June 17, 2022
Joe Fairless

JF2845: 8 Things Capital Providers Want in a Sponsor ft. J.C. Clemens


J.C. Clemens Jr. spent seven years working for Holliday Fenoglio on the mortgage side and in multifamily sales before landing at Flagship Capital Partners. Flagship is a direct lender and equity investor for commercial real estate transactions with a compelling value-add story. J.C. serves as its managing director and chief production officer while investing in separate general partnerships and limited partnerships on the side. In this episode, he discusses how he qualifies sponsors he chooses to work with, what an ideal sponsor looks like, and the biggest indicator that a sponsor isn’t going to be a good fit. 

 

1. They’re in the emerging stage.  

“I think we catch a lot of people between kind of deals two and deals 20,” J.C. says. “We’re not going to do somebody’s first deal, we’re going to want the individual to have gone round trip on a couple of transactions, but we’ll do somebody’s third, fourth, or fifth transaction, and then we typically do repeat deals with sponsors.” By the twelfth transaction, he says most sponsors tend to move on to bigger and better things.

 

2. They’re willing to be on site. 

Today, most sponsors aren’t willing to spend much time on site, J.C. says. He sees investors from New York that visit their properties in Dallas once per quarter, which isn’t nearly enough attention multifamily deals require in order to “keep the toilets flowing, keep the leasing managers happy, and keep the units filled.” 

 

26 Real Estate Investing Types

 

3. They have intimate knowledge of their target market. 

A major problem J.C. has seen is individuals from one market trying to buy deals in similar markets, assuming things will be exactly the same. He looks for “... somebody who really understands the market, having owned in that market before, or having been a passive investor of that market before.”

 

4. They have a connection with the management on the ground.

J.C. says an ideal sponsor is someone who has interacted with the management company that will be operating their deal. 

 

5. They understand the construction side of things. 

Many people in the current market aren’t budgeting adequately for labor or supply chain issues, according to J.C. “They’re really thinking that they’re just going to throw some numbers on a piece of paper and that’s how the contract work is going to go, when in fact it’s drastically different.”

 

6. They understand the business from the ground up.

J.C. says he prefers to work with sponsors that came up in the apartment industry as a vendor, who have turned units before moving on to acquiring deals. 

 

7. They have an aligned interest in the deal.

Flagship Capital Partners requires all of its sponsors to have 10% in the deal, net of all fees. “It’s really easy to not be as focused on a transaction if you’re net zero in the deal,” J.C. says. “So we want somebody who’s either got their last dollar or a lot of their family’s dollars in the deal riding along with us because that tends to keep people’s eyes on the ball.” 

 

8. They know their transaction. 

J.C. expects sponsors to be able to answer questions about their transaction without having to look up the answers and get back to him. “If there’s any fumbling as far as when they’re pitching the business to me, and they’re saying ‘I have to get back to you, I have to get back to you,’ then that’s essentially dead in the water for me,” he says.

 

J.C. Clemens Jr. | Real Estate Background

  • Managing director and chief production officer at Flagship Capital Partners. They are capital providers for value-add real estate investments across the country.
  • Portfolio:
    • GP of over 3,000 units
    • LP of 30+ different properties across the country as an institutional LP investment or as a first lien senior lender
  • Based in: Houston, TX
  • Say hi to him at:
  • Greatest lesson: Find your niche and stay in your lane. Don’t try to make deals work if they don’t fit your investment criteria.

 

 

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