Origin’s acquisition officers vet more than 400 deals a year. We make offers on approximately 50. We win approximately 12.
There’s a large gulf between bids and wins because we’re very careful not to overpay.
Most but not all of the buildings we buy are designated for our real estate private equity funds. A fund is a portfolio of assets assembled over two to three years. Fund investors own a portion of every asset in it. It’s our core product.
Before a building is ever opened to online investors we buy it first. In other words, we don’t rely on online investors to purchase any of our assets. We own them outright. We then share them with others if one of two conditions is met.
1. The deal falls outside of our core investment strategy and, thus, outside of our funds.
For instance, we generally don’t invest in condo buildings. However, on occasion, one of our acquisition officers will be presented with a great condo deal, one that we don’t want to pass up.
Our two founders, David Scherer and Michael Episcope, still put their own money in the deal. The opportunity is then opened up to fund investors first. If there is room left after that, the deal is offered on our website to accredited investors.
2. The deal is too big for the fund to handle solely.
In order to ensure the fund is properly balanced, we do not let one asset consume more than 10 percent of it.
We successfully fundraised $151 million for our latest Fund III which closed on June 30, 2017. Well, the fund can’t take on more than $15 million of the $20 million or it becomes unbalanced.
So the fund will invest $15 million and the remaining $5 million will be opened to accredited investors online.
The broader point is that by choosing our fund, investors get access to almost all of our offerings. But we also don’t want its disciplined, focused strategy to exclude us from otherwise sound investments.
Crowdfunding then becomes a key way for us to do great deals that would otherwise either be just outside of our reach or perhaps outside of our core strategy.