Stories from a Small Balance Real Estate Entrepreneur - SBREfunds.com

Stories from a Small Balance Real Estate Entrepreneur

By Matt Burk
Papers and gadget

Much of this blog the past four and a half years has been me sharing my own personal experiences and observations as a Small Balance Real Estate (SBRE) entrepreneur. These experiences are very different from those of institutional fund managers and are not widely reported or written about in traditional publications, so I have tried to give a voice to them. I think a big part of what has resonated so strongly about the blog is that even though the anecdotes are mine, they could just as easily be those of thousands of other SBRE entrepreneurs around the country who are out there doing deals, raising capital, battling it out, and building their businesses. I know this because I am on the road – a lot – meeting many of you whose challenges, frustrations, opportunities and issues are so eerily similar to mine as well as each other’s so much of the time.

As I write this latest entry, I am on a plane back to Portland, Oregon from Palm Beach, Florida (no easy trip, I might add). One of my partners, Darris Cassidy, and I flew out Wednesday and it took literally all day to get there. We were traveling to a family office event we paid good money to attend, and we arrived at the hotel just in time for the opening cocktail reception. We walked by the already gathered crowd on our way upstairs to drop our bags off and then headed immediately back downstairs to join the group. Knowing only a handful of people, we mixed and mingled (not my personal favorite thing to do) as best we could for the 90 minutes we had and we managed to meet a few people with whom it seemed we had at least some possibility of future dealings. Since there was nothing formal scheduled after the cocktail party, which is typical at most events we go to, we were then on our own for dinner on our first ever visit to Palm Beach.

We asked the gentleman who had originally invited us to the event (who lived there) if he could recommend a nice restaurant we could go to, which he graciously did. He said he liked a place that was not fancy but had great food so we took him up on his suggestion and caught a ride from our hotel where the conference was being held into town, about a fifteen-minute drive. We rode along the water on Ocean Boulevard the six or so miles up to the restaurant in downtown Palm Beach, past Mar-a-Lago and the big electronic signs on the side of the road indicating that it would be closed at that point all weekend long starting on Friday. Our driver commented on the massive disruption President Trump’s arrival causes to the local traffic and people on the island (not to mention the significant costs to Palm Beach County) every time he comes there. We experienced the traffic backup and diversion for ourselves firsthand on Friday morning on our way to a breakfast meeting at The Breakers hotel with a client who came to visit us from Miami.

Anyway, we arrive at the restaurant without reservations and the host, dressed impeccably in a suit and tie, greets us warmly. We immediately discern from the atmosphere in this “not fancy” restaurant what Palm Beach is really all about – money, and lots of it. We decide to sit at the bar for dinner, something I enjoy doing whenever I go to a new restaurant, as it gives me a great deal more interface with the people and insight into the place. This occasion proved no exception. Our bartender and server, a lovely and friendly woman who I will call Grace, was outstanding and engaging in every way and made the experience something personal and exceptional. I opened the extensive wine list and asked a server a few questions indicating I knew something about wine and he quickly deferred to another person. I asked that person and he quickly deferred to the sommelier, a very proper European guy who took us a good hour to loosen up. He and Grace bickered over the right choice of appetizer and meal for us and acted very much like the “married work couple” they had become after all these years – and it was all highly entertaining. Darris and I sat there for nearly 3 hours – eating dinner, talking shop, drinking too much wine, and engaging with the people who worked there and who came and went next to us at the bar.

We met a retired entrepreneur from Louisville, Kentucky who had started his company at 19, sold it at 52 (too early, he told me, with the benefit of hindsight) and retired to Palm Beach more than 20 years ago. We heard all about the 84-year-old billionaire (who looked like he was maybe 72) who walked into the bar with two women who were much, much younger than that. We watched an amazing blind piano player entertain the patrons while his dog slept underneath his feet. We attempted to help two ladies who sat next to us at the bar locate one of their lost cell phones, as any chivalrous SBRE entrepreneur would do, to no avail. And all the while we discussed the challenges of how to raise capital from investors to fund non-institutional sized and structured real estate strategies and transactions. We both agreed that hanging out regularly at this bar every night would be an excellent approach to doing so!

With our speaking slot not slated until 11:45, we slept in a little bit the next morning, due both to still being on West Coast time and to Grace pouring us much more wine than we paid for after liberally sharing our Quilceda Creek cabernet with her. We went downstairs to scout out the event, which was much like many others we have attended, but apparently with more family office investors (rather than gatekeepers) in attendance. At our appointed hour, our session was skillfully facilitated in interview style by our patron who had recommended our dinner spot the night before. He assured us multiple times (both beforehand and on stage) that there were some extremely capable and prodigious check writers in the room who understand real estate deals, funds, and syndications thoroughly. We felt confident this was the case, which was why we came in the first place, but of course having them actually write checks is a more elusive matter. We duly delivered our story and our message and it seemed to go well. We were approached by several people afterwards as we segued to the lunch break and we had a few brief conversations, exchanging cards. Then everyone went off to lunch and the schedule resumed with the afternoon speakers and sessions and we were once again more or less on our own to try to figure out how to maximize the value of our time and money.

As with so many of these events, it is nearly impossible to say immediately how much of a success it was or was not as it all depends on what business materializes in the coming months from the whole effort. We certainly made contact with what we think are some interested and capable investors and allocators and we will follow up appropriately going forward. What eventually comes out of it is unknown at this point and is what will ultimately define the value of the rather grueling, less than 65-hour trip from Portland to Palm Beach and back. We are not going to really know that answer for weeks or more likely months and this is part of what makes raising capital so tough. There is just so rarely any immediate gratification or full awareness of the probable outcome. I’m a long-term guy so I understand the need for patience, but every time I am on the tail end of one of these trips (like now as I write these words on the long plane ride home) it is hard to appreciate that fact nearly as much in that moment. Raising capital as an SBRE entrepreneur is just flat out hard work.

We had also decided to make this trip, in part, to visit with a client of ours from Miami that we like a great deal. We are in the middle of a fund creation engagement with them and seriously looking at investing in and raising capital for this group. We met with them for dinner after the event and again before we headed to the airport to talk about their deals, their underwriting, their fund structure, their philosophy. This other side of our dual sided platform – the SBRE entrepreneur – is so much easier for us to judge the likelihood of success so much more quickly. As stilted as the capital raising process can be sometimes, the discussions with quality SBRE entrepreneurs couldn’t come more naturally. We understand their pain points and their opportunities intimately because they are so similar to our own. In many ways, we are our clients. We empathize with the most challenging aspects of their business that are so irritating to deal with, and we understand the magnitude of their opportunities if they can address these challenges and irritants. Our commitment and capacity to help solve core problems for them in ways that no one else they meet can is the root of our value proposition and the mutual attraction. It feels so natural and so normal – so opposite the often painful capital raising process that almost every SBRE entrepreneur I know loathes doing.

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