Is it safe to bring a deal to the "big fish" in my market?
There's a great value add strip mall in an awesome location near my house.  I know who the owners are and I'm confident I can at least get them to have the conversation about selling. However, I've never bought any CRE before. 

If I wanted to bring this deal to an experienced investor, to propose a JV, do I need to have it under contract first? Not really sure the logistics of how this part should work. I just don't want to introduce the sellers to the buyers and then get boxed out of the deal, if that makes sense. 

Context: when I say JV, I mean that I'd take the absolute smallest percentage with the expectation of being able to learn from them as they drive it.
[{"id": "iywd2mv", "text": "You need to have more control or agreements in place before you bring it up. The big fish might already know about it.", "replies": [{"id": "iywnzrl", "text": "Noted. Thanks for this feedback", "replies": [], "depth": 2}], "depth": 1}, {"id": "iywlo6h", "text": "Why would they give you any percentage at all? If you don\u2019t bring anything to the table other than the relationship, and expect them to run the actual deal and be the equity I don\u2019t see any possible way that they cut you in. If you have the track record and experience to actually manage the deal, then I guess there\u2019s a sliver of a chance? But still unlikely. Not trying to rain on your parade either, just being honest.\n\nTo answer your question, and assuming you\u2019re a value-add guru who is going to actually manage the deal, you\u2019d want to pitch this to experienced investors the same way any syndicator would. Build out a model and run the numbers, give the investors your target return and sell them on all of your assumptions. Prove that you\u2019ve stress tested different scenarios, give them details on the debt you\u2019re underwriting into the deal and back it up by actually talking to folks in the debt markets to make sure your assumptions are realistic. Make sure you have your renovation numbers dialed in, talk to some GCs and get quotes. Talk with some folks in leasing to make sure your rent numbers make sense. Make sure you have contacts in the municipality in case you\u2019re doing any rezoning or additional construction. \n\nAre you a broker, syndicator, GC? Or work in REPE? What\u2019s your background? What\u2019s the amount of equity you need?", "replies": [{"id": "iywnh07", "text": "Thanks for the input. I think the value Id bring is that I would PM the GCs and tenants for free, for a certain period of time in exchange for the ability to buy in. If they want their PM involved for peace of mind that\u2019s fine - they can oversee me if they want. I live very close and would be the boots on the ground and make sure the trains run on time. \n\nI\u2019m a PM for a FAANG and I\u2019m confident my skill set would carry over. I\u2019ve also PM\u2019d GCs for my own residential RE investing. \n\nI\u2019m not sure how much equity I\u2019d even ask for. I\u2019ve never jv\u2019d anything. Only done residential investing myself. Don\u2019t really need a huge slice. It\u2019s more about learning from the pros", "replies": [{"id": "iywo955", "text": "I would structure your equity such that your PM fee goes straight into the deal as equity. Probably not too dissimilar from a land owner throwing their land into a deal as equity. You might want to have a number based on a %fee based on rents throughout the life of the deal in mind to ask for upfront.", "replies": [], "depth": 3}, {"id": "iz6mbx9", "text": "These leases are NNN.  Why would a property owner need \"boots on the ground\" nearby?  What makes you qualified to be a PM of a strip center?  More specifically, why would a property owner employee you to oversee their property versus utilizing their own PMs  who already oversee commercial properties?\n\nAlso, offering time being a free PM is not worth any equity share in a property.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iywubx4", "text": "Get it under contract then start talking about it. Make sure the buyer on the contract reads and/or assigns so you can create a buying entity. Good luck", "replies": [{"id": "iyx051s", "text": "Bad Idea .... almost every deal that has ever been brought to me by a little guy, was completely fucked up on the purchase.  Usually they paid too much and their terms were dog shit.\n\nI'll give a nice finders fee and let you in on the workings of the project but please get out of the way !", "replies": [{"id": "iyxnjdg", "text": "Can you give some examples of what made it shitty?", "replies": [{"id": "iyyppg9", "text": "As a lender, for starters, there is a limited cap allowed for closing costs so if the main partner is over that amount, the LTC goes down along with IRR.\nNext as a lender is the headache of analyzing any waterfall structure and if there are any triggers for change in ownership that inflates legal costs and possibly lowers LTV.\n\nFinally, the usual small deal brokers brings big investors, no analysis and documents provided are nearly always garbage. Major investors and lenders are usually provided a made up proforma that has no support from leases, bank statements, accounting statements, missing true-ups, and tax returns.\n\nFor the lack effort from small brokers that typically don't know and don't care to add any value other than forward along requested documents they deserve minimal commission. The best way to get a cut of a deal is for OP to figure out a price they can realistically get a lender and investment partners, then get the seller to sign a purchase option contract before putting together the deal.", "replies": [{"id": "iyyqif1", "text": "Thanks for taking the time to post this, but isn\u2019t this obvious? Are people just desperate to throw together big deals with no skill set?", "replies": [{"id": "iyyv67m", "text": "No. I went from doing $10+ million loans to deals less than $5million.\n\nThis is why this forum exists.\n\nThe broker business model of deals over $10M is a well polished offering memorandum package with supporting documents from brokers that typically have control of the seller/borrower with an exclusive listing or longer term relationship.\n\nThe typical business model of a broker under $5 million is smile and dial with minimal deal analysis. Cast a wide net and try to focus on medium size fish the big brokers won't bother with. As OP indicated they might be able to get control of the seller, but obviously don't have the track record, skill, or financial ability to buy or list this deal on their own.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "iyx4ass", "text": "This is what I\u2019m afraid of. Don\u2019t know enough yet to really put a commercial deal under contract with the right terms and pp", "replies": [{"id": "iyysdmn", "text": "Offer the seller a non disclosure agreement to the seller and request the following documents, rent roll, 6 months bank statements, 3 years income statements, true-up reports. You will get push back and tell the seller that you need the info to put in your best offer to maximize their price. Do the analysis and ask lots of questions about what doesn't make sense. Leave wiggle room in the non disclosure to share documents with investors, lenders appraisers and others. Maybe do a walk through with someone you know that can give you a rough idea of deferred maintenance to look out for to input for your IRR calc.\n\nOnce you have put together a good price that would get lending approval and hit an IRR for an investor, then submit an purchase option agreement to the seller that would give you 6+ months to put together the deal.\n\nThis will also manage expectations to the seller, but mean higher financial risk to you from the point of view if your purchase price is too high and can't find a partner, you lose the purchase option deposit. vs. losing the commission on having the seller and buyer go around you.\n\nThe easiest way is to get the exclusive listing that gives you an option to bring on a co-broker and at a commission that will get a big broker willing to partner with you.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iyxhfb0", "text": "Can you and some friends or people\nYou're comfortable investing with buy it?", "replies": [], "depth": 1}, {"id": "iyxzqlm", "text": "Must have under contract. Do whatever you have to do to get control. Then go to the money. \n\nI\u2019m in your spot sometimes and I\u2019m the money sometimes depending on deal size", "replies": [], "depth": 1}, {"id": "iyy2q2z", "text": "The big question is what makes this a value add deal?  Vacancies?  Crap tenants and bad appearance in a good neighborhood?  Expiring low rent leases?\n\nDo you know the owners or just who they are?\n\n\nGCs are paid to manage their subs and the project. Be careful about thinking \"watching the GCs\" has any value or leverage in the deal. Most will think this will be a distraction with little value IMO. \n\nYour leverage and value will be 1. Having control of the deal (contract) 2.  Having a real, no brainer price to make it fly 3.  The threat of you closing and executing this deal without them, giving them FOMO on a potentially great deal. And distant number 4. A reasonable expectation of participation both as part of the project and financial gain.  \n\nYou will also need cost to execute, timeline to execute (lease expirations can be critical and possibly handcuffing here), knowing EXACTLY where the value add is and why, maybe even willing new tenants to fill vacancies or replace current tenants.  \n\nI have always been happy to look at deals like this from players with not enough experience to close and execute. I have yet to buy any of them. It just seems to me that almost always there are big issues with the numbers, including cost to execute, time to execute, and thinking the price is good.  This is not meant as a knock on you, it's just my observation over 20 yrs. \n\nCan certainly talk more privately but I would say you first need to establish that the seller will sell, and their first number they tell you. Along with their financials from 2021 and YTD 2022 and rent roll. \n\nGood luck with the deal, it is never lost effort if you learn things. Make the phone calls.", "replies": [{"id": "izowmnb", "text": "really appreciate all of this - thank you!", "replies": [], "depth": 2}], "depth": 1}, {"id": "iyy4jv8", "text": "If you can\u2019t trust someone to not box you out of the deal, you damn sure don\u2019t need to be making any joint ventures with them.", "replies": [], "depth": 1}, {"id": "iyykax0", "text": "You can get equity for bringing the deal 5-15 %. You must trust the big fish. There must be clear path and timeline to adding value. You gotta shoot your shot.", "replies": [], "depth": 1}]