October 3, 2021

JF2588: How to Reverse Engineer Your Pitch to Accelerate Your Funding with Brian Adams #SkillsetSunday

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On today’s #SkillsetSunday, we’re talking to Brian Adams about reverse engineering your pitch in order to accelerate funding. Brian is discussing the three problems he’s focused on solving for investors; blindfold, commingled funds vs. syndications; and what you need to do before even making your pitch. 

Brian Adams Real Estate Background: 

  • Full-time in commercial real estate
  • 11 years of experience 
  • Portfolio consists of 2.7M sq. ft.; $400M gross asset value; 14 markets
  • Based in Nashville, TN
  • Say hi to him at: www.excelsiorgp.com 

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Deal Maker Mentoring

Deal Maker Mentoring


Ash Patel: Hello, Best Ever listeners. Welcome to the Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m with today’s guest, Brian C. Adams. Brian is joining us from Nashville, Tennessee. He was a previous guest on the Best Ever Podcast. If you Google Joe Fairless and Brian Adams, the episode will pop up.

Brian, thank you for joining us, and how are you today?

Brian Adams: Doing well. Thanks so much for having me.

Ash Patel: It’s our pleasure to have you back. Today is Sunday, so Best Ever listeners, we are going to do a Skill Set Sunday, where we talk about a particular skill that our guest has. Brian has 11 years of experience and is a full-time commercial real estate investor. His portfolio consists of 2.7 million square feet across 14 markets, and has a gross asset value of over $400 million.

Brian, before we get into your particular skill set, can you tell us a little bit more about your background and what you’re focused on now?

Brian Adams: Absolutely. So like you mentioned, I’ve been in the business for a while. I am a New Yorker who married a Nashville girl, so I moved to Middle Tennessee about 15 years ago. We talked about this on the previous podcast when I came on, but I was fortunate enough to marry into an affluent family. My wife’s family has a single-family office that has invested in the commercial real estate space for the last 30-plus years, so I got exposed to some of the managers and sponsors we were working with at the time… Connected with my business partner, and we started our firm 11 years ago now… And we’re going to get into this a little bit.

Initially raising blind pool co-mingled fund vehicles, six years ago, pivoted towards just deal by deal syndication… And today, we’re focused on solving three things for our investors – access to direct co-investment opportunities, double-digit cash-on-cash yield that we distribute monthly, and then making sure that we’re taking full advantage of all the tax benefits that come from direct real estate ownership. What that looks like – typically industrial flex medical office in a secondary market in the southeast and the Midwest. So to your point, we have about 2.7 million square feet under management, portfolio’s probably $400 some-odd million and we’re in 14 markets today.

Ash Patel: Brian, you stated blind pooled co-mingled funds. What is that?

Brian Adams: So the best way to describe it I think is by defining what it isn’t it. So a fund versus a syndication. A fund is where you have raised the capital, but have not done any deals yet. A syndication is where you have the deal, but you haven’t raised the capital yet. So a blind pool co-mingled fund is a bunch of Wall Street jargon; it basically means you go out to the marketplace, people commit to invest with you based on your investment thesis, parameters, market opportunity, etc. You take all those commitments, you pool them together, and then you go and find opportunities, investments opportunities on behalf of your fund investors.

Whereas a syndication, you find building ABC, you think it’s really attractive, you then take that building, that one particular property, to your investors and you say, “Hey, investors, you should invest in just this one particular asset”, and then there’s a standalone investment, with no diversification with other opportunities, etc.

Ash Patel: Brian, I’ve got to ask you, a lot of people that I interview have gone from syndications then to funds. Why go the other route? Because it seems like if you have the fund, you have a lot more flexibility on where to deploy, when to deploy. So why would you go the other route?

Brian Adams: I think one of the biggest myths floating around in our commercial real estate sponsor world is that having a fund with institutional LPs will be the solution to all your capital problems; nothing could be further from the truth, in my experience.

Listen, having discretionary capital is a beautiful thing; to be able to send out an email, and then contractually, 10 days later, money shows up your bank account, it’s wonderful. The problem is, I think, with my investor base, which are high net worth individuals, family offices, independent RIAs and boutique broker-dealers, a fund is a sub-optimal investment vehicle for the type of real estate investment we’re doing. For some people, it can make a lot of sense. I think a blind pool fund is really hard to raise, it’s a difficult product to pitch. You have to explain to people what the mechanics of fund are, how capital calls work, how the 10-year cycle works… You’ve really got to get nitty-gritty in your PPM or your perspectives about what you plan to do with those funds; people just don’t like it. Again, my investor base.

Funds are really good products for institutional LPs who want to write a $25 million to $50 million cheque and want to get broad diversification in whatever asset class that you’re dealing with. They understand funds, they understand the mechanics, they understand the fees, it’s really easy for them to write a big cheque across multiple properties, because it takes a long time for them to get comfortable with a manager etc. But the fees, they are very difficult, in my opinion, because these LPs are very savvy and sophisticated. It’s just the time it takes to raise a fund versus how fast you can raise a syndication… And honestly, the reason that we went in this direction is exactly your point – everybody wants to get in the fund business, and I don’t want to be where everybody else is. So we went double, triple, quadruple down on working purely deal by deal syndication, with just our ideal investor base. We don’t have any institutional piece, nor do we want them. And I think that’s also against the grain with a lot of folks in our world who think that working with a Blackstone or with a pension plan or with an endowment is going to unlock all the secrets of the universe. I think it’s going to be much different once you get in the door, but that’s just been my experience.

Ash Patel: Yes, a great perspective. And you’re right, what a contrarian approach. But I love the fact that you respect your investors funds so much that you do the right thing for them, even though life could be easier for you, and you just have that discretionary pool of money. So I love, love that mindset.

Brian, we wanted to talk about reverse engineering your pitch to accelerate your funding forward… What does that mean?

Brian Adams: You asked the perfect question to tee this up. So I’ve been doing this for 11 years. I think I did it really the wrong way for about half of that time, and I’m just now starting to understand the right way to do this. I’ve put this presentation together, and by the way, if you ping me on LinkedIn or you go to the website, I put up a PowerPoint and a video together, it’s free, you can access it, and I can send you the link. Ash, you can include in the show notes if you want.

Ash Patel: Okay, let’s just say it out loud, so anyone that’s near a computer or a pen can write it down as well.

Brian Adams: Yes, if you just go to excelsiorgp.com and go to the website, and you go to Resources, it’s in there. And again, if you want to hit me up on LinkedIn, Brian C. Adams, Excelsior Capital, shoot me a note, I’ll send you the link as well. I put this together because far and away, the biggest question I get asked is how to raise capital. It seems to be this like secret sauce thing that nobody really wants to spend time on. Honestly, most sponsors that I know think it’s the worst part about this business, and clearly the greatest barrier to entry in this business, because commercial real estate is such a capital-intensive industry, that I think it’s just a misunderstood world.

So I’ve put this presentation together to give, especially first-time entrepreneurs and sponsors trying to raise their first deal, a really granular playbook. Instead of just kind of saying in broad [unintelligible [00:08:58].11] “This is what you should do, this is how marketing works, this is what sales is”, this is actually pretty detailed and exactly what you need to do. So we can just get right into it if you want. Again, one of the biggest problems I see with entrepreneurs in general, but obviously with commercial real estate sponsors in particular, is they want to outsource and third-party the fundraising component of their business. And honestly, when I hear a pitch as an investor from an entrepreneur starting a company and they say, “Well, what are the user proceeds going to be? How are you going to put those funds to work?” and they say, “Oh, I’m going to hire a chief marketing officer. I’m going to hire a chief sales officer. I’m going to bring in this third-party capital raising sales, white label functionality”, it’s a total red flag in my mind. Because you, as the entrepreneur and the member of the general partner, if you don’t embrace being the chief sales officer, you will fail. You just have to come to terms with the fact that in this business, you’re constantly going to be raising capital, and you’ll never be able to effectively or efficiently outsource it as anybody else.

Break: [10:08] to [12:09]

Ash Patel: I think a lot of people are looking at this roadmap on how to become a syndicator, and how to get things done quickly and easily, the least path of resistance, and what you described is what I see so many people doing. But you’re right, how can you effectively have a third party give your investors your vision, let them know that the hands that their capital is going into are going to respect your funds the same as you would? So I love that approach.

Brian Adams: Yes. And to exactly your question before about a fund versus a syndication… When you take a step back and you think about your business, the biggest challenge is going to be how to effectively and efficiently scale it. And when you’re a syndicator, that’s going to be your cost of customer acquisition and conversion from a time and dollar standpoint.

When I first got in the business, I didn’t really understand what cost of capital meant, I didn’t really think about it. But when you get into the fund business, for instance, and you deal with institutional LPs, limited partners, investors, their cost of capital is really high. Why? Well, they’re very savvy, they know what fee structures are, so they’re not going to pay you 2% asset management fee; they may not even pay you 1% asset management fee. They’re going to want major decision-making rights, they’re going to want to have control mechanisms on the deal, they’re probably going to own a share of your carried interest as a co-GP. Those are all things that are expensive, because you’ve got to negotiate them, paper them, and then obviously, it’s hurting your bottom line as a GP sponsor. So when I talk about cost of customer acquisition and cost of capital, those are some of the things that I’m getting at.

So we went through my bio, I’ve pitched a lot, I’ve raised a lot of capital… And the problem I see is, especially with first-time sponsors, they spend all of this time and energy, finding the perfect deal. They go to do the market analysis, they underwrite all the tenants, they go through the model, they do sensitivity analysis, they get the debt together, and they put together this usually way too long PowerPoint presentation, that details everything. And it could be the best deal in the world. But I had a mentor tell me early on in my career that “If you have something that’s beautiful, but you can’t raise capital around it, it’s just art. And art is not a business in and of itself.”

So what I see a lot is a pitch where somebody has a great deal, and they go to their friends and family, the logical people you would talk to, and it goes something like this, “Hey, I’m Brian. I went to this great college for undergraduate and I went to this prestigious business school. I worked at this wonderful investment bank or top-tier private equity real estate firm, and I was too smart for those guys, so I left to start my own thing. I’ve found this awesome deal, and you should do it because I’m really smart, and it’s a great deal.” That’s the ego pitch, right?

That is the “I’m really smart, I’ve found a great deal. I’m going to cram this down your throat, and you should do it, because I know what I’m doing.”

Ash Patel: And everyone else is doing it, so you might as well get in.

Brian Adams: Yes. So the sales and marketing component is a complete afterthought, right? And then when you get pushback or you don’t get a bunch of immediate yeses, or you don’t have a system or process this documented in place of how this fundraiser is going to go, you get really frustrated. And it could be the best deal in the world, right? I’m not saying that you’re not able to find these attractive opportunities. But again, in real estate, unless you can raise capital around it, nobody cares. The biggest fallacy going in the marketplace today is that you’ll raise on a good deal—completely wrong. If you haven’t set up a system and a platform to raise capital around your opportunities, you don’t have a business.

Ash Patel: Brian, I’ve got to ask you – you’ve got almost a half a billion dollars in assets. Are you and your partner, speaking with every one of your investors, initially?

Brian Adams: This is how I did it the first time around. I thought, “Okay, we’re going to do these value-add urban infill things, we’re going raise a fund… It’s going to be wonderful.” And if you have the time and the energy, you can ground and pound it that way; you do enough coffee meetings… I used to try to do five meetings a day, and 10 phone calls every day. And if you do it, the law of numbers will work, you will raise some money that way, but it’s incredibly inefficient, and really pretty painful on your network when you’re going to pound them that way.

So to answer your question, I think the right way to do this, if we get to the title of the presentation, is to reverse-engineer this whole thing. So you put your ego in the backseat, and instead of talking about you, you go with empathy. And empathy is all about understanding a solution set that you can provide to your investor base, that solves a problem for them. Because I promise you, when you pick up the phone or you do coffee meetings, and you’re just talking about you and the deal, the first thing in their mind across the table from you is, “What’s in it for me?” And this entire presentation and what I’m talking about here goes along those lines, right? So one of the best pieces of advice I ever got was if you want money, ask for advice; and if you want advice, ask for money.

So if you go to somebody and you pitch them this deal, they’re going to say, “Well, hold on a second… Let me tell you about how commercial real estate really works.” So taking that into account, if you’re really going to do this, if you’re going to take a step off the cliff and try to do your first deal, well, before you start even working on the deal side, put a list together of 100 people in your network. And this is where it can be a little hard, because everybody has a different network. I’m married into a very affluent family, I have a social network and investor network of high net worth individuals and family offices, and wealth management firms that work with those people. That’s great for me, right? I have that privilege; it opens up a lot of doors for me. And it doesn’t mean that I can go pitch institutional LPs; they have no idea who I am, I don’t know how they work, I don’t know who they are, I don’t know where they spend time, I don’t know what their problems are, I don’t fully understand them… But I can empathize with my investor group because I hear the same problems when we have our family office quarterly meetings; the challenges we’re dealing with, the solution sets that we’re looking for, exactly how we’d want these investments packaged up, etc. So you have to be really honest with yourself.

If you’ve served the military your whole career, and all you know are enlisted service people, you need to take that into account. But whoever it is, you put the list together of 100 people that would actually take your phone call, take your meeting, they might potentially give you money one day… And you go from the most affluent to the least affluent. Now, this is not a judgment call on whether these people are good people or bad people. You’re just being honest with yourself and with them, who has sophistication and affluence, down to the 100th level.

And when you go to them, you don’t pitch the deal. You go to them very early and you say, “Hey, I’m thinking about looking for commercial real estate investments. I want to ask you for advice.” “Have you invested in the space before?” “Okay, great. “Was it a good experience?” “Yes.” “Tell me exactly why it was a good experience.” Right? And this whole time you’re practicing why we’re given two ears and one mouth – because you’re not saying anything. These people are talking about themselves and their experiences. So you’re taking down all these notes, like what they loved about the investment, why it worked for them, how they met the sponsor. And then if they had a bad experience, you’re taking down all those notes, too; what they didn’t like. There’s no detail too small here and you really want to get granular. If you were to be pitched, how would you want to be pitched? What would you want to be included in the email? Would you want to be a phone call, in person? Would you want video? How do you want your distributions? Do you want them monthly, quarterly? How often do you want reporting? How often would you want to hear from me? What would you want the investor relations portal to look like? What kind of return are you looking for? What kind of allocation could you honestly make towards one investment? How much do you think you could allocate annually? You’re taking this all down, you’re not pitching them anything, you’re just asking for advice and you’re taking all of these notes down very carefully.

So if you do this, you can probably do it in 30 days, especially with Zoom. And again, you start with your most affluent and sophisticated contact, all the way down to 100. Once you have an opportunity, like a deal that’s live, you go to the same list, but you start at the bottom, and you start pitching the deal, and you say, “Hey, Susan, remember, we had coffee two months ago? I talked about some of these things that might be looking for. Well, I took into account all the feedback you gave me, and I think this is going to solve some of the problems that you have.”

You don’t want to start at the top of the list, because you don’t want to waste your best prospects on probably what’s going to be your worst pitch, right? So you need a bunch of that [unintelligible [00:21:25].16], you’re going to get a bunch of pushback, some weird questions you’re not going to get answers to… But hopefully, as you work your way up from the bottom, by the time that you get to contact number 50, your pitch is pretty tight, you know what you’re doing, and then hopefully, you’ve got some real conversions between number 25 to one.

Ash Patel: That is incredible advice.

Break: [21:35] to [24:25]

Ash Patel: I’ve got to ask you, if you don’t have a deal, do you regularly communicate with your list of 100 people? Do you send a newsletter, an email, let them know that you’re working on something? What’s the topic of communication?

Brian Adams: Yes, the best time to pitch somebody is when you’re not pitching anything. You can’t get too far down the rabbit hole; there’s no such thing when you’re talking about your ideal customer profile and your avatar. So once you’re real with who your investor base is based on your network and the solutions that you can provide to them, you should be reading the same things that they read every day, knowing what’s topical to them.

I know very distinctly my investors read the New York Times, The Wall Street Journal, The Economist. They watch CNBC, they watch MSNBC, they listen to Bloomberg Radio… These are all things that I consume every day, and I understand what the pressures they’re under are, the pain points, and what they’re hearing and feeling. And I’m trying to provide content, be it daily on LinkedIn, weekly through video, or monthly through webinars, or a monthly newsletter that can help educate them. And that’s the best thing that you can do, I think, is empower your investors by showing them early on when you’re not pitching them a deal that you’re a thought leader, an industry expert, and that you’re empathetic towards their problems… And that you can be a solution set, and really a point of contact beyond just the deals themselves to establish that relationship.

The best LPs that I have in terms of our relationship are the ones that call me that say, ‘My daughter just graduated from college, she needs a job in XYZ industry. Do you know anybody? Could you make some introductions?” “Yes, I’d be happy to. Let me go above and beyond, everything I can to help this person.” Or, “Hey, I’m going through a divorce, we need to work on some things. Do you have a referral for me, somebody that I could talk to?” Or a family office saying, “I really want to allocate towards venture capital, healthcare tech”, something I don’t do at all, but “Are there best ideas, or managers you like? How should I go about thinking through allocation?” Those are the best conversations… Because then when you talk to them about a deal, it’s just a continuation of this relationship you’re building with them, and it’s not so transactional that it’s really, “Hey, you’re going to give me $1, I’m going to give you $1.25 back.” That’s not the type of business I want, and those aren’t the types of LPs that I want to work with.

Ash Patel: Brian, do you have a CRM system that you recommend?

Brian Adams: Yes, we use HubSpot. It’s very good. It has all the bells and whistles. Probably more than we need, but I highly recommend it.

Ash Patel: Yes, again, this is incredible advice, especially in a world where literally, everybody is going from the single syndication model to the fund model, because it’s easier for the operator, not really taking into account what’s best for the investor. And I love your approach with empathy as well. Just incredible advice that a lot of us can use.

Brian Adams: That’s really our pitch of direct deals, double-digit yield and tax benefits. It came as a direct result of these thousands of conversations that I’ve had over the last 10 plus years with, again, my investor profile; those are the three things that they struggle with. I’m just giving them a solution set to their problems.

Ash Patel: This reminds me of a couple of movie scenes, and I’ve got to ask you this one question… If somebody calls you to pitch you something, and their pitch is horrible, do you kind of rewrite it for them? Do you teach them how to do it properly?

Brian Adams: Like the Boiler Room kitchen scene? [laughter]

Ash Patel: Yes.

Brian Adams: I do. Because what you realize — and this is really an opportunity for sponsors out there, in my opinion… Most people are so bad at marketing and they’re so bad at sales, and they’re so bad at pitching, that if you just take it seriously, you can be top decile overnight. If you just take it seriously and you put forth some effort. Because most of it is garbage. I love people to cold call me, because I think it’s great. It’s hard to do. And it’s like, ”Listen, man, you just talked for the first three minutes. You didn’t ask me a single question and you used ‘I’ words the entire time. This is not going to go the way you want it to go.”

There’s just so many things that you can do and pick up on, and I love helping people to find it, because if you embrace the capital raising engine and you embrace these accredited investors, the mass [unintelligible [00:28:55].23] there’s 13.5 million accredited investor households in America; less than 3% of exposure to alternatives. You’re telling me, with a straight face, that you’d rather call on the same 1,000 institutional LPs as every other finance guy on Wall Street, as opposed to these 13 million-plus individuals that you can actually help? That’s a no-brainer to me. I don’t understand why the industry is going the other way.

Ash Patel: Yes, again, great point. Jordan Belfort, somebody asked him to sell a pen, and I had this question when I was interviewing for an internship in college… The interviewer said,” Hey, sell me this pen.” And I’m like, “Oh, my God.” Actually, it was a coffee mug. Like, “Uh, you know, it’s dishwasher-safe, it matches your outfit”, all the nonsense, right? And Jordan Belfort – somebody asked him to sell a pen to him. And he’s like, ‘Wait a minute, tell me more. Why are you in the market for a pen? What’s wrong with the pen that you have?” He asked all the questions to show empathy, to find out what the client really wants, versus blind selling.

Brian, one more question for you is what are your thoughts about those operators who have gotten so big and they’ve graduated and they have an entire team of investor relations people, or they outsource raising of funds? What’s your advice to people like that?

Brian Adams: If you’ve gotten to that scale, I think honestly you probably have a pretty transactional relationship with your LPs, so kudos to you. That’s not the type of population that I want to service. Now, do I have time to call all 5000 of my prospects? No. But I will say – and this is probably another episode that we can get into… COVID was a reality check for me in, a lot of ways. One of them was the realization that even though I think I’m great, most LPs don’t want to suffer through a two-hour steak dinner with me just to hear about the deal. So we started putting together emails that had videotaped pitches of me pretending to be an investor, with my acquisition’s person pitching me the deal, going through the FAQs, pros and cons, the deal structure, the usual stuff… As well as a drone footage with the subtitled pitch underneath it.

And I’ll be honest, we provide so much information, and we do it in such a way that it replicates a conversation. Most people just don’t want to have that phone call with you. It’s very binary, right? And that’s the beautiful thing about the way we’ve set the company up, is… These three things that we do – everybody knows those are the three things that we do. So when you get an opportunity in your inbox, it’s really a function of – well, you know, the three problems we’re going to solve; do you happen to like this particular one? And if it’s yes, what’s your allocation? It’s much more efficient for them and for me. It might be harder on my ego and I had to eat some humble pie that people don’t want to hear me talk for 45 minutes… But again, it’s about servicing your investors ultimately, and that’s clearly what they want.

Ash Patel: Incredible. Brian, thank you so much for being a two-time guest on our show today. I think there’s a lot more that we could dive into, so if you’re willing to come back, maybe we do a Situation Saturday, where we talk about a sticky situation and what you learned from it, and how you got out of it, how you dealt with it.

Brian Adams: If we want to go through the mistakes I’ve made, we might need a full hour, but yes, I’d be happy to run through some of the challenges that I’ve worked through.

Ash Patel: I think that would be fine. And Brian, it’s always eye-opening having this conversation with you. So again, I can’t thank you enough. I’ve got to go back, listen to this episode again and take a lot more notes than I already did. So thank you so much for sharing your time with us today.

Best Ever listeners, thank you for joining us, have a best ever day.

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