October 2nd, 2013 10:20 EST
Family Office Investors: We Turned Down $50 Million
I regularly address audiences on the state of the real estate market, strategies that are appropriate for dealing with these real estate markets, creating syndications and managing hedge funds. My message targets very high level audiences and I do this because I believe that entrepreneurs are benefited by understanding how the capital markets work.
Last week I spoke the most exclusive of audiences. My directive was to provide insight to the managers of some of America`s most wealthy families who use a structure called a family office ". Family offices are the way that many of the super-wealthy people manage their wealth " organizing it with the precision of a well-run public company. Such a family would likely control their empire with a full-time CPA who functions like chief financial officer, an attorney who functions as general counsel and typically an investment advisor plus multiple bookkeepers and more. The overhead expense of managing an empire this way usually demands a minimum net worth of $50 million.
By treating their wealth like a business, they require special services so special firms have evolved. Most of the time, these family offices have great liquidity to invest into deals and consequently there has become a very high level environment where these people go to get briefings on the economy on investment alternatives and ways that they can maximize their wealth. I`ve been invited several times to these esoteric conferences to provide them with
insights that I have on how the market works and how to best take advantage of opportunities. Unfortunately many of the opportunities that are put forward are old and boring. New opportunities are surprisingly welcome in this environment.
After describing how the Bullseye Capital Fund uses a two prong strategy to produce both long-term growth and short-term cash flow, a representative of five different family offices came over to me and asked how he could get involved. I told the gentleman that we`re looking for several investors at $500,000 to $1M each. He looked at me, crinkled his forehead and said that he couldn`t do that. He told me that they can`t place $1M into a single deal because their minimum is $10M for a single deal.
Real estate requires time to absorb capital unlike the stock market which can soak up nearly unlimited amounts almost instantly. He understood that during the ramp-up phase of our strategy, we didn`t have enough deal flow to absorb $50M ($10M from each of his five family offices). It may seem unimaginable to turn down capital, but he respected our position. Imagine starting to pay a preferred return immediately upon receipt of the capital without having deals of that magnitude ready to go.
Consequently, I turned him down. Not to worry, I`ll speak with him next week and we`ll talk about a strategy where perhaps they can ease in and do a little bit at a time as we ramp up - giving him first right of refusal on continuing injections into our fund.
This proves several points:
* First, it`s easier to get a lot of money than a little. Frequently going after the tiny investors is the most troubling of all and it`s better to aim at people who are more substantial.
* Second, the magic word ( no ") is frequently the best way to make somebody want you even more.
* Finally, knowing your business as well as we know ours is what makes people want to move forward. I always say that money follows expertise " and when you demonstrate that you`re an expert with tactical skills in specific areas, money flows in a big way.
And sometimes so much money flows, that you just have to say no.
We will discuss these family office opportunities at length at the upcoming Deal Making Symposium and Syndication Seminar in Las Vegas on October 27 to 30, 2013. This discussion is one that you won`t want to miss.
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If you have an opinion or thought on this topic, please write a comment in the form below. Share this blog with your friends. Thank you for being one of our loyal readers. We appreciate you and are rooting for your success. Often dubbed a "Growth Architect" by his clients, Joel Block advises companies on explosive growth strategies by driving revenues and sales. Well known in the capital markets, Joel is a successful entrepreneur, speaker, advisor and is an astute investor.
Joel is CEO of Bullseye Capital , a full-service real estate company supporting owners and buyers of real estate assets with brokerage, leasing, property management, and mortgage services. Joel is also the founder of the Bullseye Capital Real Property Opportunity Fund, LLC which is an investment company that acquires distressed real estate by working with accredited investors.
A leader in real estate syndication, we offer seminars to assist others in acquiring the skills needed to raise syndicate capital to acquire properties. Imagine knowing how to pool funds to purchase any real estate investment, whether single family, multi-family, commercial, or anything else. For more information and complete details, please go to http://www.syndicatefast.com/.