iintoo’s Due Diligence Process, Explained

March 10, 2020

While your investment journey with iintoo typically begins when you click into one of our listed offerings, the back-end work involved in bringing you each and every one of these deals typically commences months in advance. In fact, the offerings you see on our portal constitute the <1% of all opportunities we review which are approved through iintoo’s selective vetting process.

Below, we provide some clarity on some of the most common questions we’ve received regarding our due diligence criteria and what happens to an investment before you see it.

 

 1. How does iintoo decide which deals to list on its platform?

Before considering the merits of a sponsor’s proposed project, iintoo’s acquisitions team first evaluates the sponsor’s company across a multitude of baseline preconditions. After a sponsor has passed our review, our experienced team of real estate experts, analysts and risk management specialists takes precise measures to ensure that the sponsor’s investment opportunity meets our rigorous standards. 

You can find more detailed criteria for both our sponsor evaluation and deal-level due diligence below.

 

2. How does iintoo select which sponsors to work with?

Our sponsors are sourced through a combination of established industry sources, institutional partners, capital markets advisors and mortgage brokers. In general, when evaluating a sponsor we look for the following:

  • Strong track record: iintoo requires that sponsors have completed several relevant, full-cycle deals which are similar deal size and scope (asset class & project type) as the deal at hand, within a similar submarket.
  • Effective scale: we work with established sponsors who have adequate full-time personnel, strong in-house resources and local infrastructure capable of executing the full project pipeline and proven post-investment reporting capabilities. Sponsors are typically expected to have a portfolio value of >$75 M in cumulative assets managed and other criteria depending on the subject asset segment.
  • Clean history: a sponsor’s must be impeccable, and all of our sponsors have also undergone a thorough credit score review, media audit and background check to screen out companies with prior legal, financial and reputational issues. 

 

Furthermore, our business development team conducts in-person office visits with every sponsor in our network for a gut-check for compatibility and integrity. 

 

3. How closely does iintoo work with each sponsor on a given deal?

iintoo works closely with vetted sponsor companies to create pre-approved business plans for each project which advance the best interests of iintoo’s investors and underwrites every single deal offered to our members on a firm commitment basis. 

This means that in the event that we are unable to raise a full raise amount through our investors, we will invest our own capital in order to ensure that we meet our closing obligations to the sponsor. In short, we stand by each and every deal we offer our investors and our relationship with each sponsor does not end after a deal is fully funded.

 

4. What is iintoo’s process for evaluating potential deals?

At iintoo, we leverage our in-house data and team of experienced real estate professionals to better understand the risk/return profile of each opportunity. When evaluating a deal, our team of analysts generally focus on:

Asset evaluation

  • Property type: we consider a broad range of commercial-grade properties ranging from multifamily and student housing complexes to office buildings and mixed-use properties. 
  • Acquisition background: it’s imperative that we understand the seller’s background, investment and original investment rationale, holding period, reason for sale, and how the deal was sourced by the sponsor.
  • Property condition: iintoo reviews past renovation and condition reports, seller P&L and financials, historical occupancy levels, environmental reports.
  • Submarket trends: we conduct thorough analysis of local economic drivers such as demographic and migration shifts, employment trends and past performance during economic downturns, and compile data on local asset comparable performance ranging from occupancy levels and rent growth to renovation levels and sales data.

 

Business plan assessment

  • Type of investment: iintoo generally focuses on value-add or core-plus opportunities that stand to benefit from some degree of renovation or repositioning of the property in the market.
  • Equity size: iintoo typically invests $2-5M per transaction, typically as the majority limited partner.
  • Equity horizon: in general, we aim for a 3-5-year investment horizon, irrespective of how long the sponsor holds the property. 
  • Overall feasibility: our acquisitions team and analysts incorporates the above information and dissect the sponsor’s plans for the asset interior, exterior and common areas, and the projected capital expenditures, renovation schedule, operating expenses, and revenue growth to check for project viability.

 

Once we have all the requisite data, iintoo runs multiple project scenarios & sensitivity analyses under different economic conditions in order to inform our business decisions. Our resulting risk/reward evaluations bear substantial weight on our final terms negotiation with the sponsor. 

 

5. How do you finalize a deal agreement with a sponsor?

Once we agree with the sponsor on the business plan and deal structure, our executive investment committee providing oversight throughout the approval process prior to issuing a final term sheet. 

Typically, our agreements are structured in a way which prioritizes investor payout through conditions such as the offering of preferred returns, with the sponsor making money after our investors have taken their potential share of the profit. As a result, our due diligence mechanisms for this stage are designed to deliver on investor expectations of reduced risk while rewarding sponsors who manage to exceed our expectations.

  • Draft JV agreement: Our legal team ensures that the project schedule and financial requirements are outlined in the JV agreement
  • Draft/compile transaction documentation: for each project we assign a dedicated analyst who compiles and verifies documentation relevant to the agreement, including but not limited to third party reports, title deeds, entity information, and escrow arrangements.
  • Finalize agreement: after signing the agreement, our Finance Department will begin setting up a dedicated escrow for the project as our Investor Relations Team begins laying the groundwork for taking the deal live to our investor network.

 

6. Aside from conducting due diligence and raising capital, what else does iintoo do for each deal?

After executing a deal iintoo offers active oversight and reporting throughout the full lifecycle of every real estate investment. Our analysts regularly follow up on our active deals to ensure that each project is performing in accordance with its pre-approved business plan projections, and the findings from this ongoing due diligence are compiled and reported to our investment committee as well as project investors on a quarterly basis.

We believe these efforts serve our investors’ best interests and contribute to long-term value creation, and our proprietary Real Estate Investment Management Company (REIMCO) business model is made possible through our high due diligence standards, hands-on sponsor engagement and active oversight.

For the sake of transparency, we provide a detailed private placement memorandum and deal financials document for each offer on its respective deal page for investors who are interested in taking a closer look at each deal structure. To that end, you can explore our current offerings here.

And if you have any additional questions, your Licensed Investment Specialist is always available to provide clarity into our process.

 

Disclaimer: the above may contain forward-looking statements. Developments and procedures in the future may differ materially from those suggested or implied by any forward-looking statements in the above depending on a variety of factors. All written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the previous statements. Except for any obligations to disclose information as required by applicable laws, we undertake no obligation to update any information contained above or to publicly release the results of any revisions to any statements that may be made to reflect events or circumstances that occur, or that we become aware of, after the date of the publishing of the above.


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