On February 11, 2013 Terrence Tallen was invited to Indiana University to give speeches to the Kelley School of Business senior level real estate investment and Real Estate Club about the topic of Structuring A Joint Venture with a Institutional Investor. This intriguing speech centered around the value creation process and how finances play into that. Essentially what we do is we take a mall that is a B to an A by fixing the tenant mix, updating the common areas and leveraging parking rations etc. Our job is to serve the captive audience and look for uses that increase the draw and enhance the amenities of the center. Positively affecting the density of a project is key to value creation. Terrence portrayed a complete picture starting with how to identify a promising venture via offering memorandums, rent tolls, history, site plans, traffic counts, demographics etc.
There’s a distinction between institutional partners, using your own money with bank debt, and using other people’s money like investors. Less partners equals less costs, but typically smaller deals is the old fashioned way to do it. Whereas when you go to a bigger deal, we prefer to spread out money around. In those deals you wouldn’t put in a million, million and a half dollars, but a fraction of that along with our other partners. Internal rate of return is also something to be mindful of as well because you as an investor want to get the deal done and the value created as quickly as possible and sell the property because of the preferred return eating into the profits.
In conclusion, our knowledge of and relationships with retailers are our key strengths, but knowing about due diligence, capital calls, personal guarantees and operating agreements are all very important things in order to conduct business smoothly and be highly informed about the transactions you are making.