CRE-Source.com | CRE Tips and Guides

People often ask me "you're a CRE attorney, why don't you just do your own deals?" Because it's really hard and my time is better spent growing my practice and using my knowledge and exposure to CRE GPs (relative to the average person) to identify and invest with the best.

A good deal attorney should be like a valued biz partner. Expertise is a given. They should also be business-minded (not a deal killer), proactive (offers value without asking), prompt/responsive, efficient (good process/team) and a great connector (deals, investors, lenders).

Lots of people dunking on doctors and other non-RE pros getting eviscerated in this market. I felt similarly in 2010, and I’ve since come to admire those diving head-first into the shallow end of the pool. In the aftermath of the GFC, I knew many people buying cheap SFRs hours outside of LA with no thesis other than “prices always go back up.” Me the fancy biglaw CRE lawyer: “Really? The prices in the random desert city with no supply constraints you’re investing in can’t possibly stay low or go down further? And you want to rent out a bunch of SFRs, that doesn’t scale well.” And I was right, but ALL those people made way more money than me even though those were suboptimal investment choices. The people getting dunked on now weren’t dumb, they just had bad timing. A few years earlier and we’d all be celebrating their bias toward action relative to the lawyers like me focusing too much on the risk to appreciate the opportunity.

Great point here that I've made a few times before. Not charging any fees is a bad move and a red flag for me as an LP. Getting to a promote can take years and you want to make sure incentives are aligned along the way.

Retwit is a revelation compared to LinkedIn. It’s more authentic and informal. But people are so focused on building a niche following that they hide their most compelling passions and talents for fear of diluting their brand. Let’s change this. Talented people are good at lots of things. Talking about other things you do well doesn’t signal a lack of focus, it confirms you’re a high achiever.

On my first Father's Day as a dad, I've been reflecting on the wisdom I aim to pass on to my son. Here are 3 insights I wish had clicked for me earlier that I hope to instill in him. Let me know what you think in the comments, and feel free to add your own nuggets of wisdom. 💡 Persistence > Talent - Don't let initial roadblocks dampen your spirit or let you assume you lack “talent.” Sure, talent matters, but it can be hard to assess immediately and often we inflate its role and undervalue the patience and discipline it takes to truly tap into our potential. 🤲 Seek Out Help Early and Often - No one accomplishes greatness in isolation. The ones who stand out have reached out for help to develop their talent and maximize their potential. Asking for help isn't a weakness or a sign of lesser aptitude. 🕊️ Have Grace for Others - We often forget that everyone has their own battles. Some of the most impactful moments in my life have come from receiving kindness that was underserved at the time. Try to foster those moments for others rather than letting resentment take root.

Lots of talk about accredited investor rules over the past few days. While the rules could be improved, they matter less than people think, and a lot of the takes I’ve seen seem to misunderstand the practical reality of raising funds for CRE deals. Here's why... If you just read Twitter takes, you’d think there was a blanket policy that kept anyone who isn’t accredited from ever investing in deals. The reality is that GPs that want to raise from non-accredited investors have options to do so, but most choose to limit their offerings because there is enhanced oversight, reporting, and/or disclosure required when dealing with supposedly less sophisticated investors. Some argue there shouldn’t be any restrictions, which always surprises me since you couldn’t get on Twitter a few months ago without someone crying to CZ to do something because their sh*tcoin got rugged. So let’s just assume we changed the rule so one could just pass a test and be accredited. While I’m in favor of such a change, it doesn’t change the fact that investors who don’t meet the existing tests generally don’t have as much to invest and thus aren’t really targeted by GPs. All things being equal, GPs want fewer investors to hit their target raise, not more. They are chasing large checks from anchor investors and often purposely have high minimum investments to discourage smaller investors. If you need $20mm for a deal, your goal is to raise that money as easily as possible, not to include as many people as possible, especially because keeping those investors requires maintaining good relationships, and the more of them you have the harder it is to keep them all happy. In most of the funds I deal with, if you have enough money to make the minimum investment, you are probably accredited under current standards. And if you don’t have the funds, taking a test isn’t going to help you unless the GP is a friend or family member looking to make an exception for you. The flip side is that GPs that rely heavily on smaller investors are far more likely to be less experienced and less reputable (and thus have less access to bigger investors), so imposing additional requirements on them isn’t necessarily a bad thing. When viewed this way, it makes a bit more sense why there would be a standard based on wealth/income even though it’s obvious that money isn’t a perfect (or even a good) proxy for financial sophistication.

We’re back! Twitter Spaces on investment fund economics: ✨carried interest ✨fees ✨distributions ✨capital calls ✨all sorts of other fun(d) stuff twitter.com/i/spaces/1djGX…

There's something magical about the way random opportunities manifest when you set a goal and just start working towards it. Things seldom work out exactly how you expect, but the outcome is almost always positive.

You can also find a long-form version of this information here: cre-source.com/cre-guides/gui…

✨Welcome to Part 4 of my breakdown of CRE Purchase and Sale Agreements ✨ In this installment, we'll do a deep dive on reps and warranties from the point of view of a buyer, exploring what they are, why they are important, and best practices for negotiating them in your deals.

@CREdeallawyer had a great thread yesterday on CRE loan guaranties that raised a related issue: what happens when a guaranty is enforced in the context of an LLC where only the sponsor (GP) signs the guaranty? Enter the Reimbursement Agreement (RA). A quick explanation👇

When launching a new CRE fund, understanding your target investors is essential. Institutions, family offices, and individual LPs each have unique preferences for hold periods, decision-making, taxes, and structure. Tailoring your offering upfront can set you up for success.

✨ "Drop and Swap" 1031 Exchanges ✨ A common issue for real estate partnerships is how to get the benefits of 1031x when not all the partners want to roll over their funds. The solution could be a Drop-and-Swap 1031x. Let’s dig into how they work. 👇 *DISCLAIMERS AT END*

Traditional law firm models frustrate many lawyers because they cut against basic principles of entrepreneurship: they focus on being an employee in the business (billing hours), rather than on building the business through client development and improving processes.

Ever wonder why so many real estate funds & partnerships choose Delaware entities? 🧐 ✨ What's the secret sauce of this small state? ✨ Just had a client ask about this, so I thought I'd share my answer: 🔸📜 DE's General Corporation Law is time-tested & comprehensive, making it more predictable than other states. 🔸⚖️ The Delaware Chancery Court specializes in business disputes, providing speedy & expert resolutions compared to other states. 🔸🤝 DE law allows specific rights not explicit in other states, like the ability to waive fiduciary duties, making it a great choice for sophisticated parties seeking flexibility. 🔸🚀 DE provides top-notch services, like same-day certified copies of entity documents, which can be a lifesaver for closings. 🔸Other: DE also has favorable privacy laws and taxes compared to some other states. So basically, it's faster, and the law is more robust and predictable, which makes it a good choice when dealing with partners and investors.

Make sure to set the reminder for the twitter spaces we'll be hosting next week.

🌟 CRE Tip: 🌟 Always negotiate access to the property through the closing date. Many PSA forms only allow access during the DD period, but you may still need access later to satisfy a lender requirement, and you don’t want to be at the mercy of the seller when trying to close.

Feels like two worlds comparing my experience on Twitter to all the people complaining about it like it's dying. Best social app by far. Avoiding political discourse is necessary to enjoy it. #retwit and #nba for me only, please.

Reminder to #CRE deal sponsors: As lenders start asking for credit enhancements, your separate syndications need to stay separate; avoid terms that require you to cross-collateralize deals. Your investors signed up for a specific deal, not to be at risk for default on others.