Black Creek Group hasn’t let lockdowns and remote working derail its fundraising efforts. In fact, the Denver-based real estate investment management firm is on pace to have its second best year of fundraising following record high levels of inflows in 2019. At mid-year, the firm had raised $1.1 billion, including $935 million from individual and high-net-worth investors and $180 million from institutional investors
That success is due to a solid infrastructure that the company had in place before the pandemic. Notably, Black Creek has leaned on its decentralized sales force, which it has had in place for nearly two decades. Two-thirds of its 45-person sales team is located around the country. So, even as COVID-19 forced office closures and limited in-person engagement, salespeople are still able to meet with prospective investors and advisors on the golf course or over lunch. “It’s a tremendous advantage to have an in-territory sales footprint,” says Black Creek Group CEO Raj Dhanda. “We can’t go into an office and have a traditional meeting, but we can still interact in communities where our salespeople live."
And like many other sponsors, Black Creek is also replacing traditional in-person road shows with virtual meetings, forums and conferences. The company is also doubling down on communication with both investors and tenants. For example, the firm conducts weekly calls with members of its portfolio management team and sends out monthly letters that outline in detail how properties are performing. “The reason that is important is that if you are communicating and addressing investors’ concerns, then it is a lot easier to continue raising money during this time,” Dhanda says.
Virtual meetings create new hurdles
Road shows have long been an important platform for raising capital, especially when firms are trying to get their foot in the door with a new investor group or financial advisor or have a new offering to pitch. “Road shows [are] a great way to introduce your particular themes and opportunities to invest in your company or your fund, and they are particularly helpful because you have a somewhat captive audience,” says Mark M. Goldberg, CEO of Griffin Capital Securities LLC and a board member for the Institute for Portfolio Alternatives (IPA).
Moving road shows online has created some new hurdles in what traditionally has been a highly relationship-oriented process. It’s harder to establish personal relationships without in-person interaction and some of the social rapport that often went hand-in-hand with conferences and meetings. Although people adapted quickly to remote working, shifting meetings and presentations online can make it more difficult to “read the room” so to speak on the level of interest and engagement of the audience.
One of the things that is surprising is that companies take the same power point that they used for an in-person presentation and use it for a virtual presentation, and then they are somewhat dumbfounded when the results aren’t the same, notes Goldberg. Particularly in a virtual format, you need to get to points very quickly and bring substance to the dialogue, he says.. “The length of time that someone is willing to spend with you virtually is literally a fraction of the time that they would spend focused on what you were presenting in an in-person format."
“We do try to be cognizant that you have to be more direct to the point and punctual,” says Dhanda. If there is a virtual meeting scheduled for 1 p.m., most people have another meeting or presentation scheduled at 2 p.m. So, they might very well leave regardless of where you are in your presentation. That’s different than if someone is physically in a room with you.
That being said, Black Creek has found that when someone is looking at you during that virtual meeting, their focus is almost every bit as high as if they’re in the room with you. “I don’t think people would have thought that virtual meetings could keep the level of engagement, but you really do get almost all of the benefit in a virtual meeting from an engagement and focus perspective without travel or down time between [when] one meeting ends and another begins,” he adds.
Finding creative workarounds
Most sponsors and fund managers agree that raising capital is part art, or the finesse in how information is delivered, and science. People often talk about the art and science of raising capital. “Those who have relied overwhelmingly on the art and didn’t give a lot of attention to the science have really found themselves struggling in terms of capital formation today,” says Goldberg. Investment firms and sponsors need a good CRM system. They need to be effective and strategic in digital communication and virtual presentations. Relationships still have a place in sales, but those relationships do have their limits, particularly in a world gripped by a pandemic where it is more difficult spending time with people, he adds.
Fund managers and sponsors are leveraging digital tech as workarounds to in-person meetings and property tours. For example, some managers are creating short videos that highlight a case study, members of the management team or the investment strategy. “There are digestible ways for investors who are interested in the strategy to get to know a manager better without having to do the travel or the in-person meetings,” says Susan Swanezy, a partner at global capital advisory firm Hodes Weill & Associates.
And it’s not only those groups raising capital that have had to adapt to new methods. Institutions in charge of vetting new managers traditionally have conducted their underwriting in person. Meeting fund managers and sponsors in person is especially important when investors are committing funds for seven to 10 years. Early on in the pandemic, many institutions hit pause as they evaluated portfolios and strategies. “As the COVID crisis has endured longer than any of us has expected we’re now seeing investors and consultants adopt more virtual ways of doing due diligence,” says Swanezy. Those new methods include virtual tours, one-on-one video calls with all of the members of a management team and much more in-depth reference checking, she adds.
Some sponsors are finding more success with virtual road shows than others. The key to moving past that first introductory meeting often hinges on the offering. “If it is a sector where people want to get exposure sooner rather than later, they are willing to make the sacrifice of forgoing in-person meetings,” says Swanezy. For example, there are lots of creative approaches to presentations and due diligence for strategies that focus on industrial, life sciences or data centers than for some other sectors where there may be more of a wait and see approach, she adds.
Certainly, sponsors and investors are looking forward to a return of in-person meetings and property tours. However, road shows may have more of a hybrid look and feel in the future. If a typical sales cycle is three to five touchpoints with a potential client, all of those touchpoints no longer need to be in person. “You can’t replace sitting across the table from someone, and having their focus and establishing your own credibility,” says Dhanda. “But I think there is now a growing acceptance [of] the fact that the first one or two meetings in that sales cycle can happen virtually or through other digital communication.”