Institutional Investors - Real Estate

Stacey Winn: What are the institutional, investment bankers and LP's looking to invest in today?
Justin Clark: The institutional model is very interesting right now. Contrary to popular belief, capital is still relatively patient. Some of the main drivers are some form of income production, now whether that is standing inventory that can be sold today or the traditional condo/apartment arenas. The key is income in the deal today with some back-end kicker.

Stacey Winn: What type of real estate do these players have an appetite for?
Justin Clark: Single Family residential investors are looking for at least a 20% IRR on the deal. The cash flowing investments are typically sitting at upwards of 8% IRR with some cash flow throughout the term of the deal.

Stacey Winn: So, they are looking for good deals and they are deciding that on a case by case basis.
Justin Clark: Correct, it's population driven, it's how pro-growth/anti-growth the city is... It also matters very much how much buildable land there is left. They are looking for infill projects.

Stacey Winn: Would you say that they are currently capitalized?
Justin Clark: The bigger firms are well capitalized. The interesting side of this coin that has yet to show it's side is the residential funds that were trying to raise in 2007 and 2008 never got off the ground. People were not investing in many of the residential funds. Whereas the commercial funds that were up and running during that time were able to raise, however the commercial investment product has gone away. The commercial funds are now looking to make investments in residential real estate.

Stacey Winn: What type of groups and funds are they looking to invest in now?
Justin Clark: Here is the biggest question, do they care about legacy issues or not? What we are seeing today is that the majority of the institutional relationships are double handshakes. These relationships are following the bios as apposed to the brands.

Stacey Winn: How big of a role did the legacy issues play in this process?
Justin Clark: Right, the media wants to make it seem like everybody is Bernie Madoff. The truth is that the legacy issues are not as big of a deal killer as some of us thought they would be. Today it is about the right group/bios going out and implementing a business plan that meets the institutional and investment banking criteria.

Stacey Winn: What are they looking for from the sponsors side?
Justin Clark: Today, the institutional players are looking for 10-20% of the capital to come from the sponsor and the institutional player would put 80-90% of the capital in the deal. This creates opportunity for a company like Americap, because now we have skin in the game and can profit from the deal alongside the institutional players.

Stacey Winn: What size are the deals that are being looked at today?
Justin Clark: Initially, the institutional players were saying that they had no interest in placing less than $10 million at a time. These $10 million pieces have lots that we have no interest in holding today. The major value deals are the smaller 100 to 300 lot deals. We are finding today, that the institutional players are saying let's put 4 deals together and invest our capital that way.

Stacey Winn: Would you say that deals are happening today?
Justin Clark: The big news is the money on the sidelines. There is a ton of money waiting on the sidelines, however deals are happening today. The smart money is getting in now and buying the deals they want, rather than buying the deals they can get.