Small Balance Real Estate – 2015 Reflections

Matt Burk
December 30, 2015
Small Balance Real Estate – 2015 Reflections

Working on plans for a new year and reviewing performance from the past one often puts me into a reflective mood, which I can be prone to by temperament anyway. Something about the time of year, the turning of the calendar, and perhaps just getting older seems to hasten this natural tendency in me and I cannot help but think about all that has happened this past year in Small Balance Real Estate (SBRE). Three weeks ago, my executive team and I went to Seattle to do our annual strategic planning session for 2016 with Ron Huntington, an executive business coach we’ve engaged for more than a decade, and since then we’ve discussed, debated, and tried to finalize our priorities, goals and game plan for 2016 (and beyond). Fairway America as it is today was quite literally born in that city four years ago (while there for the very same reason) in December 2011, which had been a particularly tough year on the heels of 3 more very tough years right before it.

We had made the incredibly difficult and painful decision just 4 months or so prior to wind down our largest fund to date, a fund which was a culmination of more than a decade’s worth of work. At the time, not only our fund but in fact our entire business and livelihoods were facing what appeared like certain death unless we could somehow reinvent ourselves. There was no simple solution and we had many forces constraining our options, including owing a lot of money to a single bank who wanted it back as quickly as possible, no access to new capital, a completely depressed market for the assets we owned, the recent lay off of several key employees, including the total elimination of our entire sales team, and a mission to shrink the only existing source of revenue we had. To the outside world, not to mention to my own deepest fears and insecurities, the situation seemed bleak. We had two forces working in our favor, however, that are in combination much more powerful than either one without the other. One of those forces was absolute and total necessity, which has been correctly described as the mother of invention, and the other was sheer determination to succeed (or perhaps to not fail). And that was the situation when the idea we needed came to us that unforgettable day in December 2011 in Seattle.

In addition to the tactical execution of the wind down in a way that enable us to survive while producing the best result we could to our investors, we also had to try to figure out where we took the business from that nadir.  As we contemplated our options, we placed several criteria on any future business model we might pursue. One of the criteria we placed on any reinvention was that it had to eliminate all of the things we hated about the old business model and retain only elements we liked and deliberately decided we wanted to keep. It had to originate from and leverage our core predilections and preferences (i.e. we had to enjoy the work), our core competencies (i.e. we had to be good at the work), and our core values (i.e. the work did not require us to compromise our principals or prostitute ourselves for money). The point we had reached required us to dig very deep and fortunately for us, highly painful experiences foster greater awareness and from greater awareness springs more consciously designed strategies and plans. The idea for the transformation of our model began those two days in December 2011 in Seattle and it has evolved and grown in myriad ways since then in rapid succession. It has been very hard building something completely new while evolving away from the old and I have worked as hard as at any time in my life during these past four years – but the time has flown by because we have so thoroughly enjoyed what we are now doing.

And truly we are doing things that no one else (that we know of anyway) is doing. Stated more accurately, we are doing a number of things in combination that no one else is doing and in ways that no one else is doing them. The simple starting point was the realization that every Small Balance Real Estate Entrepreneur faces more or less the same forces that constrain the growth of his or her business and these forces are not easily identified, let alone understood or mastered, at least by most people. Largely it is the capital side of the business that presents the greatest challenge and there are many inter-related components that combine to effect that side if it is to be done really, really well. It can rightly be considered a long term proposition to genuinely build an SBRE business that transcends the sticking point beyond which most cannot travel, and there is not a clearly marked path to take to get there. Our goal is to help others make that journey and in doing so, travel further and further along that same path at the same time ourselves. It is not an either/or (this group or that group) proposition but rather the path is wide enough for everyone willing to travel down it to make the trip. Frankly, we believe that the more that make the trip, the stronger it makes all those of us that travel together as we can share the accumulated knowledge, resources, and experiences for mutual benefit.

Simply stated, our mission is to build the world’s leading community of SBRE Entrepreneurs and High Net Worth (HNW) investors who are by far the best suited capital source for their enterprises. We intend to continue to do everything we can to define and lead that space for the mutual benefit of both constituencies as well as ourselves. For the SBRE entrepreneur, our promise to you is to provide the tools, the knowledge, the resources and support you need to help you systematically attract capital to your small balance real estate business. For the HNW investor, participation in the Fairway and community gives you preferred access to expertise, information and opportunities from the trusted authority in the SBRE space. Through our educational products and services, our fund creation and other advisory offerings, our online Marketplace of SBRE funds, our live events, and our own proprietary funds to invest in and alongside other SBRE entrepreneurs and fund managers, we will continue to develop and provide the most comprehensive suite of services to both SBRE entrepreneurs and HNW investors available anywhere in the world.

Although we have traveled a great distance in four short years, we are, in many ways, still in the very early stages of this business model. There is a great deal to be done to truly build this community and facilitate the conditions under which participants on both sides of the equation, which must by definition be in balance in order that it not be lopsided, may genuinely and deeply benefit from being a part of it. We are proud of the work we have done to date toward that end, but know that there is so much more to do. All of us at Fairway are deeply committed to doing that work, and we are looking forward to traveling further along the path with you in 2016!

Happy New Year!

Photo of Matt BurkMatt Burk is founder and CEO of Fairway America, LLC, and, and Chief Investment Officer of Fairway’s two proprietary nationwide small balance real estate (SBRE) asset based pooled investment funds, Fairway America Fund VI, LLC, and Fairway America Fund VII LP. Fairway is the nation’s premier consulting, advisory, and investment firm in the SBRE private pooled investment fund space, providing a full spectrum of practical, real world products and services (including capital) needed for true success for SBRE entrepreneurs all over the U.S. Matt is a highly regarded adviser, consultant, and mentor to dozens of SBRE fund managers and author of a widely read blog followed by serious SBRE entrepreneurs and investors. For over 20 years, Matt has led Fairway’s deal underwriting as well as capital raising efforts in Fairway’s seven proprietary funds and individual trust deed investments, resulting in more than $250,000,000 in capital raised from accredited investors through more than 1,000 SBRE deals. He is currently working on multiple SBRE fund consulting engagements nationwide, authoring a book on how to raise capital for and effectively manage pooled investment funds, and dedicating his efforts to create greater awareness and drive more capital to the many high caliber and deserving SBRE entrepreneurs around the U.S.