In this chapter we’ll watch Sam navigate the institutional investment ecosystem with Ralph, Hazel and other professional investors looking for opportunities to deploy significant amounts of capital through Koala’s platform.

Sam’s first step will be in framing the offering, ensuring he positions himself and Koala as an “experienced multifamily sponsor” (i.e., a senior team with years of experience and pedigree, and a track record acquiring value-add assets that deliver outsized returns).  He’ll also want to show he has a proven value-add strategy and a competitive moat.

On the deal side he will be positioning Washington Place, and other deals in his pipeline as providing to institutional investors downside protection, i.e., that the underlying assets (as-is) have high demand before applying his value-add strategy.  And that he is able to hit the following key metrics:

• UYOC: 8% (strike zone today) – *proven unit economics
• IRR: 20% or better – portfolio sales comps (with cap rate), can be levered aggressively
• Scale: $200mm pipeline of similar deals, in place team to execute at scale

We’ll then work with Sam to build out a marketing deck that relays the sponsor and deal profiles above and tells investors the following story about his small multifamily asset class focus, Koala’s unique advantages, and outlines a believable return scenario:

Once the marketing materials are complete, Sam will then have to consider which specific institutional investors to target.  In doing so, he’ll have to be able to answer the following questions:

• Will they invest in the asset class, region, investment stage?
• Is the check size big enough?
• What are their required returns?
• Is the exit strategy they seek achievable?

Sam will then build out an investor list, leveraging a number of different resources. If he can access Pitchbook or Preqin that will be a good place to start (but at the price of $20,000 per year he probably won’t bother with a subscription).  He can leverage ChatGPT with prompts like “find websites of [middle market] private equity real estate companies who mention ‘joint ventures’ or ‘platform investments’”.  He can also search for people in his network Linkedin related to “private equity real estate”; search Google news for  recent multifamily joint ventures, and use Apollo use to find emails of specific contacts.

He’ll build a target list of about 150 groups, with plans to take 20-30 “rifle” shots, while blasting the rest with a mass outreach campaign, alongside hitting the investor conference circuits.  From here, the process will go as follows:

• Collect NDAs of interested investors
• Manage investors’ follow on questions (Sam will be overly detail-oriented in responses… and timely!)
• Convert all FAQs from investor calls into FAQ sheets to save significant time
• Run model & underwriting walk thrus with investors to help them understand align on potential buy boxes
• Set up lender & partner conversations for deeper due diligence around details in the financial models
• Meet in person and conduct market tours for investors to confirm the assets are as they appear, and get to know Sambetter
• Negotiate term sheets, and pick a partner!

This section will also break down best practices for investor calls, setting up Sam’s data room (and provide the class with marketing and modeling templates designed for an institutional audience), and how to leverage AI across the capital raising process.

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