How are we different:
Cap10 is the only CRE Investment platform committed exclusively to the investor network. This is because we are the only CRE Investment platform that does not charge a success fee.
Not charging a success fee benefits our investor network in a few ways:
1) We see more and better quality deal flow – Sponsors do not need to pay a 6% success fees on their good deals. (…yes, it is our belief that platforms with success fees only see lesser caliber deals and bad deal flow). Also, large success fees damage the deal sponsors promote.
2) Higher Returns for our sponsors… A 6% success fee, reduces an IRR by about 1.5% on a 5 year deal and 2.5% on a 3 year deal. What that means is that for every $1 million invested, this success fee costs investors ~$140,000 in lost returns. Pretty damning.
3) And, as we mentioned, our allegiance is with our investor network, not the deal sponsor.
Cap10 is not a registered broker dealer or investment advisor. This is a choice that we’ve made that allows us to limit the expenses of the platform. Because of this our compliance costs are significantly reduced which allows us to operate without success fees.
So What does this mean for our investor network.
1) We cannot and will not give you investment advice.
a. We will provide you with deal flow and commentary on the deals based upon our standard review process, but we will not recommend a deal to you. You need to review what is provided and determine whether an investment is suitable for you. You must do all of the diligence that you would ordinarily do when making a private investment.
What kind of deals will I see from Cap10…
We do not limit ourselves to any particular type of deal at Cap10. Our general thesis is that you invest in people as much as you invest in a particular transaction. So we like to spend time getting to know the sponsors as much as we like to review specific deals. We tend to like deals in the sub-institutional market. This is a total equity check size of $5-15 million. We believe that this is an area of the market where the equity commitment it is a bit large for many sponsors to raise through traditional friends and family money for a deal and a bit small for many institutional investors to get excited about investing in the deal. We think this is a great spot for our network to step up and provide liquidity for accretive returns.
Additionally, we are not adverse to working with sponsors with a limited track record if they can demonstrate that they’ve lead deals in a similar organization. We find that these sponsors are hungry and have learned how to find and evaluate good deals, but do not have the network (yet) to capitalize those deals.
Our favorite deal sponsors are great at finding quality deals, but not as good at finding equity. Both are relevant skills for success in the real estate business, but we also find that once deal sponsors are too good at putting together equity into deals, the quality of their deals goes down (they are less selective about the deals they will do because they need to do too many deals to utilize their equity).
