In today’s snippet, I will be sharing my key takeaways from the 2024 Best Ever Conference, the premier commercial real estate conference for active and passive investors. As usual I selected to share below the key highlights relevant for passive investors specifically. If you’d like to learn more about my takeaways relevant for active investors and sponsors, connect with me one on one.

Unlike last year, where the room was polarized (see last year’s snippet), this year saw a quieter and smaller crowd. This is not atypical during a down cycle, which commercial real estate is going through.

The industry has gone through unprecedented series of events that will likely be discussed years from now in textbooks and case studies.

The conference opened up with the Leftfield Investors Day – specifically tailored to passive investors, where Jameson Lett (financial advisor) discussed the four key strategies for W2 investors to get started building wealth and their portfolios by: (1) by protecting your paycheck (treating that as your seed money), (2) paying yourself first (saving at least 5-10% of your paycheck), (3) building liquidity (with the accumulated savings, and (4) investing excess liquidity. He spoke about the importance of diversification between liquid and hard assets and closed it off with a reminder that wealth building is a long term journey that requires patience, discipline, and natural curiosity.

Tom Wheelwright, CPA, led and insightful presentation showcasing the tax advantages for passive investors who are still working a full time/W2 job. In the past, I discussed the tax deferral benefits of depreciation (link here). However, he went a layer deeper, walking through a few numerical scenarios of how powerful such deferral can be over time. The key is that even with depreciation recapture at the time of exit, there is a capital gains tax exclusion of up to $44K if single and $89K if married filing jointly thereby minimizing the overall tax liability. It is no wonder then that 30-35% of the portfolios of the wealthy are in real estate.

There were a number of LP panels.

The first one was led by Jeremy Roll (full time passive investor), J Scott (active and passive investor), and Paul Shannon (fund manager), where they discussed their view on capital calls, paused distributions, and risk-return analysis.

There are good and bad pauses of distributions, as we discussed previously (video link). Per J Scott, roughly 50% of his portfolio is experiencing good and 50% bad distribution pauses and he provided examples of each. As one approaches an investment opportunity, evaluate it from a risk-return perspective and understand why you are investing in the deal. If higher return is important, then cash flow is less important; if the return is lower, then cash flow is more important. They also discussed how rare it is for sponsors to showcase the risk analysis in a deal. This is something our firm takes pride in as we typically include a discussion/slide on the key risks of the investment and our mitigation strategy. This is something that makes our firm unique and we were reminded of this yet again during this discussion. Lastly, when facing a capital call, ask yourself – do you have faith in the sponsor, in the business plan, and in the model assumptions.  Do not proceed, if all three do not check out, i.e. contributing to the capital call just because you like the sponsor is probably not a prudent move. Evaluate each capital call as if it is a new investment.

In the fireside chat following the above panel, Mark Halpern (passive investor) and Paul Shannon (fund manager) discussed how to vet a sponsor.

A few of their criteria include – experience with the asset class and business plan (e.g. stable value add multifamily property with 150 units – this is very specific), understanding their track record pre 2021 and most importantly how they are performing today (between 2021 and today), communication and transparency (we typically communicate on a monthly basis with our LPs who have direct access to me), identify the risks (in our investment presentations we spend time to discuss that), references and referrals from other LPs (we gladly provide those upon request), frequency and quality of reporting (we do not share 100+ page reports but instead distill the information to key items LPs should pay attention to and have the rest available upon request), 3rd party administrator presence, skin in the game (we co-invest alongside our LPs and our GP team typically puts up 8-10% of the equity with 5-10% being industry standard), performing background checks on the sponsors and operators, understanding how the sponsor thinks and if they have a solid decision making. Actual vs. proforma performance was also noted (we share this in our monthly reports and with prospective LPs upon request – this is a much more meaningful gage on performance vs. sharing IRRs as those can be impacted (favorably) by market movements).

In the next panel, Jeremy Roll (full time LP), Mauricio Rauld (SEC attorney), and Matt Faircloth (GP) discussed important aspects of the deal structure to pay attention to. Specifically they shared their key Operating Agreement items to pay attention to, which include – differentiate between return of capital vs. return on capital, cumulative vs non-cumulative preferred returns and distributions, presence of complex hurdles (may be ok so long as the hurdle is not set too low), and investor portal vs PPM discrepancies (if misaligned, it presents a potential liability for the GP).

It was apparent that many LPs are frustrated as the preponderance of their questions revolved around being able to take control and influence the sponsor. A few key strategies shared to accomplish this included making noise, filing a complaint with the SEC, or connecting with other LPs in the deal. Their number one LP frustration with the sponsors was lack of or inconsistent communication as well as lack of transparency (i.e. not sharing the bad news). In our monthly communications we share both the wins and the headwinds (as well as our action plan to turn these around).

The economic update contained an optimistic and pessimistic view. As the press has much of the optimistic view covered, herein we share the more pessimistic view (which coincides with our own view). All leading and current economic indicators point to an upcoming recession. We covered those in detail in a prior post. Out of 14 fed hiking sessions, 11 resulted in recessions and the 3 times it did not, they stopped right before the curve inversion. It was acknowledged that US dollar printing and government support may counterbalance a potential or deep recession.

And while it is best to avoid catching a falling knife, all panelists agreed that staying on the sideline is not the best move either (and none of them currently do).

What is important in such environment (and what we practice too) is to understand and prudently mitigate risks, only enter into deals that have adequate cushion and that are operated by sponsors with a track record, and adhere to key investing and underwriting fundamental principles (as a result thereof we tend to decline a lot more deals than the ones we do, which end up being one to four per year).

As the various discussions wrapped up, Economist John Chang, reminded us to “Keep your eyes on the horizon.” Despite the noise and the fact that we are in a down cycle, real estate still remains one of the best asset classes to invest in. And time has been a testament to that…for those who are diligent, disciplined, and patient.

Should you have any questions or want to learn more about real estate investing or for an overview of our target markets, please reach out to

Disclaimer: The information presented does not constitute legal, accounting, tax, or individually tailored investment advice. Past results do not represent or guarantee future performance.