By Alex Pascale

October 23, 2024

As some of you may know, my path to real estate private equity was not a traditional one. Being that I was in college in the Bay Area during 2009-2013, I had a front row seat to the start of the tech boom this past cycle, in the mecca of it all. To paint the picture, a little tech enabled cab company called Uber was started my freshman year in a co-working space in San Francisco. The summer before my sophomore year, Instagram was developed and launched in the City. Dropbox, Airbnb, Zoom, WhatsApp, Pinterest, Coinbase and many others were all founded in the Bay Area during this same timeframe and since then, have grown into household names in their respective categories.

When I made the decision to attend Santa Clara University, I thought this was a great opportunity for me to “get out” of my hometown (San Diego) for four years, as I was destined to return and get into the “the industry”, as it was called in my house as the son of a real estate broker. This was “the plan” post getting my finance degree up North.

Needless to say, all the tech growth happening in the Bay Area during my time at SCU was hard to ignore, especially as my friends that graduated in the years before me went on to land high-paying jobs at some of these dynamic and high-growth start-ups. So as the story goes, I scratched my plans to return home after being offered a job at an enterprise software startup that was founded by the ex-Chief Marketing & Strategy Officer of Salesforce.com (Tien Tzuo who was the 11^th employee hired at the modern behemoth by Marc Benioff).  Truth be told, I also had a significant other at the time that was still attending Santa Clara (now my wife), so am very grateful to this day that Tien and the sales leadership team took a chance on me as a young sales development representative for more reasons than one.

I went on to work for Zuora (Tien’s company) and another ex-Salesforce.com executive founded startup, called Okta, for my first six years out of college in sales and sales management roles. *Side note that in the middle of my tech experience (Summer 2015), I bought my first apartment deal with some friends and caught the “real estate bug”*. Both Zuora and Okta offered complex and somewhat custom software solutions to significant problems, leading to long sales cycles that required a deep understanding of the state of the customer’s businesses and related processes, before you could be effective at “selling” them anything. The process to identify a potential customer’s pain points, commonly known as the “discovery process”, is critical to having any success within that account. While I put my finance degree on ice during this time, I intimately learned that the best way to “sell” something was to ask pointed, open-ended questions to the prospect and LISTEN effectively to their answers.

Now transitioning to the Real Estate Private Equity world, which I did in early 2019, I’d be lying if I didn’t tell you I was anxious that my excel skills weren’t up to snuff and that I’d be a fish out of water without the right lingo – both of which proved to be areas I needed to sharpen up in and did so quickly. BUT…what I also quickly realized is the skillset I had built selling complex software solutions to large enterprises, was extremely applicable to the acquisitions seat that I was sitting in at in a real estate private equity shop.

For background sake, at the shop I was at, we bought ~$50-60M multifamily assets via joint ventures (JV’s) alongside institutional separate accounts who brought the capital as the LP, and us operating the asset as the GP. We did not capitalize the LP equity component of our deals via a pre-raised fund and therefore had to reach out to a number of these institutional separate accounts for every deal we wanted to buy; essentially match-making the appropriate capital to the appropriate deal. Reaching out to these groups and working through a deal pursuit process, including underwriting, comp’ing, articulating the story & business plan, explaining how we’d execute that business plan, keeping them up to speed on the bid process, debt assumptions, etc., all prior to getting control of the deal and entering a due diligence process (which is another animal), was extremely time consuming, so we were highly incentivized to only take each deal to the specific groups we thought had a high probability of investing in it alongside of us.

Therefore, deeply understanding the needs of the separate accounts we had relationships with was extremely important. And that comes down to (you’ve heard this from me before) ASKING pointed, open-ended questions and LISTENING effectively to their answers.

Examples of key questions:

1. Volume of undeployed capital & timeline to deploy it
2. Different buckets of capital
3. Current portfolio exposure (asset type, geographical, etc.) & go-forward allocation needs / goals
4. Profile of the last deal they did and why
5. Key return metric and targets
6. Leverage ratios
7. How they think about underwriting forward looking rent growth & residual cap rates
8. Favored markets / sub-markets

All of our capital partners generally had the same “problem” that we could help them solve. And that was that they had capital “sitting on the sidelines” that needed to be deployed and generate yield, some of which need to be invested into the solutions we provided – institutional multifamily assets in the Western US that generate favorable risk adjusted returns. By asking them the questions listed above, we could be a better partner to them by providing relevant deal flow to help them solve their “capital” problem, and also be more efficient / effective with our time; a win-win.

No longer was I trying to help IT teams solve application access inefficiencies at Okta or finance / product executives with go-to-market and revenue recognition challenges at Zuora, but my method for success largely remained unchanged in helping large insurance companies, pension funds and institutional capital allocators solve their “problem”. And that’s what (IMHO) great sales people / organizations do…they become a valuable resource in a prospect’s business to help them solve the challenges most important to them.