The two rules that saved eleven deals over four years
Started with 62k I'd carved out of the service business over a few years and a plan to put it into deal-level real estate without owning anything. Eleven positions across three platforms, average commitment 5,600, mix of about 60% equity and 40% debt by dollars.
Where it stands. Six positions have closed out. Blended realized on those six is roughly 9.1% annualized, which is inside the range I underwrote and below the range the offering pages advertised. Of the five still open, three are performing, one is paying a reduced distribution, and one is a write-down I'm carrying at about 40 cents on the dollar and will probably carry to zero. My best position returned 1.61x in 31 months on a small industrial deal that leased up faster than modeled. The write-down was a retail conversion where the anchor tenant never signed.
The part that nearly broke it was reporting, not performance. One sponsor stopped sending quarterly updates for two straight quarters. Emails went unanswered, the platform's investor relations person told me they were following up. When the update finally came it was three paragraphs and disclosed a loan modification that had happened five months earlier. Nothing about that was illegal as far as I know and it was still the moment I understood that my information is exactly as good as the sponsor chooses to make it.
Two rules I'd keep. First, no single sponsor holds more than 15% of the book, measured by dollars committed, and affiliates count as one sponsor. That cap is the only reason the retail write-down is annoying rather than serious. Second, once a year I write a page on each platform, what I've funded there, what got paid, how they handled the deal that went wrong. The page on one platform got short and unenthusiastic in year three and I stopped funding new deals there. That decision looks better every quarter.
What I'd change is the pace. I deployed the first 30k in about seven months because I was excited, and four of those positions were funded before I had any real basis for comparing sponsors. My later picks are better and it isn't because I got smarter about property. I got a set of sponsors I'd watched behave for two years.