By Coleman Cox

April 25, 2024

Entrepreneurship sounds sexy – but remember that after the coming out party is over and you’ve heard the last “congrats”, you are the CEO, CFO, king dishwasher and everything in between, responsible for setting the vision/strategic direction, identifying the path necessary to achieve the vision, and relentlessly executing along that path.

With our business started and business plan / vivid vision set (refer to our first blog post on the Vintage Vivid Vision), we found ourselves in front of a computer tasked with mapping out what needs to be done first, second, third, etc. This writing will walk through exactly how we spun the business up and what we focused on from a real estate perspective (ignoring the administrative IT/HR/Branding/Legal/Accounting that can be cumbersome and a lot of folks forget about!).

Note that, in my humble opinion, the most difficult question to answer when starting a GP real estate business is the source of your LP capital – we were fortunate to have materially answered that question in the near-term simultaneous with starting the business – a writing for another day.

Our immediate goals for ramping up the business in each selected location essentially were the following: (i) create pipeline, (ii) build relationships with all key stakeholders (primarily brokers, property managers, and general contractors) to identify the top talent we would consider aligning ourselves with, (iii) get our name into the market with a clear description of our business plan and investment strategy, and (iv) have a clear understanding of what it takes to buy and operate assets in our space (primarily market terms to win deals, operational underwriting assumptions and timelines, and construction underwriting assumptions and timelines). While we had experience operating multifamily assets at an institutional scale, we knew the sub-institutional space was a new set of broker, property manager and vendor relationships, and also required a refined understanding of specific operating assumptions.

Based on these goals, our strategy was brokers first. Brokers are the gatekeepers into the vast majority of executable pipeline, have the strongest networks for sharing information (such as a reputable new Buyer in town), and are constantly in the market seeing different opportunities in different locations with different managers and different contractors, etc., giving them one of the best vantage points for identifying talent. We created a list of ~50 broker names, some of which we knew previously, some of which came through word of mouth, and some of which came through a review of the listing broker for every sale in CoStar/Loopnet/Zillow/Redfin in our buy box for the last 5 years.

With the list in hand, we wanted to make sure every one of these connections and conversations were meaningful. The only way I know to do that is to script out a high-level talk track, ensuring you are covering the key discussion points in every conversation. After sending an introductory email, building a foundation to the relationship (remember nobody wants to help a robot!), explaining our background, source of equity, and investment strategy, the key points we covered in these conversations were (i) current market dynamics and this specific broker’s specialty area, (ii) current yield / pricing by location grades, (iii) terms to win and typical closing process, and (iv) network recommendations (PM’s, GC’s, Consultants, Competitors, etc.).

These conversations were a great success and helped us form our own ideas for yield expectations, our strategy for finding and winning deals in our buy box, gain access to the network we needed to find the best partners, and ultimately educate our equity on our learnings.

If you’re also looking to better understand location grades at the submarket level and/or micro-location level, I highly recommend finding a willing broker to spend the time with you walking through Google maps, and documenting it in detail. If you don’t already have the local knowledge, knowing the little things is invaluable to better understanding a market: “stay away from this street, the demographic shifts from good-to-bad at this freeway, there is good retail here, there is a homeless problem there, this submarket has been on the verge of gentrification for 30 years, etc.” Nothing replaces time spent in a market and seeing and feeling real estate in person, which is why we feel so strongly about the advantages of local relationships and knowledge and keeping market coverage manageable, but these conversations can be crucial to increasing the speed with which you understand a market.

To keep these posts more bite-sized, we’ll pick up next time on our process for (i) ensuring we had reliable partners to execute alongside, and (ii) solidifying general underwriting assumptions.