In real estate, when the market is hot and values/cash flows are increasing, every mistake gets overlooked. When the market turns (and it always does), investors scrutinize everything.
However, in today’s world where anyone can produce media, it’s not just investors who scrutinize, it’s anon Twitter accounts, newsletters, niche media sites etc.
In real estate today, there’s no bigger public punching bag than multifamily syndicators.
I’m not going to say it’s undeserved. There are several high-profile examples of multifamily syndicators who got over their skis, charge exorbitant fees, have unfriendly waterfall structures, and who are poor operators. Some are even outright criminals!
However, none of this is unique to syndication. It’s a biproduct of a highly fragmented, capital-intensive, and largely unregulated business.
The process of raising capital directly from retail investors (syndicating) to buy real estate is common and really the only way for entrepreneurs to get started in the business.
And it’s not just small firms, entrepreneurs, and crowdfunding sites who tap retail capital – institutions are raising capital directly from retail investors through vehicles such as non-traded REITs including some of the biggest names in the business (Blackstone, Starwood, and Hines).
The reality is that all real estate companies besides institutions are syndicators – they may just call it ‘real estate private equity’.
The third rail here is that the real offense is being a “syndicator” vs “private equity” and “dentist SPV” vs “multi family office/fund of funds” and “best ever conference” vs “high production value podcast” https://t.co/ZIDbptx4XL
— EB (On Loan) (@EllliotttB) April 14, 2024
Since launching Atlas in 2010, we’ve acquired over 50 deals totaling $1.5B in value across 10k apts. We’ve done this primarily through deal-by-deal syndications, raising nearly ~$400M from a network of over 500 HNW investors.
Like most firms, our initial capital came from a small network of friends & family and grew organically over time. We made mistakes along the way, but always acted as a fiduciary to our investors.
Today, we’ve scaled the team and we’re raising our first dedicated fund vehicle. What we sell to our investors is a disciplined approach with systems and processes we’ve honed over past 14 years and experience and expertise as multifamily operators.
Our network of trust-based investors is one of our largest assets, and we’re going to continue to lean into that.
As an industry, the real estate business will always be filled with grifters. Retail investors, who operate on trust and FOMO, will continue to get scammed.
But real estate syndication is the lifeblood of the industry. Syndicators are entrepreneurs who risk everything and make a bet on themselves. They’re apt operators doing gut renovations of historic properties and creatives doing adaptive reuse projects in emerging neighborhoods.
As an industry, we need to evolve and bring transparency to the business. We need market-rate fees and structures where syndicators get paid for their work and the risks they’re taking, while aligning interests with investors.
We need retail investors to continue to trust and support real estate entrepreneurs. It’s fine to bash on real estate syndicators, but don’t do it to gloat. Let’s do so with the goal of evolving the business.
Signed, a proud real estate syndicator.
