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discretion to opt into what I feel are more meaningful opportunities. However, if you make a commitment and you fail to honor it for any nontechnically defined reason, this will result in a very difficult conversation that you and I really don’t want to have. Work only with best-in-class, experienced operators. Many of us know who these families are, and we know them well, too. In the 20 years that I’ve managed my own balance sheet after leaving Goldman Sachs, I can tell you that in real estate, operator experience is a tremendous hedge against having a good deal and a bad deal. Working with operators and developers who have audited track records, or going through at least two cycles with a strong balance sheet, helps materially discount the risk to you, the investor. Investors who only focus on a pro forma and consider getting the highest possible return, without regard to risk, a badge of honor will be wise to remember an article I wrote for Forbes several months back ( Forbes.com/ sites/theyec/2019/10/29/eight-reasons- commercial-investment-partnerships-go- bust ) that lists out the eight reasons why commercial investment partnerships go bust.
Opportunity Through
Thankfully, we have such a robust deal flow pipeline that we don’t have to pick through the stale transactions that have been re- traded several times like other investors do. This is because of our reputation for doing what we say we are going to do, as efficiently as possible. In the industry, we call this providing certainty of execution. This is exactly why when we call in the capital after you say “I’m in,” we need you to pay attention. If you don’t follow through, it makes the firm, our other investors, and me, look bad. It hurts my reputation, and it hurts my ability to serve those who have been with me since they so steadfastly joined at the beginning. The only reason we’re able to source exceptional cross-asset opportunities is not because of anything other than our reputation of following through on our past commitments — NFL limited partnerships, Class A commercial real estate, fine art, and so forth.
Behind closed doors, most uber- large and established multifamily operators and families have stopped buying multifamily altogether in blue states. In NYC, I’ve already heard of equity impairments of up to 20% recently, and it’s not getting any better. The risk in multifamily is extraordinarily high, and that’s exactly why we’ve looked the other way into more competitive sub-asset classes with much higher barriers to entry that only the very well-heeled can participate in meaningfully and appreciably. That’s not to say there aren’t going to be opportunities in this space later, and when that time comes, we already have those world-class operators we can tap into. I perceive a wave of technical defaults coming in the multifamily sector. Let’s be patient and watch what happens. We have you covered.
3 www.DandrewPartners.com
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