I am on a panel about crisis management when a deal goes bad this Monday and here are some of my ideas:
- Communication helps broker/dealers and sponsors - don't hide from bad news. Sponsors, broker/dealers and advisors should view each other as allies not adversaries.
- Don't underestimate clients' ability to understand and deal with unpleasant news. I would bet most clients owned stocks and mutual funds through the stock market correction in 2000 through 2002.
- Investors today are more diversified than in the 1980s and hopefully real estate part of the allocation. Diversification used to be three or four different limited partnerships, now it's a variety of investments.
- Clients (hopefully) have more assets with an advisor than just the TIC deal, and the real estate needs to be put in context of the overall portfolio. Clients want to believe and trust their advisor - give the advisor the tools and information to keep this trust
- Avoid bad deals. This sounds simple, but basic review of a deal's financial projections and assumptions can give a good idea from where the problems will come. Its not 2004 and you don't have to do a deal. Be selective. Don't be blinded by yield - look at what is behind the yield - operations or financial engineering. If something is too good to be true, it is.
- Know the difference between a crisis and a problem deal.