Pull Not Push – Real Estate Advisory with a Different Perspective
“The Local Sponsor’s Role is the Product Development and Deal Sourcing Specialist. The customer is the investor. Period and End of Story.” InDev Capital’s belief system.
The Usual Conversation
When most advisory firms sit down with a local asset manager and are engaged to find capital, the asset manager shows the advisor an investment opportunity or strategy for which it desires large-scale LP capital and desires the advisory firm to go “sell the deal.” The advisor then creates a process to find the capital. Often this process, particularly in emerging markets, does not work. We know because, in full disclosure, we have tried this method. Why doesn’t it work?
It is a fool’s errand because it starts with the wrong premise. It is based on the local sponsor being the customer and the advisory firm finding an investor – who then becomes a non-participant in developing the product or strategy. For local asset manager that have a deal and want an advisory firm to sell it with no previous investor interaction, there are lots of firms to call but InDev is not one of them.
The Customer is the Opportunistic Investor
InDev Capital’s orientation, while providing top quality service to our local asset manager, is 100% of the viewpoint that the investor is the customer and the emerging market real estate asset manager serves as product development and deal sourcing specialist. This orientation changes everything. We spend significant time up front in dialogue with the investment group, understanding its needs and desires in a potential transaction. Importantly, we verify what types of asset classes interest the investor, the target IRRs, and equity multiples on a levered and unlevered basis. Importantly, having a detailed understanding of this perspective makes working with the sponsor so much more effective.
Perception of Risk – Education and Dialogue
We do not sell. Instead we provide education and dialogue. We do this by asking questions that lead to the investor “pain” or business objective that they desire a local sponsor to help execute an emerging market investment. Usually this will revolve around achieving the highest risk-adjusted return possible. And importantly, the global deep-value investor’s perspective on risk is often different from that of the local asset manager.
Dialogue Builds an Integrated Process
Based on this open dialogue, we have found that the investor provides a picture of his ideal type of transaction. Upon that landscape, the asset manager can source opportunities or try to structure the opportunities available based on this investor demand. This is critical to our Local Asset Manager equals Product development process and our Pull not Push Real Estate Advisory Process.