Talking With The Former Owner Of Carrington at Brier Creek

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Last month our managing partners, including myself, took a trip to Orlando, FL, to attend a conference called the National Multifamily Housing Council (NMHC). This annual event is the largest multifamily conference to network with all of the major players in the industry. There are thousands of people that attend this event each year.

One of the major benefits of attending this event is to be introduced to multifamily operators that will potentially sell you one of their assets. This is great because many sellers won’t take you seriously unless you attend this event to meet them in person and make a presence.

Our most recent acquisition was a 270-unit asset in Raleigh, NC, called Carrington at Brier Creek (Carrington). This was our largest acquisition to date at $51,500,000. In order to win any deal, you have to go through a process called best and final where each buyer submits their best offer prior to being selected for what is called the “buyer call.”

On these buyer calls the seller and broker will drill us with questions about our underwriting assumptions including debt and taxes. They also drill into the most important question of the call which is the equity.

I remember our buyer call with the seller (first name is Jeff) of Carrington like it was yesterday. The call started with the broker doing his normal introduction:

“Thank you for joining us on the call today. To get the call started, why doesn’t the team introduce yourself to the seller.”

The seller, Jeff, interjected before we could begin our introductions and said something that we didn’t know was going to be the very thing that allowed us to win the deal.

Stalking the Former Owner on Linkedin

Ever since our group was awarded the contract for acquiring Carrington, I had a burning question that I wanted to ask him. I knew that Jeff was going to be at the NMHC conference.

While I was on the airplane headed to Orlando, I pulled up Jeff’s LinkedIn profile to study his picture. I wanted to make sure that I could pick him out of a crowd while attending the event. I was determined to ask him my burning question.

Picking the Seller Out of a Crowd and Asking Him My Burning Question

through a broker meet and greet the first night we arrived. The broker that invited us was planning to introduce us to several owners with potential acquisitions available for us in 2020.

All of a sudden, I spotted Jeff out of the corner of my eye. I quickly looked down at his name badge to make sure it was him before I went to introduce myself.

As Jeff walked by, I quickly looked him in the eye and introduced myself, “Hi, Jeff! Dan Handford with”

He immediately knew who I was and welcomed my introduction with a big handshake and ear-to-ear smile. Of course, he made a nice profit from our acquisition so I would be smiling too.

We began talking about several things and he even mentioned a couple of other assets that he would like us to look at for acquisition in early 2020. This was exciting and yes, we are currently working on these right now. Nothing finalized yet but hopefully this will prove to allow our investors another solid asset from this seller.

Ten minutes went by and I had to ask my question. “Jeff. I have been dying to ask you a question ever since you awarded us the Carrington deal,” I said. “What was it that caused you to finally award us the deal? You knew this was our largest acquisition to date and knew we had to raise all of the $14,000,000 prior to a quick 51-day closing with no extensions.”

Jeff replied, “Honestly, it was because I regretted not awarding you a deal that you had lost earlier in the year. You made a solid effort to win that deal and it allowed me to get to know your group. I felt comfortable in your ability to get the job done. And now you have performed better than we expected by closing the deal early with no hassles.”

I replied, “But the group we were competing against had captive equity and you ended up awarding us the deal even though you knew we had to raise all of our equity from contract to close?”

He responded, “Yes that is correct and that was the biggest risk I was taking in awarding you the deal. My group now has $3B in assets and I got started in the multifamily space just like you, as an apartment syndicator. Deep down I wanted to help out the ‘little guy’ as I knew that if you could perform on this deal that it would open so many more opportunities for your group.”

I replied, “Wow. That’s awesome! Thank you for giving us the opportunity and we look forward to closing more deals with you.”

Key to Success in Multifamily: Always Be Submitting Offers

While on the buyer call with Jeff, he continued as he interjected the broker and said, “Hold on for a minute! I don’t need you to introduce yourselves as I already know you from our last buyer call on the deal earlier this year. I like your group already and just have one question for you. Where’s your equity coming from?”

As I sat back and studied the buyer call and also the encounter with Jeff at the NMHC conference, I realized that the main reason why we were awarded the Carrington property was that we had become a welcome guest. This was accomplished by making sure we are submitting offers even if we continue to lose out on projects. Our drive and determination to submit on Jeff’s property earlier in the year allowed us to start building a relationship with him. That relationship continued to build and by the time we submitted on the next asset his confidence in our group was already very high.

The nice thing about being a passive investor is that you don’t have to worry about these types of interactions. This article gives you an idea of what our group does for you when finding solid performing assets to acquire. Our hard work is paying off for you even though we think many times that working countless hours performing pre-LOI (letter of intent) due diligence is in vain when we don’t get awarded a contract.

After this conversation with Jeff, it instilled in us the confidence that we need to continue to push hard and submit offers while staying strict on our acquisition criteria.