In DRU’s last article they introduced an excerpt from Scott Chaplan, Esq. Chairman and Managing Director of Del Rey Urban‘s new book, Money Matters: World’s Leading Entrepreneurs Reveal Their Top Tips To Success. The excerpt gave examples on how to give extraordinary returns to ordinary investors in any market!
This week DRU will release the following excerpts from the book where Scott presents how they maximize investors returns through DRU’s unique business model and drive customer acquisition cost down in a very competitive market.
- The Fund Manager’s Dilemma
- Maximizing Investor Returns: Changing The Model
- Customer Acquisition Cost in a Shifting and Competitive Market
- The Transactional Value Chain
- Brokerage Operation
- Design by Consuela®
- Greene, Fidler &; Chaplan, LLP | In-House General Counsel
Maximizing Investor Returns: Changing The Model
Customer Acquisition Cost in a Shifting and Competitive Market
Capital, at present, is abundant in the market. Pricing is reaching unprecedented levels in our core markets nationally, rents are at an all-time high, CAP rates are lower than interest rates (a material challenge for all investors), and the national pattern of economic gain is the longest consecutive period I’ve witnessed in my life (120 months is the record for our country; we are at over 90 months of consecutive growth now).
The traditional real estate investment fund has a two percent management fee for assets under management (“AUM”), a 20 percent carry as a participation in assets acquired by the fund (the “Carry”), and an organizational fee traditionally set at one percent. Since most fund managers are financial engineers and not operators, the standard prism is fee generation which, in competitive markets, may prove antithetical to the interests of investors. By focusing on the carry and mitigating fees wherever and however possible, we can remain profitable and provide higher, more stable returns for our investors. We accomplish this through vertical integration and pass the attendant savings on to our investors and consumers (investors who borrow from or co-invest with us). We also achieve profit goals through efficient execution of our projects resulting from managing the majority of the elements of the transaction.
The Transactional Value Chain
The more points we touch in the transactional value chain, the lower the incremental cost to our investors and consumers. Lower costs to each of these subsets equate to higher, more consistent, and risk-mitigated returns for our investors.
DRU Brokerage and its DRU Estates and DRU Commercial divisions afford us deal sourcing in- house and the ability to react quickly in a changing market (in addition to cost coverage and cash flow). Our two office boutique brokerage will end 2018 with more than 50 agents in a distinct construct the market has never seen. As investors and operators first, we have a better understanding of the value chain our clients need. As a key client, we manifest our expectations throughout the brokerage and train our DRU family accordingly.
Design by Consuela®
DRU Brokerage competitors are not eating their own cooking. We source for ourselves, scope rehabilitation and value-add prospects for both commercial and residential opportunities and provide these skill sets and relationships to our third-party clients. Our in-house design is performed by Consuela, a principal who is vice-president of DRU Brokerage, managing director of its estates division, key residential sourcing and disposition agent. Our sell-through velocity is enhanced for all of our clients as a consequence of our deep understanding of what it takes to ensure market adoption once a project is exposed.
Greene, Fidler &; Chaplan, LLP
In-House General Counsel
I am a founding partner of Greene, Fidler &; Chaplan, a family business office, and real estate firm established in 1995. GFC acts as general counsel for the DRU Family of Funds and all affiliated entities in addition to many clients who own tens of millions of square feet of commercial and multi-family residential properties nationally and internationally. We are one of the most active firms in California in the landlord-tenant space, affording us a seat as thought leaders and first movers for our brokerage, management and investment arms. We also ensure less expensive, more comprehensive problem solving and documentation skills than our competition, who hire advisors as needed, work to bring them up to speed, and hope to achieve the cohesive fluidity our well-worn path affords.