equity. We relied on the relationships we have (and some we had just built) to fill the gap we didn't expect to be there.
The big lesson learned here is don’t count your chicken before they hatch. A signed contract from an equity partner is a far cry from funds hitting your account. So always be hustling and make sure you have plans in place to get the funds you need to close.
Rest assured we are applying these lessons learned for future deals, and will continue to focus on building great relationships and marketing opportunities in a clear and professional manner. Onward!