commercial real estate

I got the question the other day, “where do I go to raise $50 million to create a distressed properties fund?”

Is may sound snide, but I’m thinking, “if you have to ask…maybe you’re not ready to manage $50 million yet?” My observation is that those who have a track record of success acquiring property, creating value and generating excellent returns for their clients do not have difficulty raising money. Do you have experience buying distressed property and profiting? If not, perhaps you need to look at starting smaller. If you have a modest amount of this experience at a smaller level, a good way to “level jump” is through a one-off joint venture with an equity source on a single larger acquisition. A typical deal structure for these JVs will have you putting up 5% of the equity and the partner putting up the rest. Partner gets a preferred return, you benefit from a large part of the upside. Partner gets control over major decisions, you get to run the asset day-to-day and benefit from associated fees.