Fred Schnider Investment Model
The Fred Schnider Investment Model is a new approach to investing in real estate opportunities. It is an alternative for developers to gain private equity for new development and repositioning opportunities. The foundation of our strategic model is built from decades of participating in billions of dollars in capital transactions invested across a broad spectrum of real estate sectors. This new investment model utilizes Fred Schnider’s horizontally integrated platform to achieve superior investment results and provide deeper resources for both our sponsor partners and our investors.
The company formulated its strategic model through decades of participating in transactions from $1 million to $200 million, and with on-going, extensive in-person interviews of Washington, DC area developers and builders of all sizes, as well as bankers, fund managers and other private equity sources. Fred Schnider responds to what we learn from our partners and other market participants, constantly striving to innovate and improve the way we do business.
Private equity is more important than ever for completing the capital stack of a real estate development strategy. The metrics utilized by banks remain extremely rigid and constrained, causing sponsors to seek out strategic partnerships with capital providers. Fred Schnider has identified tremendous opportunity in the $1 million to $3 million investment range as private equity investors are often increasing the minimum amount of capital that they will invest.
The broad resources and capabilities within our company can execute our partners’ vision and strategies. By aligning our company with our sponsor partner, in risk and decision-making, the overall financial metrics of the project are improved. This results in better acquisition, development and construction financing terms, more lenders willing to provide financing, and improves the overall financial performance of the project. The company allocates a portion of the improved financial metrics back into the quality of the project and into the community. This in turn enhances our brand, the pride that we have in our projects and reduces market risk by delivering a product that is higher quality and more appreciated in the marketplace.
Direct ownership of a sales and marketing company, Smith | Schnider (SmithSchnider.com) provides off-market access to significant deal flow across all sectors in the real estate industry. This allows us to deploy capital across more transactions in diverse but attractive geographic target areas, mitigating risk, as well as expanding our relationships.
When we learn of an opportunity, we apply real-time market research and analysis before the opportunities are ever marketed widespread, if at all. This provides us with a project pipeline of superior quality compared to other investors, and is also a key to why our development partners give our company a priority for investment opportunities.
The company manages its assets on a state-of-the-art digital information sharing platform, so owners and investors can review opportunities, invest, track execution and performance of business plans, and receive reports and distributions.
We are socially responsible investors committed to the quality of the projects in which we invest, and how they contribute to the surrounding community. Our co-sponsors have also demonstrated a commitment to delivering quality properties and enhancing the communities in which they build.
Fred Schnider’s Key Differentiators:
- We understand the underwriting of the deals in which we invest and guarantee our investors’ principal as a result.
- We have the capability of providing capital, research analysis, marketing and sales, financial modeling and analysis, engineering and construction management, property management, as well as accounting and reporting, “back of the house.”
- Our team is poised to perform timely and appropriately targeted due diligence on all our investments. We have the experience, the track record and the ability to source successful investments, positioning our capital alongside our sponsor partner rather than in a preferred debt-like position in the capital stack.
- We are a genuine collaborator, providing true entrepreneurial capital and helping our sponsor partners successfully execute development projects.
- Our capital is aligned with the risk profile of our partners and not preferred lenders.
- We think and act like developers not preferred lenders.
It is important for the company to express to our potential sponsor and to our investor partners discernable metrics that must be met in order for us to consider an investment financially viable. Fred Schnider seeks opportunities that will generate a targeted IRR of at least 35% over the life of the investment and a multiple of 2x.
In many cases, we can exceed those parameters. In certain cases, we will deviate from minimum returns if the relationship with the sponsor is extremely important to us, or the investment is of such a unique and high quality that we think it is good business to invest. If we believe through our research and our own financial analysis that the opportunity meets our investment guidelines, we will conduct in-depth due diligence prior to investment.
We will be involved in the project from inception through completion:
- Participating in major decisions with the sponsor, key development team members, other capital partners and lenders
- Inspecting construction and reviewing contracts and other pertinent documents
- Preparing monthly reports for our owners and investors
While we directly invest in longer term hold opportunities, Fred Schnider fund opportunities are scheduled for no more than 3-5 year hold periods. Our fund model has several unique features which may be discussed directly with company representatives.
We are excited about what we do and seek to provide a “hotel” level of service to our sponsor partners, owners and investors with the goal of creating long-term relationships.
Summary of Fred Schnider’s Investment Philosophy:
- Fred Schnider aligns with its sponsor partners interests. We seek like-minded development partners with best in class reputations and track records, who believe in quality, sustainable design and in making positive impacts on the communities where they conduct business. Commonly private equity investors are most concerned about the investors preferred returns, complex waterfalls and security for the investments, acting more like secondary lenders than partners.
- Fred Schnider only invests in real estate opportunities, focusing primarily on new development, creating value from the ground up. Typically, others invest broadly across diverse asset classes and geographic regions therefore bringing little expertise or other resources to the partnership…just capital.
- Fred Schnider focuses on tranches of capital in the smaller $1 million to $3 million range that are often unpursued by the established private equity community. Through careful underwriting, Fred Schnider aligns with its sponsors without minimum return hurdles or preferences. We believe that cumbersome investment hurdles and preferences leave little if anything left for the sponsor partners’ efforts and do not result in positive outcomes for anyone.
- Fred Schnider brings deep horizontally integrated systems available to our partnerships, including financial analysis, construction management, accounting and reporting, property management, sales and marketing, and research and engineering.
- Importantly, our direct ownership and management of a sales and marketing company produces significantly more quality deal flow than other funds.
- Fred Schnider is focused on how our investment model can help the growth of our partners by enhancing our partners’ revenues, and by insisting on high standards for a development’s sense of place. Our model can both mitigate risk by reducing debt, and obtaining better terms and rates for required financing through an enhanced sponsorship group.
- We strive to maintain a select group of preferred sponsors that align with our values and will look to us as the leading equity source and development partner for their projects.
For more information on how you can invest either directly in one of our projects or through fund opportunities with diverse holdings, please contact Martin L. Schnider at MSchnider@FredSchnider.com or at (301) 502-5586.