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Losing Deals in Best and Final

In December 2019, our team reviewed 37 investment opportunities through the various stages of due diligence. It’s important to have strict criteria to ensure we invest in the best assets to achieve our goals. It’s critical to rely on criteria when we are competing to get an asset under contract.

For example, of the 37 opportunities only five met our criteria and of these five we had a chance to get two different assets under contract. When we are competing at the final stage to get an asset under contract, the industry calls this “best and final” and brokers try to have the remaining few buyers compete to drive the price up.

Well, we got to best and final with the two assets in December but unfortunately did not win either one. Our group’s criteria is to ensure a solid Investor Rate of Return (IRR) and equity multiple can be achieved using our conservative underwriting. Before we even get to a best and final round we already have determined the price we are willing to offer for an asset based on the return metrics we want to achieve for our investors. This metric allows us to make final offers without emotion because we have a set maximum offer price that we don’t deviate from. We believe that “losing” an asset is better than overpaying for a mediocre one.

As we look ahead to 2020 we are focusing more time and energy on high quality deal flow so we can evaluate more opportunities and purchase/invest with our investors in the absolute best assets.