Unwritten Capital

New Newsletter: Emerging Managers - Where the Alpha Is (link to get in your inbox in comments) TLDR: Emerging managers and folks who want to invest in them should reach out! --- At Unwritten, we spend a lot of time with emerging managers in niches. Friends ask why we don’t just focus on more conventional deals and raising a mega-fund to put more dollars to work and earn stable asset management fees? All the household names in the industry are going bigger and bigger in their raises every year… The answer is several fold. The first part is obvious – becoming a household name that can raise a ton of money is really hard! Nearly impossible. Institutional capital is consolidating. The ol’ “No one gets fired for choosing Microsoft” is applied to fund managers. “No one gets fired for investing with Blackstone” because allocators don’t get fired for picking a household name. They get fired for taking a risk that didn’t pan out. This is true even as returns for the big funds trend to average returns (on a good day!). Second, size is actually our strength. We can do the deals that the big guys can’t. Deals with attractive fundamentals AND upside. When a concept proves itself at location 3 or 4, there’s still meaningful alpha to capture: new products, creative partnerships, operational enhancements. Third might be the best part. Even before those bells and whistles, the real estate already underwrites to an attractive return, often higher than what the mega-funds produce in their best case scenarios. Last, and the cherry on top, is “capital markets alpha.” Because these deals are either too small or too early in their life cycle, the big guys can’t play there… yet. Once the larger funds can, the capital spigots open and two things happen: 1) performance get compressed and 2) those who invested early should get some nice cap rate compression as part of their return. The beauty of being small and in a new asset class is that you aren’t fighting with the same five mega managers to squeeze the last basis point of IRR out of an already low yielding asset. That gives us – and our partners – real pricing power as we pursue acquisitions. Those are just a few reasons why we don’t want to be a trillion dollar asset manager. We are excited about partnering with emerging operators early and building institutional-quality portfolios and scaling them to the point where larger capital partners can step in. We capture outsized yield in the early stages and leave the squabbling over bps of IRR to the big boys. If you’re an emerging manager looking for a strategic partner or an investor who wants to see tomorrow’s winners today, we’d love to hear from you.

Little kids make new friends easily. They meet on the playground. They share snacks at school. They wear each other’s shoes home by accident on the first day of Kindergarten (true story!). In business, it’s not as easy as wearing each other’s shoes home. You have to be out there pressing palms and heaven forbid and excuse the cliche, “adding value.” Maybe playing a little golf too! It’s hard freaking work. And just as rewarding as sharing snacks in the lunchroom. Part of the special sauce with what we’re building at Unwritten is the hundreds of venture investments that we’ve made into startups innovating in real estate and the built world.  Note - we are starting to have conversations for our next venture fund. Our first vehicle has a dozen plus breakout winners. Send us a note if you want to learn more. We work with those portfolio founders daily.    We are also constantly speaking with real estate investors and owners. This gives us an edge on both sides with companies and investors. OpCo and PropCo so to speak. It also puts us in a unique (and fun!) position helping the companies build and also having first looks at the best emerging real estate platforms with these teams. We love hearing about the latest and greatest. Tons of smart folks working on new and creative ways to play in the antiquated real estate industry we all find ourselves in. If you’re an operator building the next big thing - we want to meet you.  Investors looking to get ahead of the next institutional real estate asset class – we’ll get the best deals in front of you. Shoot us a note. PS. In the future, we’ll share more about some of these firms we’ve already partnered with - their thesis, operations, growth plans, etc. If there are things you want to hear more about, let us know and we’ll make it happen!

All about Housing! The United States is chronically under supplied on housing and current solutions aren’t enough to fix it. Especially in cities with high demand. It’s why an apartment in NYC costs multiples of what a mansion in downtown Detroit costs. Sorry Detroit caught a stray! There is plenty to be written about Detroit’s amazing revitalization efforts, but that's for a different day. The US needs new and creative ways to approach long term housing supply. So the question is…so what? That’s a multi trillion dollar question! And no one has been able to solve it fully yet. But there are a lot of ways to try and make a dent in the problem with creative opportunities. That’s where we’ve been spending a lot of time. More in our latest newsletter post. Link in the comments and please subscribe!

The Future of Real Estate is Built with OpCo/PropCos! Many of the best operators of this cycle will be built tech-first. And many are inherently scalable too. Because of our work on the venture side, those operators tend to find their way into our office. The old model where venture funds all the growth is over. These companies need two kinds of capital: Operating capital – to build tech, product, brand, and run sales and marketing. That’s what venture dollars are good for. Real estate capital – to…buy real estate. That’s not a great use of venture capital. In the OpCo/PropCo structure, the assets sit separately from the company so each can be funded with capital that matches its risk/return profile. The OpCo is where most of the risk belongs: Will the concept work? Can it scale? Is the team any good? Those are venture underwriting questions. The PropCo owns the real estate. This should be much less risky than the OpCo. Relatedly, it’s also much more easily underwritten. This structure is critical to the future of real estate innovation because it separates the types of risks incumbent in building these platforms and appropriately places them with investors who want and understand each type. We go deeper in our latest newsletter post. Link in the comments and please subscribe!

Real Estate Growth Needs More than VC (and we have some ideas!) Since ramping up at the end of 2020, Unwritten Capital has backed over 400 “real estate” “tech” companies in venture rounds. (Yes, the quotes are intentional. More on that in a future post.) As our portfolio has grown, a recurring theme emerged: Many companies don’t just need venture capital. They need real estate capital too. Early in these company’s lives, some need to buy or lease physical assets to prove their model and reach terminal velocity for their business. Enter Unwritten Capital! Unwritten Capital partners with next-gen real estate platforms to provide real estate equity checks from $1 million to $100 million. That is paired with hands-on support to get operators ready for institutional scale. Capital and Counsel are our calling cards. We love niche asset classes. We love real estate that doesn’t look like your grandpa’s “real estate.” We love backing bold operators reshaping physical space in new ways. We are actively partnering with the best next-generation platforms to help them win. Operators - ready to grow your platform with smarter capital? Investors - interested in co-investing in opportunistic and high-growth real estate platforms? (Read more. Link in first comment)

It’s newsletter time! Unwritten Capital plays at the intersection of real estate and technology. That’s the well that we will be going back to again and again. Please subscribe! Link in first comment.