by Robert Kantor

While there is no shortage of investment opportunities, separating the gems from the pebbles requires a proven and deliberate method of sifting through the choices. Based on my 40-plus years of success in commercial real estate (CRE) investment and asset management, an eight-point checklist for scrutinizing investments follows.

1. Know who you are investing with: What is their track record in CRE and finance, their reputation? Do your research on your investment team to make sure they have the required experience, track record and skill set within their area of expertise. For example, are they experienced in residential or commercial real estate?

2. What is the team’s investment criteria? If your investment prospect cannot articulate the investment criteria utilized to source and select prime investment opportunities, then walk away. The company’s investment criteria must be proven, steadfast and unwavering.

3. Are the deal structure and company transparent? No smoke and mirrors. It is critical to thoroughly understand the structure of the deal you are considering. If the investment team cannot explain deal structure and company operations in a way that you can understand, don’t invest.

4. Are the company and its owners co-investing with you? If your investment team doesn’t have skin in the game, they aren’t walking the walk, nor demonstrating their belief in the investment. If you invest, they should as well.

5. Who receives cash flow first? Make sure the management compensation structure aligns with your interests. For example, management compensation should be contingent upon your profits. Other than normal administrative reimbursements, avoid up-front fees to management.

6. What are their asset management capabilities? It is one thing to acquire an asset and another to skillfully manage that asset for the greatest return on the investment. Understand the asset management strategy and expenses. Throughout the full lifecycle of the asset, the team ought to closely monitor each asset to manage and ensure preservation and enhancement of property value for maximum returns.

7. How did the team you are investing with navigate the recent economic downturn? As Martin Luther King, Jr. stated, “The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.” How your investment team conducted itself during the recent economic crisis speaks to their character.

8. Does this deal reflect your risk profile? If you are risk-averse and prefer to maintain and grow your wealth with low-risk, then investing with Headwater Capital is right for you. Commercial real estate acts as a hedge against volatile U.S. and global equity markets, delivering long-term stability, increased values and cash flow.

Headwater Capital’s team has four decades of CRE investing success — having profitably acquired and managed assets in excess of $500M. Our investment process begins with generating a list of  potential commercial real estate properties meeting our rigorous investment criteria. To find out more, contact us at info@headwatercapital.com.