We know that, as multifamily syndicators, our business is only as good as our ability to raise capital, and that building relationships with investors is just as crucial to our capital-raising efforts. The problem is, with an endless list of to-dos as operators of our business, building social capital and nurturing investor relationships take a back seat, right? While you spend a good amount of your time on the nitty-gritty of building and running a lucrative real estate business, have you also been investing time and effort to get to know your investors and find out what they really want?
This is our topic of discussion in a recent conversation with Brian Adams, president and founder of Excelsior Capital, where he heads its investor relations arm. Brian talked about valuable lessons from his syndication journey, sharing insights into investors’ mindset and highlighting the importance of embracing our roles as salespeople. I’ll be sharing some nuggets of ideas and pieces of his advice here. If you want to listen to the full podcast episode click here.
The secret sauce to raising capital
“The secret sauce to raising capital is to listen to your investor base,” Brian says. Halfway through his syndication journey when he was just pushing deals and projects to his potential investors, Brian realized that he did not really know his investor base. So, he took his business on the road and did mini roadshows to sit down and listen to his investors. These efforts gave him valuable insights into what his investor base really wanted.
“I realized they really wanted three things: capital preservation, yield, and tax benefits,” says Brian. While many investors share Brian’s investors’ preferences to focus on conservative investment strategies with minimum risks and access to assets that generate cash flow with the tax benefits that come with direct real estate ownership, your own set of potential investors may have their own wants and requirements. The key here is to communicate and listen.
“Don’t just cram down what you think is a cool idea, or a cool investment, or a great deal, because even if you have the best deal in the world in your mind but it doesn’t fit your investor base, you won’t be able to raise capital for it,” advises Brian.
So, start talking to your investors, get to know them, find out what they need, and deliver. Give them that attentive experience and it will be much easier to raise capital.
Tips on Approaching Investors
The sponsor as the capital raiser
The syndication sponsor must be the main capital raiser. Brian advises against hiring third-party capital raisers and says, “If you, as the principal and sponsor, are not the chief sales officer and the chief marketing officer, you will fail.”
Why? Because no one but you will have the passion, the drive, and the persistence to do whatever it takes for your business to succeed. “No one will understand the story the same way that you do. So, you cannot offload the task. Unless there’s a person other than you who will feel comfortable getting a hundred no’s a day while making 200 asks, it’s not going to work,” says Brian.
The pitch: Investor first
Keeping in mind what your investors care about – their wants, their problems, and their fears – start working on how you can address those needs, solve their problems, allay their fears, and highlight them in your pitch. ”Just come out of the box and tell them what you do and how you can address those problems. I think your pitches will go much smoother,” advises Brian.
When given the opportunity to talk to a potential investor, remember that people lose attention within the first five to seven minutes so use those critical moments talking about how you can help them make smart decisions about the problems they face and overcome their fears. Of course, it’s important to talk about your background, your track record, and highlight your successes but your investor’s story should be your main focus. It’s investor first, you, second.
You are a salesperson: Embrace it
There are many people in the syndication business who, perhaps due to the stigma attached to “salespeople” typified as bold, aggressive, and intrusive, avoid being tagged as a salesperson. “But it’s what you are and you need to embrace it,” says Brian.
According to Brian, there are more than 12 million accredited households in America and if you’re talking about converting 1% of that, you need to be among the top 1% of sponsor-syndicators who make persistent efforts to convert. “I’m not saying, be aggressive but then, it’s not a sales call unless you make an ask. Make the ask, get the no, or get the yes. But you need to aim, shoot, and move on,” advises Brian.
It’s crucial to be transparent with the type of business that you are in vs. not in because you cannot be everything to everyone. So, aim to capture a niche group that you know will fit with your offering..
Where to find investors
Brian uses two ways to meet new investors: (1) personal, face-to-face interaction and (2) online or digital engagement. “I am a road warrior – 150 flights a year, attending conferences, coffee meetings, lunches, drinks, dinners, grinding it out. I’ve had to shift a bit during Covid, and now, I’ve really embraced LinkedIn as a great venue and a marketplace to make these types of connections.”
As the world’s largest professional networking platform, LinkedIn offers many opportunities for real estate syndicators to find partners and investors. It’s a powerful tool to build relationships if you learn the right way to use it.
Using LinkedIn to connect with investors
Take advantage of the opportunities that LinkedIn can offer in finding investing prospects, expanding your business and increasing your profit, or simply enriching your career as a real estate professional. And the best thing about LinkedIn? It’s a 24/7 marketplace of ideas, products and services, with individuals and groups in dynamic interaction.
Here is Brian’s advice on using LinkedIn to your best advantage.
Find and understand your investor base
Understand how your investor base uses LinkedIn to source opportunities. Are they individuals or families who are looking for deals? Are they investors who have experience, not just passion, for the industry? Utilize the platform to do your research and make sure you target only those investors who are a good match for your business.
Find time to create content and engage with others
There are only about 12 hours a day when you can be productive, so spend those hours wisely by creating valuable content and sharing it with your LinkedIn network. Content sharing is an effective form of inbound marketing that attracts the target audience that needs you and allows you to form meaningful, lasting relationships with clients and prospective investors.
Post meaningful, valuable content regularly
“I post once in the morning, once at night, or in the afternoon and I try to post or share things that have meaningful content for my logical investor base,” shares Brian, adding that if your aim is to be top-of-mind of your target audience, you have to appear on their LinkedIn feed on a regular basis.
Create online activities to boost your reputation and increase engagement
Make the effort to create online activities that will help you establish yourself as an authority or expert in your field of business. Your LinkedIn analytics will also be favorable when you create content that drives traffic and engagement.
“Our company does a webinar regularly, typically, on technical topics focused on commercial real estate such as 1031 exchange, cross segregation analysis, etc. We add value by being a resource for people, at the same time, these webinars help us build our status in the business,” says Brian.
Always be in front of investor needs
Brian had a meteoric rise in the syndication business, acquiring numerous assets in a short period. But he admits to making a huge mistake. He became so deeply involved in asset acquisition and negotiating deals that he neglected his forte and primary function – which is investor relations, business development, and communications. “All of that stuff got pushed to the backburner. It was a huge mistake because it really alienated a lot of my investor base,” says Brian.
So, he overhauled functions in his office, hired people and delineated tasks, invested in software and technology for investor relations, and now leads his IR team to be the best in class for investor relations and communications.
“Today, we are getting way out in front of anything with our investors. Making those mistakes and having that painful period of my life as a manager ultimately makes me a much better sponsor,” says Brian.
While forming long-term relationships with investors can be tough amidst the daily toil of a real estate entrepreneur’s life, it is still a critical responsibility and necessity in reaching our business goals. Keep in mind, investors are on this journey with us. Valuing and empowering them to reach their goals translates to more value and success for ourselves. So, invest the time to pursue it.