Raise Capital Faster by Matching the Right Real Estate Deal to the Right Investor | Scott Kidd

Scott Kidd (00:00)
⁓ they treated like a transaction. They don’t look at it long-term as, know, this is all relationship business. I personally only want to get involved with people that want to get involved with me and we have aligned interests and we’re doing that this for the long-term. It’s not a one and done. You know, we’re, we’re in it for the long haul.

Dylan Silver (01:54)
Hey folks, welcome back to the show. Today we’re joined by returning guest Scott Kidd, Fund Director behind development projects in the commercial space.

Founder of Yachty Real Estate Investors, funding high level business with lifestyle and access. He brings a unique mix of capital strategy, development, execution, and experiential branding. Welcome back to the show, Scott.

Scott Kidd (02:16)
Hey, great to see you again. I’m glad to be back. It’s just been a lot. It’s always a lot of fun coming.

Dylan Silver (02:24)
We were talking in the green room about the bottleneck that a lot of people face in this space being, well, how am I going to raise more capital? That’s a huge issue for a lot of people, syndicators, fund managers, and then folks who are doing a lot of deals.

Scott Kidd (02:42)
Yeah, it can be, you know, I’m a big proponent of, you know, well, finding a great deal is a big part of it, but you also need to maintain making those capital relationships at the same time. A lot of times you have to make sure that the deal is in alignment with the people that you’re talking to.

Dylan Silver (03:05)
Now, in this market today, who do you think is someone who is best positioned to be working with investors and raising capital? Is it someone themselves who has a big real estate background, someone who has a Wall Street background, or someone who’s just a master network?

Scott Kidd (03:24)
Um, I think it just depends, you know, for each one of those groups that you mentioned, um, each one of the things that’s really important, what I focus on is alignment with the person I’m talking to. Like, I want to make sure that, that we know where they are and I know, um, who they are and what they’re, where they are in their life to, um, you know, make sure that we’re the right fit together.

Because if we’re not, then it won’t really gel. And I’m not really looking out for their best interests. If I’m not in alignment, say if they’re not used to multifamily and everything like that, there’s no reason for me to really be, I can talk to them about it, ⁓ but ⁓ they need to be educated and understand what they’re getting into.

But if I keep telling them about it and try to get them into it, it’s really kind of a misalignment. I’m not really looking out for their best interests. It also really depends on where they are in life, because it’s really about what they need for their long-term success.

Dylan Silver (04:39)
So for folks who are in the middle of trying to figure out which direction to go in, what would you recommend for folks who are diving in trying to raise capital as far as a starting approach?

Scott Kidd (04:52)
⁓ starting approach, you know, you really want to, ⁓ you know, make sure, you know, who you’re talking to and make sure who your target audience is, especially with the asset that you’re dealing with. Make sure you have an alignment of interest with whoever you’re talking to, whether it friends and family, institutional capital, you know, what’s, what’s their overall goals. It’s not about sure. You might have a great deal, but it might not be a great deal for dealing.

You know, Dylan might be looking at, you know, private credit. only, you know, I’m getting near retirement. just want, you know, my six, eight, 10%, um, you know, paid out every month. I don’t necessarily care too much about the long-term, you know, 25 % or IRR or whatever, you know, or, you know, the long equity pop at the end. Um, I may just need the cash flow.

Dylan Silver (06:37)
Yeah, I mean, when people talk about goals, think over the last 10 or so years, things have changed drastically, right? And time horizons have adjusted as well in the deals that you’re raising capital for. What’s a typical hold time or does it vary deal by deal?

Scott Kidd (06:57)
generally we, what we focus on is a 7 % yield on cost and then, ⁓ the equity multiple, you know, two X multiple and roughly five years, you know, or, you know, or longer, you know, you know, hopefully less, but five years is usually our target. ⁓ we’ve done some things that, that have, ⁓ you know, come in less than that, but which is great, but that’s generally our target because, ⁓ you know, two X multiple in five years is.

doable even in today’s environment.

Dylan Silver (07:31)
Now, when folks are looking at working with institutional capital, family offices, accredited investors, ⁓ once you have ⁓ a successful capital raise with one firm or with one family office, with one accredited investor, does that tend to spawn additional relationships or is each outreach just as challenging as the first one?

Scott Kidd (07:56)
⁓ well, it’s all situational, but it gets better because, know, as you gain more confidence and also as your deals get better and your, you know, your overall systems get better, you know, you’re, you would hope that you’re growing into, ⁓ you know, better situations where it makes it better for the investors and, know, family offices, institutional capital, credit investors, all those are three unique.

uniquely different things. in each one of those segments, each one of them has a thing that they’re looking for. And you generally want to solve a problem that they’re looking for, what type of investment or property that they’re looking for. It’s not about really what your deal is or what works best for you. You’re looking to fill a need for them.

Dylan Silver (08:49)
Once capital has been raised and deployed, I mean, to me, and I think a lot of people who are on the outside looking in, that’s when a whole other segment of this comes into play where now you’ve got to keep investors happy, you’ve got to keep them engaged, and you’ve got to help make sure that everyone understands what their money is doing and going to work for, because it’s going to be five years, like you mentioned, until the exit happens. So what’s communication like with investors along those five years?

Scott Kidd (09:18)
Well, you we have, you know, monthly newsletters, we have updated meetings that we do, you know, webinars, ongoing continuing education about what we’re doing, you know, market analysis, stuff like that. And then overall, you know, a lot of times for me, I like to pick up the phone every so often, you know, every, a minimum once a quarter or so check back in with people. depending on the person and what we’re actually working on and on the project.

⁓ you know, I like to over communicate, you know, good, bad, or in different, things need to be communicated. They need to know where they stand. You need, you need to know, they need to know that, ⁓ you know, you, you are doing what you do, ⁓ to help them along their journey and make sure that they’re involved with what, because it’s, know, you are, it is their hard earned capital. You want to make sure that, ⁓ you’re bringing your expertise and letting them know that.

everything is safe and you’re doing the best for them.

Dylan Silver (10:24)
Now, when we talk about raising capital for development projects, there’s so much that can change because from the start of a development project until completion could be, know, months could be years potentially and markets change, you know, global political dynamics change. And so there’s a lot of unknown there as someone who’s raising capital. What’s your ⁓ tie in with the development team and what are those communications typically like between the folks who are managing

the development side of things and the capital raising.

Scott Kidd (11:31)
Well, we have weekly meetings, ⁓ big picture stuff, smaller segmented ones that are deal specific or asset specific also to keep everyone informed of what’s going on. And we always put in contingencies and we communicate all those things ⁓ to the people that we’re actively partnering with. Because I don’t call an investor, I more call it a partner because they’re partnering with us.

you because they have a certain level of trust with us. Um, because, know, they’re a limited partner and just because they’re a limited partner, it’s not, they, they, uh, give us their hard earned funds and then we walk away and we see in five years, it’s an ongoing process. We we like people to learn the process with us, you know, how that deal is going, you know, to where we’re, we’re a continuing base for education. So they understand that this is a viable.

asset for them to invest into and also that we’re a viable group that is very consistent and very conservative and stable. You know, we focus on stable developments that, you know, could be, you know, of benefit to them, you know, if that’s something that falls in line with their risk profile, because there is risk associated with it. And we just want to be clear that those are, you know, that there is with everything, there’s inherent risk.

Dylan Silver (13:02)
What do you see as being the biggest differences in skill sets between the person who’s raising capital and excellent at that and someone who’s great at managing projects and crews and subcontractors?

Scott Kidd (13:17)
Um, the, you know, each of them takes a unique skillset. know, both of them involve people because all of this is a relationship business. It’s all people. It’s all about building the long-term relationships. don’t, we don’t get involved with anyone that’s sports, just transactional one and done. We want to build that relationship for long-term, you know, and the more on the more operational side, cause as a captain, I’ve done that for many years.

⁓ It’s more of a direct relationship where you get a lot more yes, no answers and a lot more guidance in that way. in the capital raising side, it’s more of ⁓ a sales approach where it’s more person specific, know, and deals specific. We’re dealing with this specific person. Not to say that that doesn’t go on in the operational side, but

Each person in the operational side has a specific job and each task is very task oriented. Whereas with the capital raising side, you’re more dealing with the different personalities and different long-term assessment of what that person is. And you’re going to grow with that person. Whereas, you know, granted the operations side is going to grow as well, but each, each job and each one of those jobs is, is going to be fairly similar.

you’re gonna set up the systems towards the same every time. Whereas on the capital raising side, you can’t think that you can have the same conversation with every single ⁓ partner or investor. It has to fit with what they’re looking for.

Dylan Silver (15:05)
Do you think realistically, know, folks can be both strong developers and capital raisers? Do you think for the most part, people have to pick one or the other because it’s almost two different entities?

Scott Kidd (16:00)
I think you can be good at both. mean, you if you’re a very strong developer and you have a very strong track record and you’ve done well as a steward for people and performed well over the years, ⁓ generally you don’t have a problem raising capital because your track record speaks for itself.

Dylan Silver (16:26)
Yeah, I mean, when we think about, you know.

Scott Kidd (16:27)
When that comes over time,

it’s not an automatic. It’s not an automatic, either one of those.

Dylan Silver (16:35)
When we think about some of the bottlenecks that people face, and I’ll say it again, this raising capital thing seems to be the most common bottleneck that I see people face. I have segments of real estate. They might be doing a lot of flips, right? And we’re not talking about multifamily. It just might be single family flips. And they realize, hey, we’re gonna need more capital, Capital becomes a bottleneck. For folks in multifamily, of course you’re constrained by how much…

money you can put down to qualify for loans and you bigger projects and etc. When you’re talking with newer developers and newer capital raisers, what’s the biggest mistake that you see people making?

Scott Kidd (17:17)
⁓ they treated like a transaction. They don’t look at it long-term as, know, this is all relationship business. I personally only want to get involved with people that want to get involved with me and we have aligned interests and we’re doing that this for the long-term. It’s not a one and done. You know, we’re, we’re in it for the long haul.

want long-term partners to where.

You know, hey, we’re dealing with John. he likes, you know, he likes hospitality and he loves what we did in the fund with that one.

Dylan Silver (17:50)
Do you do you see developers get stuck in in projects because they’re focused on things like you know, capital allocation and and how they’re going to raise capital ⁓ or or typically are they already have that side of the business handle when they’re working on projects?

Scott Kidd (18:10)
I think it depends, you know, it depends on their track record. If they’ve been doing it for a long time, a lot of times they have those systems in place. happens. I see it quite a bit with myself and others, like when you’re growing, you have those growing pains, you’re trying to, are you going to need more capital or you need more deals or you need more different systems? Cause as you grow, you know, you might have, you know, if you’re dealing with a hundred unit property portfolio.

It’s much different than dealing with a thousand unit portfolio or a 10,000 unit portfolio. Cause you’re going to have, you’re going need more people. You need more systems in place and everything that, you know, that you have to grow with. And whenever you’re going to the next level, it’s a little more, you know, you might not know what you actually need because you’re not there yet.

Dylan Silver (18:45)
Yeah.

We were talking in the green room about a deal that you were raising capital for in Texas. And I know that you’re based out of Florida, but you do a lot of traveling. So looking at deals all over the country. Now, the Sun Belt is very hot, seems, but there’s also some risk because everyone’s looking at the Sun Belt. Some people may say, you know, overdeveloped. When you’re evaluating deals anywhere, are there any major red flags that you would just say, hey, I’m not going to touch this?

Scott Kidd (19:30)
Well, you know, we mostly are focused with the multifamilies and residential is in Texas in that Texas triangle I-35 corridor Austin up to Dallas specifically. You know, so within each market you’re going to have and each metro area, you’re going to have multiple different markets.

in there, you know, like Austin, as we were discussing before and San Marcos and stuff like that, they’re giving huge concessions, which means probably means that there’s a lot of product that just came online and it needs to be absorbed. something like that we’re probably going to stay out of because, you know, it just means that there’s probably going to be a little while before all that stuff gets absorbed. So that’s why we’re focusing on the northern part of

You know, the Southern part of Dallas where it’s less competitive, less, you know, where there’s infill lots where, you know, where there are smaller boutique style, ⁓ multifamily where, you know, there’s less competition. Like on the North side of Dallas, they’re, building huge multifamily and it’s very competitive. Land is more expensive. You know, that’s why we’ve kind of, we’re carving out that niche there, ⁓ for us. And, know, we don’t necessarily.

Dylan Silver (20:39)
Yeah.

Scott Kidd (20:52)
Right now we’re looking in the Dallas-Fort Worth area ⁓ or in Kansas City with our medical office and surgical centers ⁓ looking to bring that the medical products into ⁓ other areas for area agnostic, Florida especially and Texas because those are unique because they’re all pre-leased by the surgical group that we partner with. It’s not necessarily location specific other than it needs to be close to a hospital so that

that ⁓ and the surgical group usually they understand all those demographics as far as what the needs are. We basically build the shell and partner with them and show them how that they can benefit from the real estate. They can build out their business and build the real estate and benefit from both.

Dylan Silver (21:42)
So you’re developing for the medical space. I think that when we talk about some of the niche areas that people are getting into, I haven’t spoken with too many folks who are doing medical, medical office. But of course, it’s a huge need and ever expanding for folks who may be looking at which asset class to get into. And they’re looking at retail, maybe medical, maybe multifamily, right?

Scott Kidd (21:46)
Yes.

Dylan Silver (22:11)
and they’re trying to figure out, what works for them? Do you think it takes a certain type of persona to be a successful operator in each segment, or is it really just does the deal pan or not?

Scott Kidd (22:23)
⁓ it’s a little bit of both because I know a lot of like with the medical offices, ⁓ we’ve had luck with speaking to a lot of doctors and surgical partners because they understand that side of the business already, you know, and multifamily. lot of people understand that along with, you know, as a step up from, you know, single family and stuff, because we’ve all lived in an apartment at some point. A lot of us have, we understand that people have to pay.

to live somewhere, know, retail and stuff. understand the small mom and pop stuff. We understand who buys stuff from those places all the time. We frequently a lot of the same local establishments, you know, it’s all kind of depends on your personality and stuff. some won’t touch, you know, multifamily, some won’t touch a medical office, but you know, it all depends on what you understand and what you’re educated about. I think, you know, each

to each his own, there’s no one thing, one size fits all for anyone. I would think it’s more up to the individual and their experience.

Dylan Silver (23:29)
We are coming up on time here, Scott, any new projects that you’re working on these days.

Scott Kidd (23:34)
We are working on a hospitality project in Chesterfield area of the St. Louis MSA. It’s a very affluent area of St. Louis and it’s a baseball themed ⁓ hotel. We are working on a licensing agreement with a that’s not quite all the way there yet, but it’s pretty close. the idea being is that

We already have the land allotted there along with 206 multifamily units and 40 luxury condos, 200 key hotel. be Chesterfield Mall project. And it’s very unique because we want to take this and eventually do it in every major league baseball market. So it will morph into quite a large project because there are 32 major.

baseball markets ⁓ and some other smaller segmented ones that could be a good fit for these baseball themed type hotels. not every market is going to be robust enough to really carry one of these hotels. it could be, it has a lot of potential and that’s something we’re really excited about and I’m really excited about because everybody loves baseball.

Dylan Silver (25:00)
Scott, thank you so much for joining us today. Thanks for taking the time.

Scott Kidd (25:04)
well, thank you so much again. You know, I’m sure I’ll be back for a fourth time.