I launched BrandView Inc in 2014 with a simple mandate: Focus on value-add investments in the sub-institutional, “small to middle market $2-50M range”, and, advise mixed-use development projects on feasibility, venture structuring, capital raising and execution. This leveraged my prior corporate experience leading these efforts for a large-scale investment/development firm. However, I had not yet identified enough purpose in it to feel consistently passionate. This was in mid-2014 when I landed a few consulting clients (including my old firm, LOWE) while developing a small residential project in La Jolla and finishing a apartment renovation in Los Angeles. I was scattered going from project-to-project and lacked a cohesive mission.
“When driven by purpose, you stop doing the minimum required. You really go deep within yourself. You become a creator. You become willing to go above and beyond the “call of duty.” You put your soul into your work. You genuinely seek to address the particular problem you’re trying to solve. You genuinely care about the people you’re serving.”Dan Sullivan, Who Not How
It was not until after I learned from many experiments, failures and some successes over the next 4 years that I found congruence in serving the needs of investors, tenants and neighborhoods together with leveraging my experience, strengths and personal passions. Along the way, here are the problems (opportunities) we became committed to solve:
- Syndicate private equity to directly serve investors – We syndicate the majority of our investments among a group of private investors, sometimes up to 40+in a single project, that we get to know and build relationships with over time. This creates a rewarding ecosystem where we provide access investors with access to opportunities that deliver financial returns. I found this significantly more fulfilling in comparison to institutionally managed investment funds that have several layers between the investment fund vehicle and the investors they are serving. Don’t get me wrong – institutional investment funds, ie Blackstone, Starwood, etc make great joint venture partners for many reasons (and we continue to selectively pursue them) including funding 90% of the equity for a given project. That being said, they are mainly composed of employee pension funds, where employees invest a portion of their hard-earned compensation toward retirement. This structure makes it impossible to actually meet and develop a relationship the individual investor you are servicing.
- Having Sponsor control to add more property value over long-term holds – Another benefit of having multiple investors in an investment syndication is that it gives us control as the Sponsor or general partner to run day-to-day operations and make major decisions on when to sell vs refinance and hold. Sponsor control comes with fiduciary responsibility and provides great opportunity to add value to the property and ultimately the neighborhood in multiple phases over a long-term holding period. In contrast, institutional funds rarely provide Sponsor control beyond day-to-day operations. The fund manager sets the property business plan according to the fund’s timing objectives to invest, add value and get out as soon as possible to achieve their target time weighted return or IRR. This has a higher likelihood of leaving property value on the table, which works against the Sponsor, the fund’s investors and ultimately the neighborhood community.
- Private investors need both superior risk-adjusted returns AND after-tax returns – Commercial Real estate investments provide attractive tax shelters for private investors in the form of depreciation, 1031 like-kind exchange and most importantly the complete tax exemption for cash-out proceeds from refinancing. This behooves private investors to invest in long-term real estate strategies that provide annual return on investor capital through rental cash flow and return of capital through refinance. This also aligns with our approach in #2 to hold assets long-term and add value in multiple phases.
- Retail disruption creates mixed–use opportunities – We view retail spaces to provide an opportunity to reduce or re-size the amount of retail needed and repurpose the balance of the space to achieve higher and better uses. The internet’s disruption of physical retail officially began when Amazon bought Whole Foods in 2017. Almost overnight, we saw an overabundance of retail space in the urban cores and suburbs that needed to be repurposed into higher and better uses. In my prior life I also saw first hand how municipalities required retail ground floors and institutional investor-developers just tried to pencil in the lowest possible rent to get by without thinking about how impactful these spaces can be as the first impression of community creation (or lack thereof).
- Mixed-use innovation to serve and achieve more with less space – We take vacant and underperforming properties and give them a new life through community environments that create a diversity of uses in a project. In some cases this involves converting vacant spaces into much-needed housing. In other cases its as simple as taking a larger apartment, office or retail space, subdividing, renovating and leasing it in smaller spaces to service more tenant needs. In all cases, the COVID-19 pandemic has accelerated the need for mixed-use from being a steady want to a crucial need .
- Focus on fragmented and underserved small-to-middle market investments – In focusing on boutique assets in the $2-50M range, our institutional operational experience becomes our competitive advantage in finding pricing inefficiencies and dislocations in more opportunities within in a fragmented space with mom-and-pop and private owners of legacy assets that are underutilized and underperforming. Our institutional approach and processes are in turn provided as a value to our investors – high net worth individuals and family offices alike – when we execute and communicate our progress on each property business plan.
To pull it all together into congruence: We take dying properties and give them new life. Spaces that harmonize living, working and community. This creates multiple income streams for our investors over a long-term investment period to generate attractive after tax returns. When communities prosper, all stakeholders prosper.