If the syndicator is serious about their investment, they will most certainly have a marketing/pitch deck. But what is it, and what should you expect to find in one? The following sections outline the items which should be included in a deck. This is by no means an exhaustive list, but we think they should all have at least the sections outlined (in no particular order).
Executive Summary
This will usually be a one-slide description that covers the highlights of the rest of the sections below.
The Team
We discussed how important it is to find the right sponsor; this is where the sponsor gets to brag about themselves. Some of the things to pay attention to:
- Years of experience
- Number of deals that have gone full cycle and did they perform to targets
- Number of similar assets they are involved with
- Do they have a focus on the asset class being presented?
Related Article: How to Evaluate a Potential Sponsor/Syndicator
The Market
Everyone has heard the 3 most important items in Real Estate – “Location, Location, Location.” Well, as part of the marketing materials, the sponsor should outline what makes this a good location. It is always good to “trust, but verify,” so we do encourage you to do some googling around to confirm the data shown. What you should be looking for (non-exhaustive list):
- Population growth
- Unemployment rate/Job growth
- Top employers and company relocations
- Occupancy rates
- Rent growth rates
Related Article: Analyzing Markets for Real Estate Syndications
The Property
The market is important, but you will be putting your money into an asset. The marketing materials should cover at least:
- Asset structure such as the number of units, amenities and unit mix (multifamily, storage, mobile homes), rentable space (industrial), major tenants (retail), etc.
- Property class and Year built
- Occupancy rates
- Proximity to employers/shopping/hospitals
- Rent comparison – the target asset vs. comparables
Business strategy/plan
This will be the section in which the sponsor should explain how they plan to make you money. Things to consider:
- If value add – what improvements are planned, to what percentage of the asset, and how much will it cost
- Rent increases – what is the plan for rent increases and how accelerated that is (be weary of too quick or too optimistic projections)
- What if any operational changes are they making
- Occupancy increase strategy
- If development – what is the development schedule
Financials
This is where the rubber hits the road – the nitty gritty of the investment details. Even if you are not a numbers person, you should go through (and yes, maybe suffer a bit) with this section.
- Price and purchase cap rate
- Planned income and expenses over the target hold period by year
- Sale target and sale target cap rate
- Debt – financing percentage and terms
- Total amount raised
- Fees – acquisition, refinance, asset management, property management, disposition etc.
Investment ask and returns
This is where you will find what is needed from you and what you can expect back. You should see the following:
- Minimum Investment (although most of the time, this can be negotiated down, especially if you are investing with the sponsor for the first time)
- Target hold period
- Target return IRR
- Preferred Return
- Waterfall splits
- A sample illustration for returns over the hold period
Conclusion
These are by no means all items you will see in a marketing material; however, most deals out there should have at least the information outlined above. Just like marketing is important in everyday life, it is also important in a syndication deal. We hope the above information is useful for you. Happy analyzing!
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