Raising Capital: What Works and What Doesn’t - with Bill Brancucci

In this podcast episode, “Raising Capital: What Works and What Doesn’t,” Kim Lisa Taylor interviewed seasoned syndicator Bill Brancucci of Citadel Real Estate Group. Bill and his Citadel partner, Patrick Castelli, are among Syndication Attorneys’ most successful clients. Bill shared what the firm is doing and how they built the business into the success that it is today — valuable and inspiring information for other syndicators and those contemplating becoming one.

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Transcript

Edited Transcript from the podcast episode ‘Raising Capital: What Works and What Doesn’t’

With Special Guest Bill Brancucci

Kim Lisa Taylor:

Hey, everybody. Welcome to Syndication Attorneys’ free monthly podcast, where we talk about topics of interest to real estate syndicators, with the opportunity for live questions and answers at the end of the call. I am attorney Kim Lisa Taylor.

Before we get started, please note that all of our podcasts will be recorded and may be used for future promotion, posted on our website, or broadcast in a podcast available to the public. If you don't wish to have your voice recorded, please schedule a one-on-one consultation instead of asking questions during the live call. Information discussed during this free podcast is of a general educational nature and should not be construed as legal advice. This is an audio-only presentation. 

Today, the topic is, “Raising Capital: What Works and What Doesn't,” with seasoned syndicators Bill Brancucci and Patrick Castelli, if he can join. They're both from Citadel Real Estate Group, and they're some of our most successful clients. I wanted them to be able to share with you guys what they're doing, and how they've built their business, because I think that would be really valuable information for you to hear. So Bill, welcome to the show and Patrick, you too. Sorry we can't hear you, but join when you can. 

Bill Brancucci:

Thanks for having me, Kim. I really appreciate being back here.

Kim Lisa Taylor:

Tell the audience just a little bit about your background and how you got into syndication.

Bill Brancucci:

In the early ’90s, I actually worked for a real estate developer, but here in New York, the real estate market went through a burst. And I went to Wall Street for almost 25 years with the intent to ultimately get back to real estate, which I did. I started Citadel Real Estate Group in 2015 with my partner Pat, and absolutely love the real estate business. It has so many skills it requires and I love the business. So we've been around for about six years now.

Kim Lisa Taylor:

That's fantastic. Hey Patrick, I see you got everything thing worked out – it looks like. Are you there? Oh, now we can't hear you. So you can hear us, and we can see your video, but we can't hear you.

Bill Brancucci:

We can't hear you, Pat.

Kim Lisa Taylor:

We're two-thirds of the way then. All right … So you said you've been around for about six years as a syndicator; how did you get started? Did you go through a training program, coaching? What did you do to get started?

Bill Brancucci:

First thing I did was — and my interest was piqued when the financial crisis happened and the housing market just went to pot — what I'd started doing was reading books like “Multi-Family Millions” by David Lindahl and some other people out there, that were just some basic multifamily how-to books that were very useful. But then I started attending seminars and networking, and that was really, really useful. 

I called other syndicators, people who were doing what I wanted to do. Because if you try to do this business figuring it out on your own, it's going to be very hard. It’s a team sport that takes multiple people, multiple skill sets. So prior to starting the business, I'd say about two and a half years before we did our first deal, I was attending seminars, networking, calling people like you, Kim, and learning the logistics of how this is done. 

One advantage that Pat and I had is that we had already come from an environment on Wall Street of raising money. So we were already up to speed the kinds of skills needed to raise money from people. But the documents, the paperwork, everything else in real estate was still a learning curve that we had to go up.

Kim Lisa Taylor:

And that's what we tell all of our clients who are starting out. You have to go get some training in what it is you want to invest in, right? So get training, learn how to do that from one of the experts in the field, and/or a mentor or somebody who's done it before you; don't try to just wing it on your own. And then once you have that part down, then you're ready to start raising money and thinking and learning how to raise the money and put the whole deal together. But you really have to get that underlying skillset of how to find the deals, vet the deals, know what's a good deal and what's not a good deal, conduct the due diligence, get them under contract and then how to run them, right? I mean, all those things are critical.

Bill Brancucci:

One hundred percent. I've met a ton of people who have attended seminars and they come out as if they had just been to a Tony Robbins event, very motivated and pumped up. And it's a little bit of a rude awakening if you've never raised money before from people, when you ask someone for $100,000 or anything like that, it's a strange experience. And it's not always comfortable for everyone, but you have to do it. The deals are not going to raise the money themselves until you're a known quantity, until you've got a track record. And our first several deals were a ton of work. We had to get a lot of no’s to get a few yeses, but that is so critically important to this business. And I can go on more about that …

Kim Lisa Taylor:

Did you guys actually hire a coach in your journey?

Bill Brancucci:

I had spoken to a couple of syndicators whom I had met at a David Lindahl event in Boston, back in, I think it was 2014 was the first one I attended. And I met a syndicator who's very successful. I don't know if you want me to name names but…

Kim Lisa Taylor:

Well, it's okay. No worries.

Bill Brancucci:

Michael Flaherty from L5 Investments was very helpful. He is a good friend and was super-supportive. And then we had to also find a loan sponsor and our sponsor was a 25-year veteran of multifamily. So he had a very good track record, great human being, one of the nicest people in the world. And so we had to sort of assemble a team of people who had already done this. And I think I met you, Kim, at the Lindahl event, and it was the same thing. We just didn't know all the caveats to the legal side of multifamily and syndicating and raising money. And there are pitfalls everywhere. But if you have good legal advice and a good mentor, you're going to avoid a lot of problems. 

Kim Lisa Taylor:

I'll say that all of our clients have either hired a coach or had mentors. And if you are just starting out in this business and you don't have any experience, you can leverage off other people's experience. You need to go to these networking events that are held by these real estate trainers, so you can meet other people to bring into your management team, and then use their experience to gain credibility with your investors. And that's really the way it's done: everybody kind of lends everybody else their experience, until you gain enough experience on your own that you can now go out and do your own deals. That's really the name of it. 

But getting a coach can really help propel you forward in a way that you wouldn't be able to do on your own. I mean, I use coaches in my business as well. I've had coaches for my law firm, for other things. It really does help you get to your goals faster and sometimes it helps you achieve goals that you wouldn't be able to do on your own … So first of all, I think you started by teaming with some other people, right? On their deals.

Bill Brancucci:

I was actually just going to say that, Kim. One of the things that I would advise someone just trying to get their first deal done, I would really try to be a junior partner to a seasoned team, and not be so concerned about the economics to you. There's going to be so many more deals down the road that you can do, but right now, when you're starting out, you've got to build a track record, you've got to build credibility, you've got to learn what you're doing. The lenders have to get comfortable with you. Because remember: the lender is the biggest investor in almost every deal there is. And so you've got a lot of people to impress to get your first deal on your own. 

What we did was partner with two other groups to do a very small deal; I think it was a $3 million deal in Atlanta. It was a 118-unit property and we partnered with two groups and it was only a million-dollar raise between all three of us.

And we raised I think about a third of the money, and we only got about 20% of the economics, but that was fine. We needed to cut our teeth, we needed the brokers who sell these properties also to get comfortable with knowing who you are, because what they don't want to happen is, that they tell a seller to award you the deal and then you can't close. And if that happens, the chance of doing a deal again with that broker is going to be very, very low. It's better to overkill and get over-partnered and raise more money than you need or have the potential to raise more money than you may need. Because you want to have certainty of closure of the deal.

Kim Lisa Taylor:

Right. So you started out on these small deals, like these $3 million deals. Tell us about the kind of deals you're buying now, and to put this in perspective, this is just in six years, right? So what kind of price ranges are you guys looking at for deals now?

Bill Brancucci:

Now we're looking at deals that are roughly $30 million to $65 million — in that range. So roughly 10 times bigger. That first deal was probably a C-minus property. It was in a C area. It was a very rough property and it was great to learn, but it was also a very different time in the market in 2015. Prices were so low, they had almost nowhere to go. And the deals we're doing now are at least 10 times bigger and usually are quite a bit more. And we're tending to stay with properties over 100 units because we like the economics for bigger deals. That's why we're staying in that range.

Kim Lisa Taylor:

And the metrics are a little bit different on these larger deals, right? Whereas you might be able to do a 70/30 split on a smaller deal, on these bigger deals, your splits tend to be more in the 80/20 range. Is that kind of what I've seen as a trend?

Bill Brancucci:

Yeah. And that is what a lot of family offices are used to seeing. And as you get to these bigger deals, the equity raises. We're doing a deal now that's $45 million. And so the equity raise is about $15 million. So the equity raise alone is five times bigger than our first deal. And so when you're raising that kind of money, you're going to get bigger, probably more likely to be institutional-type investors, ultra-high-net-worth people that are putting a quarter million to a million (dollars). And so they're going to demand certain economics. And like you said, 80/20 is what they're used to seeing. The bigger the deal, the more sophisticated the investors start becoming. And sure, we'd love to do a 50/50 deal, but it's hard to get on big deals.

Kim Lisa Taylor:

Well, first of all, you're not going to see the returns, and then second of all, you're going to have investor pushback at that level. What kind of people are investing in your deals? Are you seeing a lot of those people that are investing 250 or a million dollars in your deals?

Bill Brancucci:

I'd say our average investor is putting about $150,000. We have some as big as $2 million and some as small as $25,000. And in your first deal, $25,000 makes sense. It starts to become just a lot of people when you start getting into big deals. So we raised our minimum to $50,000, and even there, most of our investors are $100,000 or higher. But as far as the types of people, they're all types. I mean, doctors, lawyers, accountants, professionals, business owners … it runs the gamut.

Kim Lisa Taylor:

Now, how are you meeting them?

Bill Brancucci:

We do a lot networking. We go to a lot of events. There's quite a few coaching events where we ask for referrals. There's no one single source, but ultimately taking care of your investors is your best advertisement, because they will bring their friends and family. And the one thing about multifamily that I love is that everyone is a little bit familiar. Everyone either lives in a rental, has rented at some point in their life, or knows someone who owns a rental property. And so there's already a built-in comfort level in multifamily. And so if you do reasonably well, a lot of people will bring in their friends, their family. And the other thing that I love is, there's a high repeat rate. So a lot of the investors investing in five or six deals is very common.

Kim Lisa Taylor:

When you say you're networking, are you just networking at real estate events, or are you going to other events in your local community where you're meeting people?

Bill Brancucci:

I'm generally keeping it to real estate events. And there are quite a few coaches out there, without naming names. I'm sure you can rattle off 10 or 20.

Kim Lisa Taylor:

Yeah, exactly.

Bill Brancucci:

But my feeling is, you have to go to these all the time. And that person you meet may not be an investor for two years, but you've got to just start building that database. And I think now we've got about 600 investors after doing 11 deals. So we've got a big repeat. And I'd say the first three deals were very hard, was just a lot of work raising money. And then around deals four and five, the deals just started getting a lot easier. And the deal we're doing right now that closes in about a month is a $15 million raise, and we've got $14 million of it spoken for in about a week.

Kim Lisa Taylor:

Wow.

Bill Brancucci:

So it comes in much faster now.

Kim Lisa Taylor:

That's amazing.

Bill Brancucci:

Well, you've been a lot of help to us, Kim, so I'm very appreciative as well.

Kim Lisa Taylor:

Well, and I just like to mention for the audience that, you guys started out doing a 506(b) offering, right? And then now you're doing 506(c), so that you can freely advertise your offerings, but you also have the track record to be able to support that. When you meet a new investor, just out of curiosity, what is the most common question that they ask when you meet somebody new?

Bill Brancucci:

There's usually like four or five hot buttons. I was in California last week and I met with 26 investors. So it's a good time to ask me that. But they would say, "How long do you typically hold your deals? How much leverage do you use? What's the cash-on-cash payout?" That's a common one. "What's your minimum?" The first deal takes a lot of trust, because they're giving you your money and they're usually giving it to you for three to five years. And they hear stories of fraudsters, which are out there. And so they're going to be cautious. So we'll tell investors, "You can come in at almost any level initially, as long as you're accredited," because we know that they're just trying to gauge if they're comfortable. Some will ask for, "Do you have someone I can speak to?" And occasionally, we'll give them an investor or two that they can call, provided the investor is comfortable discussing it. So those are the kind of the key areas that people touch on.

Kim Lisa Taylor:

And what do they ask about your background and experience? Is that important to them?

Bill Brancucci:

Yeah. Not, "Where did you go to school?" Or, "How many deals have you done and what was the return?" Now, it's track record. But in the beginning, I think you're going to have to prove yourself. Even if you worked at a large investment bank, they're still going to say, "What's your experience in real estate?" And that's why partnering is so good and so important in the beginning. Because you want to be able to bring a partner to the table with you who’s got eight or 10 deals under their belt and are in good standing with the lenders. Lenders basically rate borrowers. And most borrowers don't even know this. If you have a bad reputation with a lender, it's going to be an uphill battle. So you want to bring someone who's got a good reputation, who's closed many deals successfully, to help launch your business.

Kim Lisa Taylor:

That's right. And “How many deals have you done and how have they performed?” Well, if you haven't done any deals, then you need that team so that you can say, "Well, our team has done…" or "Our management team that we've put together have done this many deals." And you build off their track record. Don't claim it as your own. I've had people that have tried to do that before, too. Partnered with someone and then tried to claim that was their experience. That's fraudulent; you can't do that. But you can make true statements about your management team and their experience. And if somebody asks you specifically, "What's your specific experience?" Then you have to be honest and say, "Hey, I'm just getting into this business. But the way I'm getting into this business is by teaming with great people who have done a bunch of stuff that I want to do." And you can overcome that objection.

Bill Brancucci:

I want to add one thing.

Kim Lisa Taylor:

Yeah, go ahead.

Bill Brancucci:

The one thing that I think will help some investors be comfortable is that not only are they trusting you, but there is “adult supervision.” And what I mean by that is that, the lenders are also making sure your deal is fairly sound and stable. Unlike 10, 12 years ago, where they were lending with 95% leverage, they don't do that now. And so they're more prudent, they're stricter. And you can at least emphasize to investors that the lenders also put your deal through their own underwriting to make sure it's fairly sound. They don't want to foreclose on you. They want you to have a successful deal. And that's good, and that should help an investor feel a little more comfortable that it's not just you that looked at the deal, it's the lender.

Kim Lisa Taylor:

Right. You guys used to do crowdfunding, right? You used to post on some of the well-known crowdfunding platforms; how was that experience for you?

Bill Brancucci:

Crowdfund was good. You just have to remember that when you go through most crowdfunding sites —not all, they're all slightly different — but some of them are going to have their own set of rules, their own set of payout and splits, and you have to be ready for them to; they're the gatekeeper. And so if they don't like the terms of your deal, they may ask you to change them before you can get to market it. So if you have a 50/50 split, that may not fly on Real Crowd or Crowdstreet or whatever, and you have to be ready for them to tell you, "Look, we're raising half the money for you; the terms have to fit our underwriting parameters." That's just how it is. But a lot of the crowdfunding sites right now, they can raise huge amounts of money very, very quickly.

Kim Lisa Taylor:

But one of the things about those — just so the audience understands — is that you have to go through a very rigorous due diligence yourself, before they'll take you on. And they are looking only for people that have done — I think their criteria always changes — but it's like five deals start to finish, where you've actually made the returns you promised and they're looking for stuff like that. If you don't have that, you have to have people on your team that have that, or you're never going to get through their screening criteria and they won't put you on their site. But just how that works is, there are some sites out there — CrowdStreet is the most prominent one, I think— that will post deals, and usually they want 506(c) deals so they can freely advertise them, and they'll push them out to their group of investors and they're in the business of cultivating a huge database of prospective investors.

So that's the way that that works, but you do have to have a significant track record to make that happen. And then you have to be prepared for them to kind of dictate what the terms of your deal are going to be, which might not be as good as what you could get if you were raising the money on your own without them, and probably won't be as good. So they're going to follow a little more, I think the Wall Street model of 80/20 splits, 2% acquisition fees, they want to make sure that the investors get all their money back before you earn anything, and it becomes kind of hard. Which is why some of our clients that used to use the crowdfunding platforms won't use them anymore, because they don't want to be stuck with those requirements. 

You mentioned that you have about 600 or investors. How many people — just wild guess — do you think you have in your database of prospective investors? People that you communicate with.

Bill Brancucci:

There’s probably another 15,000 to 1,700 that we can blast a deal out to. We use a CRM software to try to not keep marketing to people that really have no interest. You don't need 1,000 investors. That's kind of a myth out there. Most groups that I know of that have as many as us or more, maybe one out of six of them are needed for any one deal. Many of our deals now sell out and are oversold. We have a wait list to get into them. But I would just say that if you can get yourself to 100 just prospects and partner with someone else also, and maybe your first raise is $300,000 or $400,000 of friends and family and acquaintances, that should be enough to get you launched. And even if you're just a sliver in a bigger deal, the whole thing is about experience and track record. That's the number one thing that investors want and the lenders want, and the brokers want, and that'll get you launched.

Kim Lisa Taylor:

That's great. You guys have had some deals that have been kind of wonky, right? You had some strange things that happened. Do you want to talk about any of that stuff?

Bill Brancucci:

We have had one deal fall through and it was not on us. It was a deal in Atlanta that the price per unit was about $130,000 a unit. And the seller had seller’s remorse and basically wanted to buy us out of the agreement to purchase his property. So it got kind of messy and ugly, but I'll just say that the property's back on the market now for $35 million more than we had agreed to. So deals can fall through, buyers can get flaky, sellers can get flaky, and you need a good lawyer. You need a good securities lawyer like Kim, and you need a good closing lawyer that will handle the details of the specific closing of the property. But you've got to know what you're doing, because you're playing with big amounts of money and errors can be really expensive.

Kim Lisa Taylor:

So in that case, just so the audience understands the perspective is the seller actually refused to close. They went all the way up to the closing table and then the seller said, "No. I'm not going to do it." And it got a little contentious, potential litigation, and then they were able to work their work through it and just move on. But that was a whole lot of effort for nothing, and a lot of expenses for nothing, because these big deals, you don't get into these big deals without having some resources invested. And then you actually tried to work, at one point, with a joint venture, private equity joint venture partner. And you don't have to name names or anything, but what's your thoughts on anybody that might be trying to work with JV partners on deals like that?

Bill Brancucci:

Private equity can bring a lot of money to the table very quickly. That's their strength, is that they can bring $10 million, $20 million, $50 million in two or three days if they want to. The difficulty is that the terms that you would get from them are going to be very, very harsh almost every time. And the other problem is that the terms are usually changing right up until the agreement is signed. They may have a handshake deal with certain terms, they're probably not going to be quite what you thought they were until you've signed it. And that's just how they are across the board. I know dozens of developers, syndicators, and builders and private equity. The other thing you're going to run into is that many very-high-net-worth and a lot of family offices will not invest in deals where there's a private equity group in it. Because they usually come between you and the lender. So it puts the investor at the very back of the line with two groups ahead of them. Not just you have the mortgage — Fannie or Freddie mortgage — and then you have the private equity group, and then you have the investor equity. So they're the last one to recover assets, if there's, God forbid, a problem. With private equity, you've got to really know what you're doing, if you're going to talk to them, or they're going to have a big advantage over you.

Kim Lisa Taylor:

We’ve had a lot of clients that have done private equity deals ... If you're going to get into a deal with private equity, you need a lawyer on your team that's going to be reviewing those documents and helping you negotiate the terms, even a lot of times people will come to us after they've already signed a term sheet, and our hands are tied at that point. It's too late for us to offer them some suggestions on how they can push back and maybe get some slightly better terms. So the time to get us involved, if you're envisioning doing one of those things, is when you have a proposed term sheet, and let us help negotiate that and how it's going to look, and who's going to draft the documents, and making sure that you are adequately represented and that you fully understand what you've signed up for.

Because a lot of those private equity terms are going to include a whole bunch of reporting requirements, and maybe some requirements on how much in reserves you keep in the bank and all these kinds of little pitfalls that can become defaults, if you don't follow them to the letter. And I've actually had some clients that had some private equity partners that looked for technical defaults, and tried to force sale or actually cram down on the syndicator and their investors, so that they could just take over the property and keep it for themselves. I've seen some of those end in litigation, I've seen some of them just end badly where you've spent a lot of money or clients have spent a lot of money trying to make the whole thing happen, and then it never happens. You can also expect that you're going to be spending a lot more on legal fees. Usually if you're working with a private equity partner, you're going to pay their legal fees, and your own legal fees, and our legal fees could easily be double or more.

Bill Brancucci:

If your deal falls through, there's usually a breakup fee and that could be $50,000 to $100,000 because your deal fell through. So it's not just a walk in the park. And like you just alluded to, a technical default — they don't like the way you're running the property — they can push you out of the deal. And suddenly your deal, they may not have killed your equity, but they may have removed it from your own deal. And that's a very real possibility with some private equity groups.

Kim Lisa Taylor:

One of the things that you've done a little bit differently, and I think that's helped you to go after some of these bigger deals is you've created kind of a smaller seed fund, that helps generate some of the cash needed to get into these deals, get them into the closing table. And how has that worked out for you? Has that been a good thing? Has it got some pitfalls as well?

Bill Brancucci:

Because this is a big-check business, unless you have a million (dollars) or $2 million at your disposal that you're willing to put at risk. We set up a seed fund from some investors and paid them a nominal return for helping to seed our earnest money for some of our earlier deals. And that it was a lifesaver, because I didn't have a half a million dollars at my disposal to just put down on earnest money and our current deal, the $45 million deal that we have, has a million dollars in earnest money. And so between my partners and I, and a couple of investors, we pulled it together to put the earnest money. But every deal out there is going to have earnest money. And it's going to be usually at least 1% of the purchase price. So on a $3 million deal, it's only $30,000. But once you get into these $20 million and $30 million properties, which is almost everywhere now, you're talking a quarter million (dollars) upfront, some sellers now want it basically hard day one. If you walk away from the deal, they're keeping your earnest money and now that could be a huge hit to your capital. So having a fund really made things much easier.

Kim Lisa Taylor:

And the way that their seed fund operates, it's kind of like a revolving line of credit in a way, right? You take the money out, you use it, you pay some returns on it, you put it back and you put it back from the raise that you do for the property, but the risk is that you don't do the deal and you don't close and that money's out there, and you’ve still got to pay those investors and your seed fund back, and you’ve still got to pay them a return on their money. So you've got to be able to make that up out of maybe your acquisition fees out of the next deal or something. So there is a risk associated with using that kind of a seed fund. 

Other people do something called a GP fund where people will actually put up that kind of money and they'll come into your GP, with the understanding that they're going to be part of the GP or the manager of the next syndicate that you do, or maybe all the syndicates that you do. And they're going to get a share of the management earnings for their efforts. 

So what advice would you offer new syndicators about raising capital?

Bill Brancucci:

My advice would be talk to you, and to partner. I know I wasn't paid to say that, by the way. But by partnering with someone, I'm telling you that unless you have an amazing skillset and experience that most people don't, I would partner with someone that's willing to partner with you. And don't worry that if you have to raise 30% of the money, but you only get 10% of the economics; that may be how it is the first deal. But … it's not the economics they'd be after. It's the experience, it's the track record. Those things are worth gold, because they're going to open doors with brokers, because if you don't have credibility with brokers, you're not going to get a deal easily anyway. And then lenders, you need credibility with lenders.

Kim Lisa Taylor:

Here's one that I always recommend: Don't take on deals that are too big, if you haven't raised money before. You heard Bill talk about the fact that he started out doing $3 million deals and raising a few hundred thousand dollars, and now he's up to being able to raise $15 million. But there's a big world in between that, and so you've got to take the time to build that investor database. And it's a business. It's not a get-rich-quick scheme. This is a long-term business that takes dedication, time, and effort. 

And then the other recommendation I have is: Don't waste a bunch of time with big investors. One, you're going to end up with people that are going to create these onerous terms for you, but if you're early on in your syndication practice, these people will talk to you, but they're usually too polite to say no, and they'll just string you along, instead of just saying outright, no, they'll, "Well, I do the deal if, and I oh, maybe that." And then I can't tell you how many times that has happened to people.

They have kind of focused all their efforts on this big investor or two or three big investors who never materialized, and in the meantime, they could have been out raising money from $50,000 and $100,000 investors that would've let them keep control of their deals, and they ended up losing the deal because these big investors eventually just either disappear, they go dark, they stop talking to you, or they'll all of a sudden say, "Oh, I just had another deal blow up. And all my money's tied up in that. I'm not able to do it." So they'll make an excuse, they'll disappear, but they're going to leave you holding the bag. I had clients last year that went all the way to a closing table on a deal, and the last day they were waiting for one investor to put in $400,000 and they never showed up. And so they lost the entire deal because of that, and I'm sure they lost a whole lot of money. You can't wait for people. Have you experienced that Bill? People are like, "Oh, I can get you my money in a couple of weeks." What do you do in that situation?

Bill Brancucci:

I absolutely agree. That's that is a huge issue and I still, to this day, sweat out every deal. We have indications of interest, for example, on our current deal that's in Dallas, the $15 million raise. And we have $14 million indicated, but some of that will drop out. That's just human nature. A lot of people say, "Yeah, I'm interested," but you don't realize it's predicated on the sale of another deal, and so that didn't happen. So generally, I'd say for every dollar you need to raise, you should get indications of interest of at least $1.25 or to $1.50, meaning 25% to 50% more money than you actually need. People drop out, and like you said, people will “yes” you to death, they'll be polite, a lot of people won't just say, "Sorry, you just don't have the experience and keep me on your list." But you've got to learn how to sell and raise money. It's an awkward thing, but if you're going to be in this business, you have to be comfortable with giving an elevator pitch.

And that was a thing I learned from you, Kim, and Dave Lindahl's events was that the elevator pitch, the pitch that you can give in one minute or less, has got to be kind of airtight. You've got to get it down and you've got to learn how to then ask for the order and hopefully get some people to say, "I'll give you a chance on $25,000." That may be a letdown, but you need to just take that. That $25,000-flyer that someone takes on you, may turn into a much larger check on your next deal.

Kim Lisa Taylor:

All right, so I'm going to put you on the spot here. Will you share your elevator pitch?

Bill Brancucci:

On my Dallas deal, or just …

Kim Lisa Taylor:

Just your elevator pitch. What if we met in an elevator and I said, "Hey, what do you do?" What would you say?

Bill Brancucci:

I'd say, "What I do is I buy value-add B and C properties that need updating and renovation. And so we put a pool together, buy a property, renovate it, and we've been generating returns of 17% to 25% a year. And we think this deal hopefully is." 

I'm not going to project a return now, but I try to keep it really simple. Not all kinds of complicated metrics, because most of the time you've lost your audience. So I'll just focus on the key points, like “The rents are $300 below market, and by renovating the kitchens and baths, we're going to get those rent increases that we're hoping for. And I'd like to send you the deck.” And by the way, Kim, the deck — which I know you review and that’s your advertisement — it's got to have all the stuff the SEC wants, and it's got to be accurate and not misleading, but it also can't be too complicated. It's just got to get to the point and keep it “simple and stupid,” as they say.

Kim Lisa Taylor:

And for all of our clients, we actually provide an offering memo and a property package template. So it looks like the offering memorandum you would get from a broker, but it's where you plug in your numbers, your sources and uses of funds, your projections, your proposed exit strategies as well as information about the property, and what you plan to do with it. All of our clients get that. 

Anyway, one of the questions I just want to circle back on a little bit is, what do you do, I mean, if somebody says to you, "Oh, I can get you my money in a couple of weeks." Are you just going to hang out for that person, or are you just going to keep moving on and say, "Let me know when you get it."

Bill Brancucci:

Usually I'll have a hard day. So for example, this deal we have in Dallas is expected to close January 28th. And I'm going to tell people, "Funds have to be in and received by the 21st." You cannot have wires coming in the day of the close. The escrow agent will not recognize them as forwardable. And so you've really got to have all your money a week in advance. So you can't give people all this time. And you can politely tell them, "Look, I'd love to have you in our deal, but if you can't have funds in by the 21st, I have no choice, but to keep selling the deal." Because remember the lender doesn't care. The lender's going to say, "Where's your down payment?" As he is the seller of the property. And they don't care about your investors; that's not their concern. They want to make sure you've got the deposit to make the close happen. So that's key right there, is not to allow money to just drag on.

Kim Lisa Taylor:

Don't wait for people to send you money. I mean, I would even go one step further and say, I think a mistake is to say, "Well, we need all your money by the 21st." But I think you have to caveat that with, "But our deal is filling up really fast and it's first come, first serve. So if you don't get your money in and we're already full, you're not going to get in." So it could close before the 21st because you don't want just waiting until the 21st and then hoping you're going to wake up that morning and all the money's miraculously going to be there. You don't want that situation. You want people to start sending you money right now. And I always say, "No one's an investor until their funds are in your bank account, and until then, you're just having a conversation."

Bill Brancucci:

Absolutely, Kim. And the other thing is a lot of your investors are looking at other are deals. They're not going to tell you that. And so they're going to decide when they decide, right? And like you said, I mean, their actions speak louder than anything. And when their money is in, their money is in. Everything else prior to that is just talk. Unless they're just very reliable and they've done every deal with you that's a little different.

Kim Lisa Taylor:

All right. Well, how could our audience reach you? We're going to go ahead and have you give out your contact information. And we're going to go to some live Q&As. We've got a couple of people that have asked questions, but if other people want to ask questions, either put it in the chat or put it in the Q&A, and we'll get to your questions. But how would people contact you if they were interested in investing with you?

Bill Brancucci:

They could go to our website, which is citadelamerica.com. They can email me at wbrancucci@citadelgrp.com. And we can go from there.

Kim Lisa Taylor:

Okay. I just put all that into the chat. If anybody wants to grab that. And if you want to reach us, you can go to syndicationattorneys.com. You can schedule an appointment there with one of our staff. We also have a tremendous amount of educational resources there. The book you see behind you, “How to Legally Raise Private Money,” is an Amazon number one best seller. If you don't already have a copy of it, you can get a free digital copy at our website. There's a tab there that says, "Get the book," or you can buy it on Amazon. And it's actually on sale right now through the end of the year, we have reduced the prices as a special gift to all of our followers. If you want to get it now, the prices are going to go up again after the end of the year. 

All right, so let's see what we have for some comments. John asks, "Can you name some of the better networking events to attend each year?"

Bill Brancucci:

I would almost put that on you, since you network even more than I do. But there's Dave Lindahl, there's Joe Fairly’s Best Ever Conference. I think that's in Colorado. Rod Khleif has got one, and Jake & Gino. And I don't know if you have others ... There's one in January that is not by a syndicator, but it's attended by just about every syndicator out there and it's in Orlando this year; it's called the NMHC, which is the National Multi-Housing Conference. And that's a huge event, it's usually 10,000 to 15,000 attendees. It's not cheap, but none of these events are free to get in. But that event has everyone in the industry going to that one. That is end of January of this year. So you can find that online.

Kim Lisa Taylor:

The ones we heavily focus on are the RE Mentor and the Jake & Gino events. I do some teaching for both of those groups and they're both pretty upstanding groups. But there are some of the other ones who you mentioned that are good, also. But your whole goal, let's talk about that for just a moment. When you go to these events, what is your objective?

Bill Brancucci:

I go to learn and meet people. I don't really say, "Well, I'm going to try to get 27 business cards today," or anything like that. And they're there for the same reason. So bring a stack of cards, just go up to strangers and say who you are and what you do and what you're trying to do. And you're going to find people that want to help you. They're going to want to help launch you. There's a lot of supportive people. So some will waste your time, like at every event and just keep going to them. And then you're going to have that “aha moment” when you've met the right lawyer, the right person, the right syndicator. Maybe some investors go to them that are looking for emerging syndicators.

Kim Lisa Taylor:

What do you do with the contact information that you get? Do you just go back to your office and stick in a drawer, or do you do something with it?

Bill Brancucci:

I love calling people. So I’m not just emailing them, but I'll call them and just say, "Hey, I met you at the event. I was just wondering if you could talk a little bit more about what you do. And I wanted to run my business plan past you if you have a minute." If it's a syndicator, I have never had a syndicator slam the door on me or say “Go learn from someone else, I'm not interested.” Everyone I've talked to was willing to help and give me some advice. I love just picking up the phone and calling them and I've done that repeatedly with some very big ones and even sometimes set up lunch or dinner meetings. 

But I do chase these people all down. They're not going to call you. You have to reach out. You've got to be very proactive and if you have to leave four messages, do it. 80% of my business is looking for deals and the other 20% is chasing people. That's kind of what your job is going to be doing. And my partner, Pat, will frequently work with the property managers, but they're so time-consuming. You've got to spend a lot of time networking and you've got to spend a lot of time looking for deals.

Kim Lisa Taylor:

So here's a couple questions. And I think I can answer most of them. "Can you raise capital for other sectors like software and healthcare with your current investor pool?" Well, I don't think Bill is focused on doing that with his current investor pool, but you can use any investor pool to raise capital for other sectors. So the syndication doesn't just work in real estate ... Every time you're raising money from private investors, you're going to be following the same syndication securities laws that our real estate clients are following. Your operating agreement or your corporate documents are perhaps going to be different, but your PPM and your subscription agreement and the filings are all going to be largely similar. 

Bill Brancucci:

I will add on that, Kim, though. If you go to your real estate investors with a non-real estate deal, that could torpedo your credibility. Because now you're claiming to be an expert in software or biotech, and you might be that rare person that does have that skillset, but that could also really undermine your investor base and your credibility. So I'd be careful on that one. It's just my own personal opinion.

Kim Lisa Taylor:

That's good advice. And then he asks, "Can you handle cross-border investments?" Yes, our firm can handle helping you structure those deals and also doing their securities compliance for that. And then he asks, "Have you seen deal flow or interest generated in other asset classes like senior living hospitality and self-storage?" Yes, absolutely. We have clients doing all of those things. 

Okay. So we've got a couple other questions here. We've got quite a few. "Do you use a funnel marketing website, social media, podcasting, etc., to find investors?" Bill?

Bill Brancucci:

We are just starting to ramp up our social media effort. We're way behind where we should be. And we have nothing to brag about on our social media. We do blast out on email, and basically I'm on the phone all day long. But I would say where social media is clearly becoming a huge part of it is crowdfunding, which is showing the internet is clearly a big part of the future of funding.

Kim Lisa Taylor:

But it's also a really big pond. I always say it's very hard to be a big fish in a big pond, but it's really easy to be a big fish in a small pond. So if you spend a lot of time developing interpersonal relationships, face-to-face relationships with people in your community, those people will invest with you for years and forever, versus trying to cast a very wide net and catching a lot of minnows. So be careful, there's nothing that compares to face-to-face marketing. And the minute that you go out and start trying to do SEO, you're going to spend a whole lot of money. I mean, I've gotten quite close just recently for $2,500 a month to promote a new website. And so you're going to start spending $2,500 a month for drips and drabs. For $30,000, you could sure take a lot of people to lunch or dinner in your own community who would probably actually invest with you versus trying to spend a lot of money capturing people who may or may not invest with you. And the returns are probably going to be more immediate and more permanent, if you spend the time casting the net in your local community.

Kim Lisa Taylor:

If you want to know more about that, we did a podcast with Sam Freshman called, “60 Years of Investing Wisdom with Sam Freshman.” I asked him how much money he raised. He said probably a billion dollars. And I said, "How'd you do it?" And he said, "I just joined local groups and I kept showing up every month for 20 years." You're going to develop relationships and friendships and he said, "We have more investors than we know what to do with." So spend more time locally, less time globally and do it; you'll see a lot success.

Bill Brancucci:

I really agree with you. Trust is such a big part of this. And when you meet with someone and they can really look at you in the eyes, the strength in that, that human connection is still way more powerful than most internet and social media marketing campaigns. And I went to California last week to meet with 26 investors. And I came back with $5 million in commitments. In just five days, six days actually. And I don't think I would've gotten that from just a bunch of emails and “take a look at our deck.” And go on to lunch. And it's not like you have to take everyone to lunch once a week. You do it once a year, or even once every two years and then you've broken the ice. Now, the comfort is established, the trust is, and they're likely to invest.

Kim Lisa Taylor:

All right, somebody asked you to repeat the name of that large event at multi-housing ...

Bill Brancucci:

Oh, NMHC, that's National Multi-Housing Conference. And you can Google it. And I think it's January 22nd through the 24th, somewhere around there. And I believe there's a couple of different passes. I go for the networking; I don't go for the lectures. I literally won't go into the lecture halls, but I'll be walking the lobby as are most of the other people. Because it truly is a networking event. I'm not really there for the academics. I'm there for the forecast predictions of where interest rates are going to go, because it's just an opinion. I want to meet the people and they're there. So that's the event I'd go to.

Kim Lisa Taylor:

All right. Erin asks, "Can you recommend a couple of coaches that specifically focus on helping people raise money?" Well, the coaches are going to help you learn how to raise your own money. They're not going to raise money for you. But coaches that have many, many of our clients have come from, have been RE Mentor, that's David Lindahl. RE Mentor has been around for a very long time. They've helped more of our clients than any others get their start in real estate. Jake & Gino have live events, they have coaching programs. Vinney Chopra, who's one of our clients, who has done 26 syndicated multi-family properties. I think those three are all very good choices for you. 

Another question: "What CRM software do you use?" We actually have a relationship with Groundbreaker, which is a CRM software. They're investor management software that's been around for quite a long time. They will give our clients 50% off their onboarding fees. So it's Groundbreaker.co. I highly recommend them. 

Somebody says, "Can you syndicate using debt promissory notes, for example, rather than offering equity positions?" Yes, you can. Absolutely. We've written a lot of those offerings. 

And then we have several thank-yous. That this has been really awesome and helpful. Bill, we'll wrap it up right there. Thank you so much. Patrick, I'm so sorry you weren't able to join, but we appreciate you guys very much, and I'm just so impressed with all that you've done in just six years. Thanks again and happy holidays, everybody.

Bill Brancucci:

Happy holidays, Kim, and happy new year.

Kim Lisa Taylor:

Okay. Bye-bye.