The Loewen Capital Investment Process
Most of the investment professionals I have known and worked with are authentic and great at what they do, but not all financial advisors are alike, and neither are investment choices. My experience in the financial services industry has taught me a lot about those differences and shaped my current philosophy and approach to investing. The right professional and the right investment can be different from one person to the other. It should be a tailored fit, much like a good suit. So how do you go about finding what is right for you?
You should start with transparency and a good understanding of the due diligence behind the investment. At Loewen Capital we have a streamlined and proven process for ferreting out investment projects that meet our objectives and that of our clients. We insist on complete transparency from our project sponsors and deliver the same transparency to our clients. Our investors have a full understanding of what they are investing in. This is vastly different from investing in a large company, mutual fund, REIT or ETF.
Our process begins in one of two ways. We put word out to our contacts that we have capital to deploy for a project or we hear from individuals in our inner network that send us deals to consider. Before making any further move, I ask myself if this is a partner with a proven track record and whom I believe can make the operation work.
The best opportunities, highest return, and most promising projects are meaningless if the people involved cannot execute. If we do not know them or haven’t had experience with them in some manner, we are slow to move forward with them. We have high standards and rigorous protocols when considering partnerships.
The next step is to evaluate the overview of the project. We need to be provided with a written summary to show the basics of the deal, to see if it is a location and type of project that we are interested in. We look closely at the returns they have underwritten to see if they meet our criteria (13% – 17%) or are potentially worth moving forward with. This is where the risk adjusted analysis comes in.
At this stage, if we are interested we will set up a conference call with the potential partner or project sponsor to find out more. This is where we want them to share their vision and go into more depth. We dive deep into the detail to fully understand the substance of the project.
If at the end of the call we still like what we hear, then we ask for the entire package: full underwriting with all the information and data they have compiled. We’re looking to see if they are as meticulous and thorough as we are in our approach to investments. We want the full monty; appraisals, lease and sales comps, market trends of both location and the asset type (multi family, industrial retail, office buildings, etc.) It’s important as well to know the construction budgets, hard bids, and General Contractor information. We ask firm questions about the General Contractor; do they have a track record for this type of project and has the sponsor used them before?
Our team combs through all the sources and uses of the capital and looks at the debt options along with all the loan commitments and documents. We examine all their legal documents, operating agreements, and entity structures so we know who ultimately has control and decision-making power. The Excel underwriting spreadsheets are massive and complex. It’s not an easy process but it’s necessary to maximize a successful outcome.
Here is when we begin to verify the information. We do not take for granted the information that has been provided. We go online and make calls to validate the numbers. We have called apartments in the area and asked what they are charging in rents and arrange to physically visit local apartments to compare properties. If we have connections in those cities, we will reach out and do additional due diligence and fact checking.
At this time, I reach out to float the project and expected returns to a handful of investors to gauge interest, availability of funds and timing to close. I like to know we’re looking at $250 – 500K to be available before committing to the partner we will fund $1 -2 million. We form a new LLC for the project and connect with our attorney to create the legal documents, such as the operating and subscription agreements.
Once we have completed the process of learning as much as we can about the project, the people, and the area, we get on a plane to walk the property and drive the city ourselves. We are boots on the ground investors. We need to see, hear, touch, and feel the project, the surroundings, and our potential partners before we sign on the dotted line. We have walked away from several deals after flying in and spending time on the site. If it does not feel 100% right; then the time we have invested won’t matter. Sometimes you need to be able to walk away.
There are times I can spend up to 45 days on a project before I even bring it up to investors, however we have found and funded a deal start to finish in 7 days. That transaction was local, we knew the sponsors personally and I had clients who were eager to put capital out after delivering on a previous project. With great sponsors an opportunity can be quickly vetted once we see how detailed they have been in their underwriting.
My team and I have skin in the game, I invest capital along with my investors which is something you won’t find with a Financial Advisor when investing in securities markets. We take our investments very seriously and would not expect anything less for our clients than we want for ourselves. We are individually experts in our chosen fields and collaborate to bring to you, our client, a solid investment opportunity with a realistic expectation on the return and time horizon. I’m always happy to meet with interested investors one on one. The best part of my job is the connection and communication I have with my clients, give my office a call at any time.