Hey, Ariel
Here’s the uncomfortable truth about vetting new sponsors:
Markets are relatively easy to evaluate. Underwriting assumptions? Pretty straightforward. Property condition reports? Black and white.
But there’s one critical component that’s nearly impossible to assess from a pitch deck or track record… and it’s arguably the most important factor in determining whether your capital is truly protected.
How does this sponsor behave when a deal goes sideways?
Anyone can manage a deal during the good times. But what happens when occupancy drops unexpectedly? When interest rates spike and refinancing becomes problematic? When a major capital expenditure doubles in cost?
That’s when you discover who you’re really in business with.
After years of investing alongside various sponsors, I’ve found that one question cuts through all the marketing polish and reveals exactly who you’re dealing with:
“Tell me about a deal you’ve bought or invested in that went sideways, and how you dealt with it.”
The answer to this question tells you everything.