The real estate fund raising industry is currently in a challenging environment with 600-1,000 funds competing for a shrinking pool of capital, making it extremely difficult to raise funds, especially for first-time managers or those with sub-$500 million targets. Jonathan Glick, founder of Incucap and one of the most active fund placement agents who has helped place over $10 billion in real estate funds, advises most people to avoid raising funds at this time. The industry has shifted from a 7-10 year cycle to an 18-year cycle, and the private-equitization of real estate has created a fee game that misaligns incentives with investors. Success requires differentiation through unique strategies, strong founder stories, and the ability to create attention in an information-overloaded market.
He's Raised $10 Billion For Real Estate Fund Managers. His Advice: "Don't Raise A Fund."
Added:Dallas is by far the hottest market for talent and growth as it relates to new real estate platforms in the country.
There has never been a better time to hire talent.
>> You're one of the most active fund placement agents in the country. You've helped raise over $10 billion. But you said my biggest advice right now is [music] don't go raise a fund.
>> We probably will need a market recession to get into an environment where we're actually recovering again.
>> The blue chip names of the world.
>> They're struggling to raise money too these days. As a firm, we were rejected about 1500 times last year.
>> Man, that's just crazy to me. I mean, who knows what the world even looks like in 33 months. That's a long time to be raising money.
>> One of the loneliest places to be in the industry [music] is as a founder. We're in the midst of a midlife crisis trying to decide our role in the world.
>> You said uh the bulk of what you're seeing talent-wise is all coming to Dallas, Texas. Like by far number one.
>> Yes.
What are you seeing >> as it relates to our business? Um, as it relates to raising capital and um, executive search, which we have both of those platforms within our company. Um, Dallas is by far the uh, hottest market for talent and probably growth as it relates to new real estate platforms in the country. Uh, variety of reasons. Um, some of it is just the growth that's existed down here in Texas over the last 25, 30 years. Um, the spirit of entrepreneurship that I think's down here. Um, the, uh, fact that there's just entrepreneurs moving down here, tax policies, things like that that are having a real impact on where people want to be doiciled, where people want to work. There's um you know, not everyone's goal is to be on the coasts the same way they were in terms of graduating college and growth.
There's just so much more going on um where people find it really attractive to be down here.
>> What about Austin? Does that hit your radar at all?
>> Uh Austin, yes, but there's still just not as much of the talent base from a real >> and number of companies out there that um are growth. It's harder to actually find talent in Austin. um often we've done a few searches for companies in Austin and the um mostly pulling talent from Dallas ironically in those cases.
>> What kind of searches are you doing?
>> So our business is uh a quick background on our business. We we are uh in the uh business of capital both financial and uh human. So um our main business is actually capital raising for real estate funds as you know. Um but three years ago we uh launched an executive search platform with the same thesis and vision on the capital raising side which is partnering with real estate entrepreneurs to help them grow their business. Um so our our whole business in executive search is actually partnering with the up and cominging real estate platform not necessarily the big established mega funds and big names that everybody knows. Um, so we're working really more on talent strategy and focused on um, you know, growing the business. So our our searches that we're doing across the board um, can range from anything from your capital raising person to uh, acquisitions professionals, asset management, finance, the full um, the full gamut.
Um, for the last two to three years, most of our searches have been in the asset management and operations world.
people either looking for new finance you know finance roles or asset management more operationsoriented um I would tell you in the last 3 to 6 months we are starting to see a lot more people looking for investment professionals so we have two or three deal searches right now so does that say about the market when you say asset manager ops people that the platforms of of tomorrow or the platforms that are getting built are very much thinking about they're going to have to be operationally intensive versus maybe prior to this cycle where they weren't as focused on that or is there a throughine why asset management's been sexy?
>> I wouldn't say asset management has been sexy. I think asset management has been a neat. So what has happened if you really think about it as you know the real estate market has been in a recession for the last four years despite everything else going on the world and um and you know being in a very big boom cycle or even bubble we could argue. So um as a result people have had a lot of problems in the sector and haven't won to deal with them um at least publicly. So as people are working out trying to figure out working out their assets trying to figure out what to do um trying to focus on uh extracting uh nickels out of their assets wherever they can um to increase our bottom line.
the asset management, the operations became um a uh uh a much needed ad to the organization. Um it's kind of like banks. There's not many workout officers at banks anymore because there weren't uh there hasn't been a need for a while.
So, everyone's focused on getting the deal, finding the deal. Um but with all the problems that are existing um or the need to actually operate to perform and add value there was there was that shift over the last couple years >> and on the investment professional side maybe that's more of a signal of there's conviction again people are going to start putting money to work again >> a little I think the the the reality is that um we are starting to see things break it's early it's taken a long time to get through this cycle we probably will need a market recession to actually fully break and get into um an environment where we're actually recovering again. Um however, people are starting to see things in pockets and and frankly there's just a mindset where people want to move forward. Now, one of the things that is really interesting, I think, is as we go through um this cycle, there's a lot of other external forces that are changing the real estate world. Um, and as a entrepreneur in this business, there has never been a better time to hire talent.
Um, at least in our careers because there's so many people that have been stuck in a relatively stagnant role for the last couple years and everyone's just wanting to do something new.
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You're one of the most active fund placement agents in the country. You've put together you've put um you've helped raise over 10 billion.
But when we talked last week, you said, "My biggest advice right now is don't go raise a fund."
>> Tell that to everybody.
>> Those are in conflict with each other.
>> Yes.
>> Let's talk about that.
>> All right. So, um, I've been in the capital raising business for nearly two decades. Um, and our whole business has been partnering with real estate entrepreneurs to help them grow their business. We have partnered with people anyone more people younger and earlier than anybody in our business and built our business by getting those funds done. Um the real estate private equity fund business is a great business when um or has been a great business basically since it formed in the late 90s.
However, we're in a time today where it's just a crowded landscape, right? So there are at any given time depending on which database you're looking at 600 to a,000 funds in market which means every strategy on the planet is covered. There are funds that are investing in distress or diversified strategies. There are funds investing in multif family of course and industrial and marinas and >> FBOs. FBOS's we have seen that um and the reality is that um there's something do there's something that's already being done across the board. That's one challenge. Two is the supply and demand imbalance for capital is the probably the widest it's ever been in the history of the real estate private equity fund business. So um in in a way today um there is a bit of an identity crisis.
It's the one thing that the real estate private equity industry and myself have in common. We're in the midst of a midlife crisis trying to decide our role in the world. Um [laughter] and funny but true.
>> Fair enough. A and um to some extent there's this grand question around um is real estate a uh tool for uh opportunistic investing. Is it is it uh a uh place to invest for cash flow and yield? Is it a mix of both? What is its purpose in the grand allocation? So when we look at that option of having anywhere between 600 and a,000 institutional funds um the reality is that that fund today is competing for capital not just against every other real estate fund in the market but it's competing against private credit or fixed income for yield. It's competing against private equity and venture for opportunistic return. It's competing against infrastructure. It's competing against real assets. um all frankly which have actually outperformed real estate as an asset class over the last 10 years as a whole. So it makes real estate a tough place for your traditional institutional investor. Now I think going forward the asset class is going to be very attractive to taxable investors which frankly is the growth engine of wealth and wealth management um of of this country and in general these days. you know, private wealth is now actually um eclipsed public wealth uh just a few years ago. So, there's a lot of private wealth capital out there that needs a home and real estate is an attractive asset class, but we're still absorbing this shock of a 500 basis point interest rate climb and uh you know, four years ago that hasn't been worked through. So, it's not as as attractive of an asset class compared to everything else out there. So, you've got a lot of managers chasing capital.
you don't have a lot of capital going into the asset class. You don't have a lot of differentiation.
Um and and it's hard to extract value, right? You know, if you think about everywhere across the board, there's always lots of operators. You're competing against operators and fund managers and individuals for deals. So, there's lots of competition everywhere.
Um and capital raising is tough.
Everybody expects that, oh, because uh Blackstone or Starwood or um Brookfield raised the fund, you know, that I can go magically do it. There's a lot that goes into it, right? Um and and it's a multi-year process. The return on effort is a lot harder. If you think about time and return on effort, it's easier to go raise capital on a deal to high net worth. investors go to the mega mega funds that already have raised billions of dollars of capital, right?
There's better alternatives for most people than going out and raising a fund. So, the first thing I often do when someone calls me and says, "Oh, hey Glick, I want to raise a fund. You know, can you help me raise my $200 million fund to invest in Southeast Multif Family?" It's a quick no. Um because there's other alternatives for capital out there.
>> So, your your answer is obviously get in the industry, don't raise a fund. I want to break down like several things you said. Raising a sub $500 million fund >> might be the hardest thing to do today.
>> Even if it would be your third or fourth fund versus your first fund, >> it's still hard.
>> Yeah.
>> Um, one of the things that's interesting is um how long it takes to get a fund done today.
>> Yeah. And and you you're also so tap into this as well. You said it takes two years. Is that two years for everybody or two years for a first-time fund manager?
>> Uh that would be longer. Okay. So, when I started in this business 18 years ago and we work with first-time funds, then it took two years to get done. You know, there there was a fund we worked on that they had their first close in March of 2012 and their final close was Q4 of 2013. Then today, everyone's taking two years.
um with exceptions. There's always exceptions, but um the average fund is taking two years from start to finish with extensions from first close to final.
>> Okay. Now, I interrupted you. So, sub 500 million, whether it's your first fund or your third or fourth, it's still virtually impossible. Why? Not impossible, but it's really hard.
>> It's really hard. Uh again, because of supply and demand of capital differentiation.
um you know, you have to call more people to get um you know, you have to call four times the people to get half the result. Um it's hard finding good deals today. You need to see the deal flow. Um got to get out there. It's harder to actually get in front of investors today than it used to be in the past despite all the technology and despite of everything like that. Um some of that is just the shift postco right it used to be um we would if we were out on a road show where we'd actually value a road show right we'd set up road show go to different markets get in front of people people would take inerson meetings postco no need for an inerson meeting we could always do a zoom and um you know so therefore as a result people are taking less inerson meetings which means they're on their computers while their slacks are popping up and their teams are popping up and we live in a distracted economy where people are getting constantly um you know pushed with information in front of them that's very hard for them to focus. So so it's harder to get allocators attention plus they are super busy they are resource constrained and they're getting um so much put in front of them. This is actually an area where technology hurts capital raising. You know, there's a lot of talk out there these days about how capital is making uh AI and tech is making capital raising more efficient, just creating more volume, right? So, if you are the um I call it inbox overload. If you're an allocator that's getting emails every day um from every manager that's looking to raise capital, not only you getting the email of the founder or the internal capital raiser or the placement agent reaching out, you then get every automated email every time someone updates their data room. So, everyone's emails, inboxes are just getting clogged. And by the way, these people have jobs to do besides clean their inboxes all day long. So it's really hard to stand out. It's harder to stand out more than ever just because of the volume that's out there.
>> So what happens because these people that that have money to allocate, they clearly have to allocate the money rather than take all the meetings from people they don't really know, it's just going to funnel to like the brand names where they don't really have to take the meeting and they can save their job and it all starts flowing in one direction.
>> That is one of the reasons it's hard to raise smaller funds or be the new entrant, right? to be the new up and cominging platform is hard because um to some extent in the allocator world people most LPs aren't necessarily paid for taking manager risk some are most aren't and the reality is that no one ever gets fired for investing in one of the mega funds right um and on top of it um to your point you you don't um uh you do not get necessarily get fired for uh you know uh re-upping with an existing manager. So one of the things we always used to say is uh getting a new commitment from a new manager for anything an established manager first time fund manager is like taking a 500 question proctologology exam and it used to be all you need to do is get an A. you know, prior to GFC, you know, you get an A on the test, you pass that series 7 or whatever it might be, you you get the commitment. Today, you need 100 on that exam in order to get that new commitment, right? It's like trying to get into college, trying it's all these things are much harder than used to be, right? Um, >> and what would get you a 100red? Well, finish your state.
>> Well, we'll get to that.
>> Yeah.
>> Um, for a reup, all you need to do is pass.
So, it's a completely different underwriting, right?
Um and today um what you need to get that 100 it actually varies right there is no simple science. You can't study for the test and get every question right. Right? At the end of the day it's um you know capital raising in many ways is like dating and there's got to have the right chemistry and got to have the right fit and you know if there's lots of different things you need but in a way some of that's table stakes right? You need to have a you know a good track record. You need to have an interesting strategy, you know, you need to be investing alongside, you need to have um, you know, a good team, right? I think what stands out, you know, what what really causes people to stand out today is really some type of differentiated story where someone is truly doing something different outside of the pack and there's a big pack.
>> Is there any real differentiation? Like, okay, so you just said this. She said, "It's really hard to raise a $500 million fund. You're in the business of only working on things that you feel that you can get over the goal line. If everybody that came to you with a sub $500 million fund you worked on, you might not make any money because you would just be running down paths that aren't going to." So, let's play a little role play a little bit. What would I have to come tell you? And maybe you would say the answer is there's nothing you could tell me in the current environment today sub 500 million that I would be interested in working on. But if you are saying you truly have to have differentiation, what would the story need to look like for me to convince Glick to work on my $300 million fund?
It's funny that normally I would say in any given year me and my team are probably we probably probably interview 300 to 400 GPS a year and and and and most of our groups that most of the groups we end up working on are actually outbound versus inbound >> in the sense of they're people we've known or been talking to for years and watching and understanding their story really going through a multi-year courting process but often they might start 10 years earlier as an inbound calendar, an introduction or something like that. Um, the reality today is that it's really hard for us to find really interesting stuff. We're not just going and taking on a multif family fund to have a multif family fund. Um, we have phenomenal product. It's very unique. It's arguably the best portfolio of managers we've ever had in the history of our business.
Um, but it is still very challenging and we struggle with saying, "Oh, what's new? What do we want to what do we want to add to the portfolio of uh clients we're working with that's different and a lot of it is just when you see it, right? It might be um someone who is just finding deals in different ways or executing different ways. Or it might be a story that you just fall in love with and you say, "Wow, this this person's going to be wildly successful in what they do because they're doing something slightly different that is just allowing them to uh think with alpha as opposed to beta, which is really where the industry has moved."
>> Can you describe even what one of those magnificent stories would even sound like? Uh that's like me asking you which one of your kids is your favorite. But um >> the uh >> all of them.
>> Yeah, exactly. That's why I'm trying to think about right now which one I'm going to go with. Um a couple examples we use, you know, one, you know, so um sometimes we work with sector specific managers. Um, and you know, one of our cases, a group has been in the business for 25 years doing the exact same thing, buying broken assets in their sector se sector and fixing it. Um, and um, they've stayed on the stayed under the radar, doing what they do, and they take on more risk probably, you know, on the asset level than others out there where they're buying really broken things and fixing them. They've done a great job. A lot of people aren't willing to do it in their sector.
Um and uh there are elements of their story where they really have uh developed a different perspective on what's the right product um and um how to massively change the NOI profile of an asset and they've done it time and time and time again and most of their competitors have taken a very different approach to what they do. Um we have a we currently have a client that's um investing in um very nichy distinct asset classes right they call them they they they call themselves essential real assets. So it happens to be areas of kind of real world asset classes that a lot of people don't invest in and as a result they um they are playing in areas where you don't see other people looking at deals wouldn't even know how to go about looking at deals right they're investing in things like homeless shelters for example right that's unique right so that's something that's different um and then a lot of it could it a lot of it could be mindset right a lot of it could be wow this person knows how to access deals build relationship ships differently, right? You know, they they are finding ways to extract nickels out of the cushions in different ways than other people can.
>> When you said you court people for a long time, is that courting them? Maybe they're already in the fund business, but it just takes a little bit to get to you or it could take them 5 years to really get to a point where they go from high net worth money or family office money or dealby money to finally clicking like, okay, I need a fund now.
Like, what happens in that cording process?
>> All the above. Okay. So, I have one a good example of that is um uh one of the groups I just mentioned uh was someone we knew for 12 years before we started working with them. They were an operating partner. They then got backed by private equity. They then got uh they they raised their first fund through a club. Um and we were talking to them along the way. So, we identified them as an interesting story when they were four guys in a really small office. Um there's a group we worked with um in the affordable housing space that um or workforce housing that um uh we met them when they were literally the entrepreneur an intern and his wife.
But the story was just so unique that we followed along the way and um built a relationship over about a decade before we actually went out and raised the fund.
>> Okay. So if sub 500 million is we'll put that in the almost hardest to raise category and we would kind of say okay the the blue chip names of the world we all know who they are. They're always going to be able to raise. In fact, they're probably raising >> they're struggling to raise money too these days.
>> Okay.
>> So, I we had heard that one of the big mega fund names also had a 2-year first close to final on their fund raise >> which traditionally took a year >> according to the documents.
>> Was it the timing that made it harder?
Was the amount less?
>> It's probably more just getting people to commit for blind pool. Is there anybody that if you said like if you fit this box it's probably the it's it's difficult at large to raise right now but if you were in this box it's easier than most or we putting pretty much everything across the board right now is tough to raise. We have exceptions. So, um, if you look at the Prequin data and, um, you know, that talks about fundraising to market, they'll come out and they they say it's increased and it's gone from, you know, their data says across the board, it's gone from like 18 to 22 months. I look at our data. So, we have actually looked at the data of the last 20 or so funds we've worked on basically going back through 2020.
Um, and our shortest raise was seven months and our longest raise was like 32 33.
>> Man, that's just crazy to me to take to I mean, who knows what the world even looks like in 33 months. That's a long time to be raising money.
>> Yes. That's that that is actually one of the other things we see. We often see people looking to raise capital for a moment in time, especially today.
um where like oh I want to invest in you know we saw this in 2020 2021 people were like I want to invest in distressed hospitality because a lot of hotels were just shut right so there there was distress there right or distressed office buildings right and people said I want to go raise a fund for that but by the time they raise a fund often and we've seen that before where by the time people have actually raised a strategy the opportunity is shifted right uh that does happen and that's why it's especially in those moments in times someone has a good idea and they can run with it and access deal flow. They're better off going and getting capital from other places, right? Getting it from someone who has already established money in a in a programmatic JV or a partnership or just even a deal by deal.
That's actually one of the things that we see which is always interesting is people come to us saying I want to raise a fund [clears throat] and even even before today when it was you know when it was a bit easier but still always challenging um we'd always nine out of 10en times we'd tell people you know don't raise a fund and people would always say well what are my other options out there people don't know they could go to the blackstones of the world and get capital or um other allocator funds right or people don't know they could go out and do syndications of deals. So, there's a there's a weird dynamic often where um there actually is a lot more alternatives out there than there ever has been before cuz the space is just a lot more crowded than it used to be.
>> Even as you think about your own business, does that make you also think about growing the business to where maybe you weren't just a a somebody that helps people raise funds, but you help them make connections on a dealbydeal basis? You almost have to become that.
>> Um it's that's a very different business. It's very transactional. The the obviously the large brokerage houses, both debt and equity brokers, you know, do that in scale. Um, you know, we've carved out our niche and are very unique in what we do. That's actually kind of akin to in in effect investing in the manager, right? You know, if that someone's doing something in such a distinct unique way, um, you know, that there's value to that, right?
Um we uh while we won't necessarily go do deal by deal capital, we are starting and have been expanding to do things like secondaries and recaps and other trans what we call transformational capital for managers. So that might be raising a continuation fund that might be doing a GPLE secondary. It might be doing um a entity level or platform deal. It might be doing occasionally a programmatic JV. Um but we are looking at things that would actually be transformative for uh people's businesses.
>> At what point does it make sense to bring the fundraising function in inhouse? Is that by a certain fund? Is that by a certain size? Is that just like a cultural thing?
>> So we see it in all shapes and sizes. Um you know often we'll see startup funds hiring capital raisers um and [clears throat] uh and relying on that. I have a cardinal rule and a cardinal belief that um especially in that earlier stage and sub$500 million funds, it's the founders and partner stories that sell. Um so if you were to go out and raise a fund today, you hiring a um in you a couple people in house, um all that is really designed to do is to get you in the door to sell your story because people aren't investing in that capital raiser. they are investing, you know, they're not they're not investing in the brand because you're the brand and it's a very big difference. So one of the things we often see in many of the groups we work with are actually founder le because it's the founder making the pitch and most of the um emerging managers or next generation managers as we like to call them that have broken through over the last decade decade and a decade and a half in the industry institutionally have been ones where it's a founder story and there's usually not um cap internal capital raising team. you know where the cap internal capital raising teams get built is when managers become more established and I'd call it in that over $500 million fund bucket >> really more even over a billion.
>> Let's talk about like the privatiz the private equitization of the real estate industry >> private equitization of the of the private equity business.
>> Yeah. Which you've said is you don't really think that's great for the real estate industry at large.
>> It isn't the best. Um but this is and this is not just for real estate. This is for frankly all private equity.
Private equity being bought. Private equity.
>> Um, one of the things that shifts is if you really think about making an investment with a real estate manager or an operator, >> it's someone who's investing in the deal, you know, to make a return on their investment.
And arguably as an individual or an allocator making a commitment, if you are going to invest in a deal I put in front of you or let me rephrase it. If um you put a deal in front of me to invest in or fund, right? I'm investing in both the deal itself, the asset itself. I'm underwriting that. I'm underwriting the fact that you are going to be the CEO or CIO of an investment company and perform for me. And I am going to look at things like you being a line, you putting your money where your mouth is, things like that, right? Of course, you've been selling that for years yourself.
when the private equitization of private equity, not just real estate, but private equity, you know, with all the new stake entrance and things like that.
Many, it then becomes, you know, once private equity comes in, it often becomes a bit of a uh fee game, right? And and at that point, there's, you know, I I I call them I love my mother-in-law, but it's called, you know, there's a there's you have a mother-in-law in the room chiming in on things, right?
Um, and then it's not an investment game. The drive, the passion of you going and doing your first deal, the first five deals that you did is irreplaceable. Those are stories that if we if I asked you those stories right now, you'd light up and you'd tell me about, you know, all the crap that you had to deal with to get those deals done, right? Well, if you're in the fee business, you just care about AUM fees and it creates misalignment with your investors and your team. So, we see it both ways there where all of a sudden um uh if you're in the business of growing AUM and growing IBIDA, you have to worry about your management fees. That might change your investment decision on whether or not you can sell an asset or not, right? Um or how do you pay people?
You know, the reality is that especially as a boutique organization, sometimes you have to overpay people or or really compensate them for what they deliver and align them. Well, you're focused on the bottom line or you have someone in your ear focused on the bottom line, that game changes and we see it from the search side. Now, it could be really good for platforms that are looking to grow and go for the next level or if it's the right partner that's coming in, right? Um, however, you know, it's hard to underwrite that and we see people looking at uh that as a monetization. And we look at that as you know people for other reasons not necessarily saying strategically growing the platform.
>> That was a lot of my experience and seeing the industry was going down the fund route, you started to pick up on signals that one even if you could like when you show them your track record and you're like we we outperform. Look look at our returns. A lot of people, they don't um they want to see that, but they're also underwriting like we just want the most consistent person over the long term.
Like that alpha story sells a little bit when you get to the big money managers, but what we started learning and maybe this is like where the industry is headed, they were all interested, but they also wanted to own a piece of the GP and the operating platform. And my take on that was kind of this privatiz equitization.
was like if the real estate returns are going to be basic, we can make up for it by owning this piece as well and they have a consistent place to put capital, build a relationship with. But it became, and I think most people don't even know who they are when they get in the industry. You always get into the industry, at least for a lot of people, is like we're just deal people. We're just trying to put together deals.
>> And then you wake up one day and you're like, "Oh, wait. No, we're we're business building people that have to do deals. Mhm.
>> We're building a machine to do deals.
>> Correct.
>> Some people never actually figure it out. A lot do, but it once you get into business building mode, that looks different to have a staff, build a like there's all these competing forces. And I think capital, my experience was starting to see it as okay, we can't just be an LP anymore because returns, especially in the current state of things in the industry, are they're compressed >> 100%. Nobody anybody telling you otherwise is sure a deal will pop off every now and again but at large they're compressed. The only way to really make it work is to to um own a piece of the operating company and the GP which is going to make total side comment just being a pure play allocator right now really tough cuz they're compressed and your only value to the market is another layer of fees and promote.
So you're going to see this uh vertical integration of capital and operators start to to happen. Well, we've seen that for years, right? I think one of the things that we've we've worked with a lot of diversified allocator strategies, a lot of the up and cominging groups that have come out over the last decade, um, and they are all very highly driven, very motivated, very smart guys, and they've been very successful because of that. Um, but if you look at where the institutional capital has shifted, right, it's consultant driven or pensions and endowments, most people over the last decade have actually looked to more sector specific plays. We're going to go invest in industrial directly. We're going to invest in retail directly.
We're going to invest in uh iOS or senior housing directly as opposed to I'm going to go and give money to um a large shop and they're going to allocate whatever way they feel. And the irony is that many of those allocators in a way have also become competitors themselves. A lot of the consultants are now in the investment business, right? and they're also private equity backed ironically.
Um there is a growing trend today that a lot of groups are looking to invest in GPS and platforms across the board. By the way, this is not just private equity funds coming out to invest in GPS. This is institutional LPS wanting to take a stakes. Um and the the reality is that people are doing it often just to find a way to get to excess return. What happened is real estate used to be a 20% return business. When I first got into real estate, everyone's like opportunistic returns is a 20. Today it's very hard in most asset classes to get a 15. So this is a way that people are trying to find a way to get excess returns. Um and in some cases it works and in some cases it doesn't. And um you know there are some people that have been doing that for years successfully.
Now everyone wants a piece of the game and then it kind of says well wait all of a sudden how does that play in environment where all of a sudden everybody wants that? It's it is definitely a changing environment we're seeing today.
>> And we really don't have to hammer on this. This is just basic math. But if you said I don't even know if it's the quiet part out loud, but you said cool.
Then what makes it back to a 20% industry or what makes it really interesting again? There's only really a couple levers. Well, there's three things going on right now.
Uh it's hard to push rents any higher or have this huge growth story. And maybe there is. We're re-industrializing America. We're onshoring. Um there's a big energy boom. Like maybe there's that.
>> But you're better off investing in the underlying company that's growing at 50% as opposed to the rent that's growing at five.
>> Correct. Then you look at the bottom half of the P&L and you go everything is getting more expensive.
So there's only one other lever and that's entry price. That's it. And you could make an argument the market would have to correct 30 to 40% to really create a market where it's like, okay, there's a lot of stuff going on again.
Now, that gets back to we've been in a 4-year kind of slow recession.
>> Yep.
>> Uh rates don't seem to be anywhere. Uh it doesn't appear that we're going to be headed into a down rate cycle, but who knows? Not ever going to make that claim. It's not helping our asset class right now >> for sure. But it's pretty much a consensus like we're kind of going to hold still whereas the past two cycles you had uh declining rates to kind of help you.
Um but then you you talked about the supply the capital uh uh over there's so much capital there waiting that anytime prices started to move down like at least at this moment unless it was a a a macro event where everything collapsed you're probably just never going to see a something of that drastic uh with relation to price.
>> One of the things that I don't have the answer to and I think about a lot is real estate it goes through a cycle.
Real estate is not a 7 to 10 year cycle as people talk about. Real estate is really an 18ear cycle with a bump in between.
>> Yeah.
>> So if you actually look back to the modern institutional real estate investment era, call it post86 um there was you know the the first cycle would have been call it the early '9s to 2008 and the bump in the road was 20201. So, I always like, you know, imagine driving down I 10 in West Texas doing, you know, 90 miles an hour or whatever, how fast you might be going. You pass by a cop, everyone slows down a little bit.
I didn't get pulled over. I'm doing 90 and a 70 or whatever.
Um, and um, but then you don't see another cop for hundreds of miles, right? Well, everyone gets a little bit more heavy to pedal. you know, you're jamming to your favorite tune and next thing you know, you you cross the border in the New Mexico, the state line, you know, speed limits go down 55 and there's a cop waiting for you and boom, you get hit, right? That's 2008. The next cycle, 2000, you know, coming out of the GFC, right? 2009, 10 and um is still going on unfortunately, right? So, it's been a longer cycle. I would have said the next cycle was 2010 to 23, right?
um and or 2008 to 23 that that 15ear cycle and the bump in between was co and the second co hit right obviously no one knew what was going on everyone in our industry spent the first 3 months you know calling each other asking about hey how much rent did you collect this month and then ultimately unless you were a hospitality investor or a um uh office owner for the most part you ended end up fairing much better coming out of co as a real estate investor than you did going in. But then things got really aggressive. Um people were starting to pay four caps, three caps, two caps for industrial and multif family. Um especially in growth markets and then we got an interest rate shock.
That was the cop, right? The only difference is now we're like in this construction zone. So now we got where we're just trying to navigate through and we're sitting in traffic and we haven't been able to get back on the free road yet. Um the uh I run a conference every year for emerging managers and one of the topics of conversation last year was this.
Everyone's looking to find core plus money because they are struggling to find opportunistic returns in deals. By the way, people who out hustle today, I think find deals, right? Knowledge is table stakes, right? Especially in the AI world, everyone's got access to data.
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>> And um so people are finding stuff. But uh the reality is that uh today uh you know the one thing that people said was well the way I can get those returns is if you know assets were 40% cheaper.
>> Yeah.
>> Right. And so we have we have something on our uh we have we have a uh a picture on our wall in our office that says uh vacancy is temporary and basis is forever.
Um and there's some truth to that right the most people if you really think about like a lot of real estate investors like especially with developers um the the second or third owner is the person who usually makes money on the asset um and uh the reality is we do need a basis reset. Now, the thing I don't know, going back to one of the things I was saying earlier, is coming through this cycle, you know, once we get out of this construction zone and, you know, everything starts flowing down the real estate highway again. Um, there are just so many more people out there today than there had been in the last couple cycles that there still will be people um coming in. And just like anything else with the amount of liquidity out there, things might not get as cheap, right?
Because it might not be a 40% basis reset at 20%. You might say as an owner or a fund manager or someone who's, you know, has capital needs to put be put out and say, you know what, I'll buy it at that. So, so I think that it might not be as extreme as the last cycles, but we do need to work through the system for sure. Well, and the other form of capital that that that might be entering or is entering the market um from the policy update through the Trump administration and uh prior guest was Mark Gibson was talking about the the current 401k and pension plans and retirement account for $14 trillion.
They're going to start allowing that to go into basically private real estate.
And even if you take, okay, 2% of that, 3% of that, that's still $500 billion.
And their time horizon for owning that real estate is actually pretty long.
Like it's actually works out when the way he described it, assuming you're getting into good stuff, which it's probably going to all be core stuff, lowrisk stuff, they can hold that stuff for 10, 20, for they they should hold it forever. it almost works advantageously if you're going to stick it in a 30 or 40-year retirement account. So, you also talk about how far can prices go down.
There's this new entrant of capital coming in that's never been in.
>> So, we've seen this a little bit and it hasn't been talked about widely, but um when the private REITs raised tons of money a couple years back, right? they had, you know, when they're raising billions a month, they had to put out billions a month, which means core pricing got that much tighter, right?
Um, and we will continue to see that as things evolve. Um, and and to your point, what's interesting is, you know, I think this is where real estate gets, you know, you have to think about real estate as the asset class. The two ways to make money in real estate are really buy, fix, sell, right? Buy at the right basis, fix something, change a rent profile, get out because the only way you derisk a real estate deal is by exiting it. Let's be honest.
Or buy and hold for the long term.
People who bought land here in Fort Worth 40 years ago have made money no matter what you owned, right?
And that is those are really the two ways to do it. And anything that's in between the very long-term hold and the very short-term hold is a much harder execution. Why should you want to raise a fund? So you you probably tell people this when they come to see you. So h if if if your first decision that you make as a company is should we stay kind of deal by deal raise opportunistically be more entrepreneurial if you will even though you you can be an entrepreneur running a fund business but what should be the first question you should be able to ask that at least you've checked that box to say okay we should go down this fund route. Most people want to raise historically most people wanted to raise capital for uh one reason and um that has actually become two reasons over the last half decade or so.
The two reasons that people want to raise capital today are for access to discretionary capital, being able to execute on a deal, hit the bid on something that might be hard to raise money on on a deal [clears throat] bydeal basis or time or speed or whatever, right?
And then today, the other element that I added in is franchise value, right? If I raise a fund, I have recurring fees.
There's enterprise value to that. Um, and that's how I'm building and valuing a business.
Um, let's go with the former, not the latter. Um, the discretionary capital can be key for a lot of people, right?
you know, if you're doing something that's a little bit different or an approach or if it's you're just thinking outside of the box and and and and you're good at that and you have that vision and you know that capital is important, right? That's there's something to say about you know having capital to be able to execute on interesting deal flow right moment in right time. The other element is actually as a you know as a business having recurring fees is a real thing right you know if you're if you're living off the ACT fee you can't bring on the people right one of the challenges and a little bit the big misnomer about that is a lot of fund managers often are frankly in the red until fund three or fund four have a $500 million fund because they have to build the machine to get the capital to then have the aum to feed the capital right so a lot of platforms in growth mode are actually not making money and those founders aren't, you know, they're they're plowing all of the management fees they have right back into the business. Uh but, you know, those are the real reasons to do it because today there's lots of other capital sources out there if you can access it, right?
Don't break something that's not broken, right? We we see all the time, you know, groups that are local operators or or smaller platforms that might be 5 10 person platforms that have great access to capital. Um, and I would make the argument today it's harder to find the capital than the deal. Um, but most deal guys would probably, you know, defer on that and we could have that argument probably all day long.
But if you have a system of actually accessing capital, accessing capital in unique areas or having unique channels to that is just as important if not more valuable than accessing deals in unique areas. I I want to talk about team construct then.
So uh example would be I come to you I've been in business for 10 years have a team of you know 10 people whatever but now I want to raise a fund what am I going to have because part of the reason why I feel like some of these fund uh based uh companies go into the red or stay into the red is I'm also going to have to hire some people on my team that I didn't require on a deal by deal basis because the capital requires it. What are those positions that I would need to be thinking about hiring?
Some of that's more back office, right?
That might be the um the finance roles, you know, having just a little bit more of a true CFO as opposed to a controller.
Uh some that might be just on the IR and reporting element, right? having people that are there, you know, to answer questions and have all of your quarterly reporting and and things like that that you would not normally have. Um, some of that is having a full just having a full bench. If you're a deal guy, you could be you could be a threeperson company today sourcing deals and having capital and going out and doing deals. And we see operators all the time um who have actually been arguably more successful on the bottom line to themselves a small little nimble operating platforms than big fund managers because they don't need to have three acquisition people and three asset managers and and um all of that duplicative infrastructure, right? It could be literally, you know, three guys in a small office and a truck.
So you just need to have all those duplicative functions, the full bench, all of those other things that you wouldn't have otherwise.
>> Is there a general rule of thumb like for every 100 million you raise, you can expect x amount of new overhead in your business?
>> No.
>> Is there a certain level of funds that you should shoot to raise to where all those positions become kind of irrelevant again? Like it's the the question is almost something like don't get into the fund business unless you're prepared to achieve X scale. Like nobody gets into the fund business to raise one fund. You get in to raise funds three, four, five. So what is the vision?
>> Yeah, I you know we see this a lot with some of these smaller high net worth funds when people want to raise a 20 $25 million fund. Um by the time you start dealing with the infrastructure and the reporting and the accounting and it just it kind become becomes more of a time distraction, you know, a distraction than than than a benefit. I can't really quant you look every strategy is different. Every fund manager is different. There's some platforms that have a $300 million fund in 50 people and there's some platforms that have a $300 million fund in 10 people. Um, so um, no, just like no two LPs are the same, no two GPS are the same. Um, but I would say in order to get a, you know, in order to put yourself in a position of profitability and sustainability, you probably need to have um, you know, a consistent series of three to 500 million funds and up.
Um, so multiple funds at that point where you might have two, you know, call it 500 million of equity under management at any given time. Why do um when you go the fund route, does the fund world kind of discount your prior history of raising capital? Is it because the capital was never discretionary? So, they kind of look at you as fresh. I know it's deal by deal, but one of the things I kind of noticed sitting in lots of meetings and hell, maybe it's just it was our company and it was related to us, but the more I talked to people, it was kind of the same narrative of if you've if if you're raising your first fund, you're almost treated like you're just getting started again.
>> Yes, it's true. Um, and part of that is track record is only one element of why people invest, right? There's multiple different parts of the story. Um it depends where the capital's coming from right and uh often we will see especially today it's you know very it's very hard for institutional capital to be that first mover so it's often high net worth family office um but if you are the um it used to be the story for emerging fund managers was um this goes back 101 15 years um a lot of groups spun out and raised their first fund and their prior investor was always Bowpost and obviously Bow Post is a phenomenal investor, a great track record. Clarman is, you know, uh, you know, kind of an industry icon from that standpoint.
And, um, that used to be the I remember when I first got this business, it's like, oh, they they did deals with Bowpost beforehand. So, there's like so there was that stamp of approval. So, a lot of times it's often the stamp of approval, right? So, if someone had three programmatic GVs with Blackstone, oh, there's your stamp of approval. It's good enough for them, it's good enough for me. Right. But if it's someone who was h, you know, syndicating deals with individual investors or working with groups that are more or lesser unknown, you know, it it makes it harder. So, a lot of that is just kind of what club you're in from that standpoint.
>> This is a a big question. You can take it in any direction you want. So, you get to see all the different stakeholders, >> the operators, the investors, the allocator. I mean, just everybody, the consultants, just how the whole sausage is made.
>> Yep. If you could offer something to say, look this is how we assume you can't change the market, you can't change pricing of assets, you can't change anything, but you could change the actual process by which a fund gets raised or make it easier. There's probably things you bang your head against the wall and go, I can't believe we have to do this or if we did this differently, things would be move more smoothly.
What would you offer the industry to make this a more elegant process?
Because even hearing things like it can take two to three years to raise and I know there's nuance to that and it could be a first fund manager and they got to meet but like >> it's kind of like everything in the world everything's just taking longer.
>> Yeah.
>> Yeah.
>> Is there a way to shorten it and tighten it up? Is there a way to make that process more elegant? If you could cut a bunch of red tape, what has 20 years taught you that might offer the industry something to say, "Guys, we can do this better." Um there are a couple things.
>> Okay.
>> Um one is I would call it the standard college app for >> capital raising, right? You know, and there are things out there like the ILPA questionnaire, right? Um and you know, some remember capital raising is not just a meeting. There's a whole process behind it and data and diligence. But if there was a standard application that people bought into that was fully transparent and had a lot of information where you weren't doing the same thing over and over but in slightly different forms for people as it relates to a diligence process that would streamline the actual diligence process. The other thing is also um finding ways to get a no is easier. So, as a firm, we were rejected about 1500 times last year. We calculated it and we actually did an analysis. Thank you, Claude, for understanding where and how and what times of year we were getting nos and for what product and why and things like that was actually kind of interesting.
But, um, the reality is it's so hard, you know, if there is a way to streamline people's responses where you can actually know what they're looking for. Um, and for what it's worth, most allocators don't know what they're looking for until they actually see it.
Um, I can't tell you how many times in my career, good relationships with mine. You know, I don't I don't try to I don't try to be a capital raiser that, you know, knocks down the door of an allocator where they say go away and I knock the next week and say, "Oh, I'm back." Um, you know, if they tell me they're looking for X, I take that for uh, you know, for what it's worth and I pay attention to that and I listen because that's an important part of being a relationship builder and a good capital raiser of mine is listening to what the LP is saying. Um but I cannot tell you how many times over the years that um someone invested you know someone said we are only investing in industrial we're looking for industrial managers and then you know you see a press release that they invested in an office fund or you see you know or you talk to them six months later oh we just invested in two multif family funds and we're just like wait a second you told me X and you did Y happens all the time. But if there was a way to streamline that process to find a, you know, to truly kind of have even LPs go out there and say, "Hey, I'm looking for this. How can I help?" And kind of create that transparency process, that would make it a lot easier because a you can take a no for a no. Um, and then there's more communication. And one of the challenges as as we've gotten to information overload and this, you know, and and AI doesn't help this, right?
with more data rooms, more pushing, more form emails, more inboxes getting cluttered.
Um people um see so much where it's hard for them to actually, you know, be responsive to everyone.
Everyone deals with this right now, right? Showing up is half the battle. So what would actually simplifies the process is everyone could show up again.
Like the business has gotten too big, right? Allocators don't have a lot of resources, right? um we're all people and we all want to be heard right at all sides of the table. So if there's a way to make it where people actually feel like, you know, we're not just reaching out to people in a black hole and not getting responses, calling and emailing, right? Um and [clears throat] investors are getting what they want.
They can be more efficient, too, where they can actually be thoughtful. And um but it's hard. It's it's kind of it's probably one of the last areas where AI is going to take a long time to really change the to change the game. If anything, it's actually making it harder today.
you're spot on and and um you're just bringing up a good point like the information overload >> and and basically what you're saying is like let's all just go back to being human and a lot of progress can be made in a 90minute or 60-minute in-person meeting a dinner uh like how we how we've always done it than some and I know you have an opinion on this some generic claude generated email that there is nothing more uh how do I say this, it's not it's not like offensive, but if you especially if you're somebody I know that has [laughter] gone from like emailing me how you used to to now you sneak in a claw-based email to me, I probably shouldn't be so judgmental, but I immediately put you at the bottom of the stack. Maybe you had good thought, you prompted it well, but this idea that people um feel good sending AI generated emails, I'm here to tell you it is about as lowlevel as you could possibly get.
>> So, I I have a couple things to this one.
I am notorious one of my biggest weaknesses is I'm notorious for when I'm typing things out, just like leaving a letter. Like, if I said if I send you an email, I'll be like, "Chris, hope you um uh you know, hope you're having a good Friday or something like that." I don't know like leave a letter out I don't know whatever you know just like you know you and your always anytime I write your >> like you know it comes out as you or I miss a letter here and there I almost want to not I want to almost leave those there >> you have to >> in a way now just to prove the fact that it is not a uh AI generated email where it would be a little bit more perfect there right >> um but I I would tell you it's funny the one thing that you mentioned what would make things more efficient today if people put their voicemails back in Because um now you can actually get a um one of the hardest parts. Our model always used to be we were trying to get someone to respond. You know, we'd reach out. Our old game used to be call I'm sorry, email, call, email, and usually people will respond after the third or fourth time, but this sales cycle it's really eight. But even third or fourth time, you'll get someone to respond.
Now, [clears throat] yes, you can call somebody. Um, I still personally feel uncomfortable like calling anyone on their cell phone at 2 o'clock on a on a random Tuesday if they're in a meeting or something like that, right? And everyone now shifts to texting as opposed to the calling from that standpoint. But if you call the office voicemail, first of all, who has a landline anymore? But if someone does, [clears throat] everyone pretty much had their their voicemails reset in COVID somewhere along the way in their phone systems and no one ever reprogrammed them, myself included, right? But if you think about it, and this has been around for years, right?
For years, there used to be dictation of voicemails, you know, where you could get them in an email and say, oh, you know, hey, it's Chris, you know, I want to call you about this deal.
No one's doing that anymore. No one calls anyone. Picking up the phone is like, you know, that would actually make the world, I think, more efficient.
People were willing to talk, pick up the phone, talk on the phone, and and willing to have conversations more. So my my two cents when when I hear that is >> I know I went back to that subject.
>> Well, no, every single person So every call that started coming in on my cell phone was spam. We got into that world.
Same thing. Every So now I have some app called RoboKiller that has actually done a pretty good job. Like it kills almost everything.
>> But I've gotten into a world where like if I don't have your number in my phone, I am not answering it. No chance.
>> I agree. And then because my habits have changed, every once in a while I will go through my voicemails and be like, "Oh, wow. This was like a real thing. It's like four buried from like six weeks ago, but I should call him back." My anecdote, >> this is the information overload killer that >> my anecdote to that is, and I'm surprised more people don't do this.
Shout out to my friend James Basher who told me to start doing it, but I send people voice notes all the time now. So instead of texting you, I send a voice note. It's basically like a forced voicemail to you that you have to listen to. And Apple does a pretty good job of letting you know if the other person's tapped on it or not. And on top of that, it is it's probably more powerful in a text. It's like the times where um and I don't do this enough, partly because my handwriting is so bad and partly again, I'm very bad at making the time. I think I've saved every handwritten note I've ever gotten from a business professional or something like that as a thank you note. They're in my drawer, but everyone is have been remembered, right? So, if you kind of think about how do you stand out, there you go, right? No one does it. Every operator I know hits the same wall eventually. Your best people are doing necessary work instead of their best work. That's why I like Relay Human Cloud and it's why I brought them into all the companies that I run. They took the repetitive accounting off my team overnight. So, we showed up to work that actually moved the company forward.
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Isn't it funny that in this whole world, what we're sitting here talking about is the most valuable lessons are things that people have been doing since the beginning of time.
>> Yep.
>> Handwritten notes. talking to the person.
>> So, I'm in the process of hiring someone to focus on putting people together.
>> So, we're actually going the other way.
I want to make sure we do more. We've always whether it's our networking group or our emerging manager summit we do, you know, I want to put people together and create that community and have that in person connecting um in time for people to to actually connect not via screen. And we are actually focused on trying to do more of that which is hard to do in the current environment.
Everyone's busy. Everyone's got a lot of million different things going on. But I think it's more important than ever to go back to basics.
>> It's a whole another podcast, but we can [laughter] we we we we can talk about [snorts] >> what I'm doing in this next version of my career and the the how long I am in-person interactions and and and you throw I throw a couple uh private events um certain dinners, things of that in person. You do your summit. Yeah.
>> I bet you you get more value out of that summit than just about anything. And I bet the people that show up They're like lifelong friends. They talk to each other all year. Not just about raising funds. Nobody really wants to talk about that for very long. But they build human connection that's impenetrable.
>> Yes. That's the value on it. It's not like we're doing it to go out and we don't >> you always do it at a kick-ass place.
It's at like Jackson Hole or wherever >> this year in Sundance. Yes, the but [laughter] yes the the the reality is that >> um the whole idea is to actually um build that and have that form. I think one of the things that we we the reason we did that was actually if you and and and you understand this too is that um one of the loneliest places to be in the industry is as a founder like you know the um I always said you know with growing my business that the um best thing I had growing my business was no partner and the worst thing I had growing my business was no partner. Some days I'd really needed a partner being in the trenches with me and some days I didn't. And I have great partners and my team is phenomenal uh today, but in the early years it was really just me in that decision-m capability. That's a very lonely place. And when you look at these founder le platforms that we work with, all of those founders are often in that spot of like what do I do here? How do I think about this? It's actually why we created the summit. And that's what everybody gets out of that is that form.
Um, so that's that's the cool part is that, you know, having that ability to not be alone in the trenches of something. It's really hard. It is I don't care whether it's real estate, I don't care whether it's, you know, widgets, it is really hard to build something from scratch.
>> What's the common thread amongst the founders? Are they and again, I know it's we can always answer things. It's it's case by case, but are these the the typical people coming out of blue chip firms that were on the acquisition side, on the investment or on the asset management side, on the invest like what is the general profile of a founder that you see?
>> Most founders in real estate are originally deal guys um >> which would be acquisition or asset management.
>> Usually acquisitions.
>> Okay.
>> Um sometimes it's a good yin and yang profile.
>> Okay.
>> Right. We see that a little bit more. So the co-founders one might be um the guy who knows everyone and the other might be the guy who knows everything >> y >> right but one might be the deal guy one might be the COO you know one might be the CIO type one might be the COO type so one person focuses on the asset management and execution one's the the you know rain maker deal guy or capitals the often we'll see maybe it's the rain maker deal person and then the rain maker capital person right so some of the most successful platforms usually are you know there might two or three, you know, early people all with different core functions >> usually coming out of the same team or they've they've just known each other and pieced together relationships over years. Yeah, >> vary. Sometimes you have a, you know, spin out of uh a platform and it's two or three people spinning out of a platform. Sometimes it's people who knew people, you know, knew each other for years. Sometimes it's we've seen situations where, you know, especially for new operating platforms, which we see a lot of today. Um, and I want to come back to that. um the um because that that is a new trend that we haven't seen since 2010.
>> Um >> which is what >> uh people that are looking to spin out start platform.
>> Okay.
>> Sometimes it's oh we met at a networking event and he does this and I do that and it's two people that do similar things at the same firm. We see that you know happen a lot. Um we are seeing that happen now today partly because we talked about earlier with the some of the talent trends. Um, not since 2010 have we seen so many people that are looking to go out and hang their shingle. And I get it, right? When I started my platform, the reason I started my platform was because um, I was sitting in Chicago as, you know, as a capital raiser and I had built, you know, a real estate networking group in Chicago and I was talking to all these young upand cominging uh, folks and people who were thinking, "Oh, I want to hang my own shingle or start a platform." And I took a lot of those guys under my wing and at some point I drank my own Kool-Aid. But the whole reason there was an opportunity then in the GFC was that if you think about real estate cycles and talent right out of opportunity um out of dislocation comes opportunity. There was dislocation in the cycle. There were a lot of younger people that had no legacy issues drive you know it was the right time to go do things. Um and um so there were a lot of people that hung their shingle start building platforms and you know some people built you know were very successful as operating partners. some people built multi-billion dollar platforms, right?
Um there wasn't as much of it then than I thought there was. I was actually that was one of my own miscalculations of my own business cuz I thought that just like the GFC, right? There were so many people in their 30s at their time that just hung shingles and built RES and fund managers. They are the big established platforms of today, right?
Um that is actually a bigger opportunity today than it was in 20110 2011. Partly because of the maturity of the business, the demographics of the you know the pl you know the age of the founders and the demographics that exist in the industry today are actually going to create an opportunity for the next generation um over the next 3 to 5 years that we haven't seen in a long time. So, we'll we'll we'll dedicate this part of the conversation to that person that is sitting at a blue chip chip firm like right on the edge of quitting and and going and starting.
>> I talked about five a week, right?
>> How do we help people quit their job right now? Like they're probably they they might also be thinking, I don't really want people to know. How can I do this discreetly? What? So maybe let's What are the conversations that you're talking to five people a week and you you've you've touched on a lot of this, but like if you were to say, "Hey, here's my advice to you if you're thinking about jumping. Get at least these things boxes checked before you do it." What would you tell them? Would it be find a partner? Obviously, find a strategy. You're going to have to have some savings in the the bank, but but what what needs to get people to quit their job? Yeah, I I think it's conviction.
Most importantly, it's conviction in themselves, right? If you're a good deal guy at X shop, pick one. I don't if you're in Texas with Crow.
>> And real quick, let me stop you there.
How can because some people go, "Well, those deals were on Crow's dime. Those don't count for you." How do people show their track record if their track record is embedded in a larger company?
>> There are lots of ways to do that. Some of that is just if you are a this is actually kind of an interesting thing.
We we see this all the time of like, oh, I'm a deal sourcer. Um, and I've got, you know, all these capabilities, source deals, and then you look up the person and then, you know, this comes on our search and there's no LinkedIn profile.
Like, well, [laughter] >> dude, >> I'm like, really?
>> But they got a Tik Tok, >> right? You know, there's no social media anything, right? So, I'm like, well, wait, then you're not out there, right?
In an odd way, right?
>> Um, and so some of that is just the network, right? If you're doing deals and you're if you're the young rock star at X shop and you know how to go out and source deals, you know, well, the reason you're getting access to that deal is because you have those relationships. Well, you can then ask around. This is real estate's still a relationship industry.
you can make some calls and find out whether or not that person actually is, you know, legit as it relates to what they're saying, what they um, you know, what they claim to, you know, have done, right? You will know, you know, in the network pretty quick whether that's true or not. So, the reputation matters um positively and negatively, right? I think we've seen um people that build platforms and have mixed reputations and that stuff hurts them too along the way.
There's no doubt.
Um you know going back to your original question of what do I tell people in that category you know I say look to some extent make sure you have the staying power you know understand that it's going to take a lot twice as hard and twice as long for anything but if you believe in yourself and kind of have some idea to run with it like take a shot and to some extent you know for if you're a mid-level deal person at X shop and you're good and you can source deals your opportunity cost is super low because some other big shop would hire you and maybe even your existing one would bring you back if you were that good, right? Um the reality is there is a big separation but what what we call creators and catchers. You know there are a lot of people that just take deals that are you know handed broker deals and they execute them and there are a lot of people that create stuff out of scratch.
>> Um you know in in in your old you know in in your in your first real estate entrepreneurial venture, how many source how many broker deals did you guys do?
Zero. because you went out and sourced it.
>> You start as a creator in the world.
>> You created from day one.
>> Yeah. And [clears throat] if you're going to keep ma if you're going to keep growing scale, you have to start playing catcher, too. There's no way to not >> 100%. Right. Um but the you know, we did a search once where we were looking for an investment person um for a multif family shop and um the we were saying how are you sourcing deals today? And everybody's response is, "Oh, I have a proprietary relationship with, you know, the broker in the market." It's amazing how many people had a proprietary relationship with with the one broker, right? And and that's where you think about and say, "Okay, well, if that person can do it, you say, well, test that, right?" And then you have the, you know, then you can say, "Well, if you believe in yourself, go for it." You don't have much to lose. Um because of it, you just think about what that story looks like. And I always tell you know the the one of the things that's important one of the things you've learned also is that um whether it's capital raising whether it's your career and this is where our search business and our capital business overlap it's really all about storytelling right so if the person can say okay make sure it doesn't f up your story um and uh then you can go for it right if you if you're going to complete if you're going to go bash your former core like if it's going to be a if it's going to be a career limiting move. Like that's one thing. But if you've got an idea, like you can find a way and you have the staying power and you can do it while you can, you know, you know, don't have the overhead burden. This is why I think it's a huge opportunity for the folks that are like, call it low30s cuz their life expenses aren't, you know, their life needs aren't the same, right? If you are the the the best thing in retrospect that happened to me was I hung my shingle at 33 years old. I never would have thought that now, but um because I would have said, "Oh, I would have loved to go out and build a platform today." Well, all of a sudden, you know, you're at a shop, you're making money, you've got >> a wife, kids, country club membership, a nice car, nice house.
>> Yeah.
>> You know, you want to go and take no paycheck. It's a bigger thing to do.
>> So, let me ask you this question. Is there anybody going out there and saying, "Hey, we're going to raise two tranches of capital. We need the platform capital and the LP capital.
like we're going to take an investor day one in the platform.
>> Now, that doesn't necessarily get nobody's going to invest in your platform just to give you a big salary so you can cover all your expenses, but is that an option right now?
>> We're actually looking into it. Um it was funny you mentioned that. Um but >> like for your firm or Okay.
>> Um >> saying let's bring on an investor at Incap.
>> Well, we do some principal investing. We invest in the funds we work on. We've done some principal strategies over the years for things that are smaller.
we've, you know, it's what we call our ventures bucket. Um, but there aren't a lot of people that do that and I struggle with that myself. The reason being I was with someone last week had a coffee. He's looking to go start on build platform and he's looking for he wants to execute a strategy but he's also looking for overhead capital. It's like overhead capital for what do you want to hire people or do you need a paycheck? Oh, I need a paycheck. I'm like, okay, well then you're not you're not bankable, right? because that in itself is that you know d-risking platform you know is that is that d-risking calculation right you know I I've been getting this for years people have always said you know this is I've had countless coffees with people over the over the last 20 years where people say oh I'm going to go do something more entrepreneurial and this is before I had a you know a full team and an office space of my own all these other things this is years ago I'd say okay great I'll give you a fun line I'll give you a business card, right? I will open up my network, which is pretty big, and I will take 10% of everything you do. Oh, I can't do that.
I need a salary. It's not being an entrepreneur.
To this day, you know, one of the things that separates being an entrepreneur and not probably every business, but definitely in real estate, is no matter where you grow your business, you're still always signing the front of the checks, not the back of the checks. I wonder if you agree or disagree with me on that point.
>> I totally agree with you. I >> When's the last time you signed the back of a check?
>> I mean, [laughter] it's like it's like heaven when you get to do that.
>> Very.
>> Um, and in the real estate business, especially if you're vertically integrated, you're signing there's a lot of people to be paid. There's a lot of mouths being fed.
>> Yep.
>> Um, not just at not just at corporate, at the property level. I mean, I I I can't remember at one point the amount of checks we were sending every year. It was in the like tens of thousands of year. That's the only great thing about the not just AI, but just the innovative nature of of where we're at. Everything you're saying is like I think society's waking up to like all these structural problems that have been around for it's like they were some of these laws that we uh abide by today were created out of the uh great depression of n and now you're seeing a lot of the institutions kind of crack and they're not relevant anymore and media is not as relevant.
It's it's like happening across the board. the the the future of things. Um >> we look at the power of social media >> for sure, >> negative and positive.
>> For sure.
>> Right. It's a good example of that.
>> Well, and you you you go back to storytelling.
It happens more in the tech world. And I think there's a lot more room for people in the real estate world and other industries, but go look at the biggest tech companies of the world and virtually, not all of them, their founder has a very vocal presence on social media. I mean we go to Elon Palmer Lucky the I mean just go across the board these people are becoming the main characters and they tell they get to tell their company's story with no filter and they're basically telling the world if you want to hear it come hear it from me anything else that you hear >> right >> raise a raise an eyebrow to >> there are a lot of I mean look I think capital so one of the reasons capital raising change it used to be vent I used to never understand venture capital raising because it used to be a five page pitch book and here's our problem, here's our solution and invest in this and there wasn't the enema that you'd get for say investing in a real estate platform and people diving into cash flows and deals and things like that but that's basic storytelling. So now that's coming that's coming into our world because that's what people are grabbing into and being able to tell a simple story that people get, right? And so everything's just changed. Everything's kind of moving to simplicity again partly because of the information overload we deal with every goes back to what you said about being in person. The most valuable asset today and it's and we've we've said this now for since social media began and it's more important today than ever is attention.
>> You have people's attention. you have something that AI cannot break.
>> AI is going to create a lot more distraction, but if you can create attention that rises above it, you have something that most people don't have.
And that's probably how you raise capital in a way, too. It's, you know, the the stories that garner attention, everything builds on it. We had a manager that raised capital last year in under a year, which is the exception, not the norm. And there was a story that people started paying attention to quickly. And then it's steamrolled, right? And you you go people talking about at a conference, people talking about the annual meetings to other investors, everyone all of a sudden everything's coming in, right? Because then the FOMO occurs. Since you brought it up and it was quick, is that something like it was quick cuz it was such a great story and just one investor was like, I'll take it all. Or is it still same construct of lots of investors, but it was just a really widely regarded story that people? had we actually had some of that where people wanted to say, "Oh, I would I I'll take as much as I can get because it was highly oversubscribed."
But again, the exception, not the rule.
Um there often is FOMO, right? There's you do have a have and have not game, right?
Like either things click or they don't.
And unfortunately allocators do often uh demonstrate some herd mentality you know like if you know one major endowment comes in many often also follow things like that you know you know people like just like anything else right like people like you know like kind so allocators like like kind investors you know that that is part of it right if one set of people starts coming in others often follow um uh but yeah It's It's real for sure.
>> Is it is there a strategy to go to some of these uh like I think UTMCO has one or Texas Teachers whatever they have their like emerging funds. Is that >> what is that like like would you ever tell me, hey, I can't help you. Why don't you just go talk directly to their emerging like we're talking about a first fund manager? Like what's going on there? I I use I use the I don't like using the term emerging managers because it's gotten completely bastardized over the life. basically a way of it like it sounds like uh like rookie like neoight like not as great >> and the exactly um [laughter] and the definition means something different to everybody right so you know TRS's definition of emerging manager is like a fund manager a billion and below right or something like that well that's huge right um some pensions their emerging managers are more for um you minority or women of minority or diverse managers, right? Um and they have programs for that. Um you know, so it's [clears throat] it it varies, right? Uh depending on the group. Sometimes it's there isn't really one that says, "Oh, our business is for investing in emerging managers is we want to invest in first-time funds that are 300 million and below." There are few that say they do, and often they're just really doing directs or programs. They're not actually investing in funds. So there there's really um there's no good solution for that out there. There aren't a lot of fun seeders out there in the real estate space the same way there are um in say the hedge fund world and partly because the economics aren't there.
>> All right, Glick, thanks for coming to Fort Worth.
>> Thanks for having me. It's been wonderful.
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