As passive real estate investors, we often focus on the numbers – IRR, equity multiples, and cash-on-cash returns. But I’ve discovered that a sponsor’s communication patterns can tell you more about their operational excellence and investment philosophy than any pro forma. Recently, I’ve observed two concerning trends in sponsor communications that every Limited Partner should understand before committing their capital

1) Well-Known Sponsors Ghosting Investors

You’ve done your research, listened to the podcasts, read the marketing materials, and finally reached out to a reputable sponsor whose values seem to align perfectly with yours. Then… silence. Or worse, a pattern of canceled meetings and missed follow-ups.

Over the past 4 months, I’ve seen this multiple times from different sponsor groups:

•  I reached out 3 times to an investor relations contact, using a combination of email and texts, and was completely ignored by them. I still haven’t heard back 4 months later, although I continue to get their automated emails.
•  I had the investor relations contact cancel a meeting on me 3 minutes before it was supposed to occur because he had a more important meeting that he needed to be at. I suppose I should be happy that he at least let me know he was a no-show. I never bothered to reschedule since I clearly wasn’t a priority.
• I had someone book a call with me using the link on the website to pitch there deal. That isn’t why I have that link, but was willing to accept the call. Then they reschedule it multiple times on short notice – they couldn’t be bothered to keep the appointment that they made at a time that supposedly worked for them. I blocked them after the third meeting request since it was clearly wasting my time to reserve the slot for them.

In these cases, the teams were actively trying to raise money for their deals. I wasn’t even trying to reach the primary sponsor or face of the organization – even when I may have been able to. The person I was trying to contact had the specific job of engaging with investors and following up with people who were interested.

The impression I am ultimately left with is that my business is not important to these groups and that they are not serious about working with me. I have to admit that I was disappointed with the first two groups because these are well-known sponsors and based on the principals engagement in the broader community (for example on podcasts) I was looking forward to working with them. I had bought into their marketing and felt aligned with their stated values. Unfortunately, based on their actual behavior – as opposed to the marketing message they are trying to build their brands around – these are not companies that I want to do business with. The values that they demonstrated in person were very different than the ones they claimed to have.

I wonder if these companies are victims of their own marketing success. Have they grown too quickly to be able to effectively engage with potential investors? It is certainly possible that this is the case. And I may reconsider working with them in a few years if they are better able to manage these engagements. In the meantime, my concern is that if their investor relations team is that overwhelmed, what does that say about their operations team? I definitely don’t want to jump on board a ship where the core functions of the business are not operating smoothly.

2) The Spray and Pray Approach Newer Sponsors Are Taking

On the opposite end of the spectrum, there’s an increasing trend of newer sponsors taking a quantity-over-quality approach to investor relations. You’ve likely experienced this yourself – the LinkedIn message that jumps straight from “Hello” to “Want to invest in my multifamily deal with 20% IRR?”

This immediate pitch shows a complete lack of interest in understanding how I want to deploy my capital. Given I have actively posted about the types of deals I am looking at, why would you think I care about multi-family in Atlanta, or a hotel in the Caribbean, or a development deal anywhere? These are clearly not in my buy box and asking me to waste time listening to your pitch shows that you have spent absolutely no time researching me. Your underlying assumption is that all I care about is your IRR – nothing else. That is only true of the most naïve investors – and those are people you should not want investing in your deals if you actually know what you are doing.

More importantly, pitching a deal when I have never heard of you and you have done no research implies that you don’t care about building a relationship. You appear to be focused on solving your short term problem of not having enough cash and don’t care about me at all. But as Russ Gray says, ”It is never, ever, ever, never, ever about you”. People do business with people they “know, like, and trust”.  Given I don’t know you, much less like or trust you, I have no intention of doing business with you. You have to earn the right to get my business – and that goes well beyond the empty promise of a high IRR.

The reason that I blacklist these groups is that I do not want to do business with people who are trying to build a business around their needs instead of helping investors meet their goals. Without taking the time to build a relationship where we can both benefit, you have demonstrated your priorities – and they clearly do not align with mine. There are too many sponsors out there that I can build a long term relationship with to risk working with people whose only priority is their own needs.  

I can’t imagine that these groups are successful finding investors based on their haphazard approach. However,  I am seeing enough people doing it that either they are finding the money they need or they are all following the playbook of a guru who has convinced them that this is the way to go. It is sad because I believe they are hurting their business more than they realize.

Good Communication Isn’t Hard

On the positive side, with more and more sponsors following these two trends, it is easier for a good sponsor to stand out with an appropriate communication strategy. The steps are pretty simple:

1. Focus on building a relationship with potential investors. Be clear about what you stand for, what types of deals you are looking at, and what your investment thesis is. Then share that information through social media and other forums. If you do cold outreach, focus on building a relationship not getting an investment. Make sure you understand the goals of the investors you talk to and don’t assume that they will be interested in your deal.
2. Follow up with investors who express interest. By prioritizing your conversations with potential investors, you build the trust that is required to close the deal. Responding to inquiries and keeping your appointments is the minimum expectations of all investors and by doing that you are setting yourself apart.

If you are a sponsor, or a potential sponsor, please avoid these trends and treat your investors like friends, or at least partners, not ATMs.

If you are a passive investor, don’t reward this bad behavior with your hard earned dollars.

• Align yourself with sponsors who demonstrate values that align with yours
• Don’t compromise on professional behavior and respect for your time
• Look for sponsors that walk-the-walk, and don’t just talk-the-talk
• Remember that there are good sponsors out there

While it’s easy to become frustrated with poor communication practices, remember that these challenges create opportunities for exceptional sponsors to stand out. As passive investors, we have the privilege of choosing partners who align with our values and demonstrate their operational excellence through every interaction. As a result, we have the power to influence the industry through our capital allocation decisions. Let’s use it to improve things for everyone!

This article is my opinion only, it is not legal, tax, or financial advice. Always do your own research and due diligence. Always consult your lawyer for legal advice, CPA for tax advice, and financial advisor for financial advice.