FTW: Logan Freeman on Real Estate Syndication Deals

dealmaking fragmented industry logan freeman project specific model real estate real estate investments syndication deals syndication fund model
FTW: Logan Freeman on Real Estate Syndication Deals

Co-Founder, Chief Development Officer, and Principal of FTW Investments, Logan Freeman, is uniquely talented in real estate investment while remaining compassionate. Alongside his fellow co-founders, Cory Tuck and Parker Webb, he co-hosts their FTW Investments’ podcast Invest for The Win. Logan is particularly committed to equitable access to affordable housing, collaborating closely with numerous groups to help eliminate home inequality and houselessness (a more accurate term that is currently preferred over “homelessness”) in Kansas City. Logan’s personal motto, “Do well by doing good,” has helped lead him with authenticity in his business endeavors. 

Logan’s specialty is focusing on off-market properties, with off-market properties accounting for more than half of his completed transactions. Having completed over 125 transactions, totaling more than $150 million, Logan’s unique talents allow him to effectively guide individuals and organizations throughout their entire investment journey. 

Nevertheless, Logan’s first dream wasn’t in investing, nor was it his first talent. Logan spent his formative years focusing on basketball and football, becoming a standout All-American collegiate football player at the University of Central Missouri, where he was spotted and picked up as an underdraft free agent player by the Oakland Raiders. He also spent his youth working in a hay field, offering him a background and upbringing focused on a sense of hard work and being unafraid to get his hands dirty to get the job done.

Prior to going into real estate, Logan would flip cars and motorcycles. The concept is the same as flipping homes: Investing in updating run-down objects and then selling them for a profit. Vehicle flipping afforded Logan a firm grasp of real estate, which fits with his approach to the industry: Just because something is broken down, doesn’t mean it isn’t salvageable. Combining his willingness to “get his hands dirty”, do the work, and look at otherwise dismissed properties, Logan sets himself apart in the real estate industry.

 

COMMUNICATION IS HOW SELLING HAPPENS

Confidence in a deal doesn’t end with how effectively the deal is structured on paper, and dealmaking involves more than merely coming to agreeable negotiations. When it comes to dealmaking, Logan emphasizes the necessity of communication. “Selling is just the transference of feeling from one individual to the next,” he opines. You accomplish this by:

  • Body language
  • Your words
  • How does your impact affect others and their feelings?

By working on your communication skills, and becoming adaptable to others’ communication styles, your ability to create a successful deal is going to greatly increase because you’re building authentic confidence in the buyer for not just the proposed deal, but confidence in you.

 

STARTING IN SYNDICATION

Syndication -- syndicated deals or syndicated Investments -- is simply just one way of raising money from other people in order to gain financial support for your own investments. Usually, syndication involves using two or more Investors to fund one loan for a single borrower. A lot of time this occurs when the capital amount needed is too large for one investor or firm, or falls outside of their risk tolerance, so multiple investors come together to share the risk, and fund the proposed deal. There are two forms of syndication: 

  • Approaching investors with a specific deal, package, property, etc., and only acquiring investment for that specific goal.
  • Create a fund that is not specific to a deal, package, property, etc., and instead gives the promoter/manager discretion to invest in whichever properties they chose.

 

MISHAPS IN SYNDICATION

Logan chose the joint venture route at the start of his real estate investment career, however, he soon learned that going it alone wasn’t the ideal option because he quickly ran out of knowledge, experience, and most of all, capital. He sought advice from his mentor, who advised him to bring on business partners that would “supplement his skillset”. To do this, Logan needed to evaluate a number of things in order to determine whom to bring in:

  • What were his skills and which skills were actually valuable? Logan was skilled at deal-finding, relationships, and raising capital.
  • What was he lacking in order to make positive investments? Logan lacked knowledge of finance, accounting, management, or project management.
  • How many additional partners did he need to make a rounded team?
  • When he found people who possessed what he lacked, did communication and relationship work well together?

It took Logan a year and a half to go through these evaluations and find the right fit for his needs to build a rounded team of people. In 2019, his team was prepared to begin looking for project-specific syndication. Now, Logan and his team have made many investments in and look for larger properties, IE: multi-family properties, shopping complexes, and industrial properties.

 

SYNDICATION FUND MODEL VS PROJECT-SPECIFIC MODEL

While Logan and his team are currently operating under project-specific syndication, he doesn’t knock the advantages of the fund model. In fact, his goal is to one day switch to the fund model, in order to have more freedom in his team’s investments. There are advantages and disadvantages to both models of syndication:

Project-Specific Model

  • Pro: A good place for investment beginners
  • Pro: Investors are more likely to approve funding requests if you approach them with a fully fleshed-out plan
  • Con: The funding is confined to strictly the project proposed
  • Con: Less freedom to choose where to put funding

Fund Model

  • Pro: More freedom to choose where to put your funding
  • Pro: The ability to take on multiple projects
  • Con: Most fund investors require several years of experience, X number of successful deals, or an extensive portfolio of successful deals
  • Con: There can be pressure to deploy capital and lose deal discipline as investors don’t like their capital sitting idle

Regardless of the model, one thing is true for syndications: Many syndicate investors are not looking to sponsor a short-term project, and then 12 months later have to look for a new project to invest in. Logan doesn’t buy a property, fix it up, and then immediately put it on the market; his projects typically have a 5- to 10-year hold period. This way, he’s building long-lasting relationships with his syndicates, building trust with his syndicates, which in turn allows him the ability to build a portfolio of successful investments in order to move towards a fund model syndicate and be allotted more freedom in the future.

 

ANTICIPATION OF THE FUTURE

As I’ve mentioned many times, I don’t like to discuss “The R-Word” and become a self-fulfilling prophecy, however, recessions are a reality of capitalism, and you wouldn’t be doing your due diligence if you didn’t at least plan for the chance of how to operate during a recession or market drop. 

Although there was a lot of fear and uncertainty in the market after the COVID-19 pandemic hit, Logan and his company saw this as a perfect opportunity to purchase because prices were so low. This time period was ideal for buying if you could get equity and debt because they were historically the lowest levels they’ve ever been. It just took getting over the overall fear in the market and having faith in an upswing that allowed the company to make this decision that proved beneficial to them.

That being said, Logan and FTW Investments weren’t the only ones in 2020 to have this foresight. Inflation was brought on by the three rounds of U.S. stimulus checks combined with this decline in prices and debt creating heavy – and rather fascinating – competition in the market. All of these factors compiled have caused interest rates to soar, which is creating another problem: Sellers are wanting the prices of yesterday, while buyers are wanting the prices of tomorrow. This is called a Bid-Ask Gap: Wherein the amount by which the ask price exceeds the bid price for an asset on the market. This current Bid-Ask Gap is extremely large at present, and this is causing transaction volume to “drop off the cliff”, so to speak, and it takes time for sellers to catch up to the present, and essentially “face reality”.

Logan is excited about the future and developing his firm more, but he’s also nervous about the prospect of a recessionary period. Logan’s top priority for preparing for any potential or anticipated recessionary period, especially as a young guy and a young firm, is ensuring his operational capacity is very strong and focusing on:

  • People
  • Collective Genius
  • Systems
  • Processes
  • Technology
  • Relationships

By focusing on making these aspects as strong as they can be, and remaining diligent about them, Logan continues to be optimistic and faithful that FTW Investments will continue to flourish and grow. His biggest piece of advice: “The riches are in the niches.”

 

FRAGMENTED INDUSTRY OPPORTUNITY

As challenges in the market increase, fragmented opportunities become available in the market. There are fragmented opportunities now because deals done in the last 2-3 years were made with floating rate interest rates forcing owners to either refinance or buy a rate cap. Rate caps are currently very costly, hovering around 7-8%. This has caused fragmented opportunities to come in and grab assets at a discount.

This situation may cause some grief and headache for 12-15 months, Logan says, but if you’re a good operator, and have access to sources of equity and debt you can turn to, you can take on the risks and reap the potential for a huge reward. This is the period in which leading businesspeople like Warren Buffet or Charlie Munger say: “The time is now.” Great risk has the potential for great reward.

 

A HEALTHY RELATIONSHIP WITH RISK

Regardless of how safe a deal appears to be, risk will always be present. Although there are no mathematical formulas that can calculate and quantify the risk of any given deal, if you approach every situation with the mindset of a dealmaker, you can begin to assess risk in a constructive manner. By utilizing the dealmaker mindset, you are enabling yourself to break free from unhealthy fear of risk, and choosing to evaluate and respect all potential risks to your current idea, project, or deal. (For more on having a dealmaker mindset, check out: How To Have A Deal-Maker Mindset or Overcoming Negativity for Deal-Making Success, from the DealQuest blog.)

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For my full discussion with Logan Freeman, and more on the topic:
Listen to the Full DealQuest Podcast Episode Here

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FOR MORE ON LOGAN FREEMAN AND FTW INVESTMENTS:
https://open.spotify.com/show/5BL4gCOzvjmyGveSikSZ89
https://www.facebook.com/ftwinvestments
https://www.instagram.com/ftwinvestments/?hl=en
https://twitter.com/ftwinvestments

 


Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

 

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Corey Kupfer is an expert strategist, deal-maker, and business consultant with more than 35 years of professional negotiating experience as a successful entrepreneur and attorney.

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