The Fine Line between Operator Performance and Communication

As an investor, I think it’s important to keep in mind what it is that the operator that responds to what you invest in wants to focus on most, they like to acquire a property, operate it well and execute on their business plan. That’s what they like to do.

What I found is that in some cases is that the investors are as important as they are to their business. They can’t acquire these properties without investors which is the least favored part that they have to deal with often. Meaning that we as investors are distracting the sponsor operator from being able to do what they like which is acquire the property. Any time they’re putting into it, into us, they’re not acquiring the property, operating and executing on the business plan.

Understand that even though we’re in a very important piece of that business, there are occasions where we’re like a distraction, they don’t like dealing with us, that’s just a fact of life and in some cases, I like to sub people. I’d rather make a bet on the best operator with the worst documents than the worst operator with the best documents. That took me a really long time to get comfortable with because I came from a corporate world. I started investing in these types of opportunities in 2002, I was in the corporate world, worked for Disney headquarters at that time. I was used to being buttoned up, PowerPoints had to look right for presentations to whatever executive or other client we’re pitching to. What I would tell people is, we are an important piece of a sponsor’s business and it is not always the case that they put as much attention on that as they should but at the end of the day, when an opportunity is done, in my opinion, most important thing is that it is executed well.

The next important thing is that you feel like you’ve got a certain level of reporting and you are able to communicate in a certain way with ease with an operator. What’s so interesting about this whole topic is that I have been in multiple opportunities with multiple sponsors where we over perform by a lot. A lot of the investors including myself would never invest with a sponsor again just because of the communication aspect and the investors relations aspect which is pretty amazing when you think about it. So it is an important piece but obviously you’re not going to want to reinvest with someone who has very poor performance but responds to your emails in 10 minutes, That’s not helpful either.

I guess my point is, try to keep an open mind as an investor and focus on trying to not be perfectly critical because sometimes if you’re overly critical about communication or what you're getting in reporting then you may miss out on investing with some really good sponsors who maybe just aren’t the best communicators or maybe they prefer to put some of their time into operating the property and you’re going to miss out.

Listen to full episode: https://lifebridgecapital.com/2019/10/ws368-the-fine-line-between-operator-performance-and-communication-with-jeremy-roll/