From 14,000 Units to Launching a $100M Private Equity Fund

Joshua Wilson: Wow. Good day everybody. Welcome to the Investor Relations podcast show. Now, this is a new format that we've built. We've, we've become one of the top ranking podcasts on investor relations. And you might have seen our YouTube channel ton of clips from LPs and family offices to people raising capital, to, to all sorts of things on the world of investor relations.

And I wanted to bring on a, a guy I spoke with maybe two years ago, and we were having a conversation around the topic of family office and multi-family real estate. So I was like, Hey, why don't you come on the show, share a little bit about who you are, what you do, and what the new format will be is a little bit longer.

Form conversations, we're gonna be about 20 to 30 minutes long, but you're gonna learn from people who are doing it every day. And so if you have questions about it, you, you know, I'd love for you to. Either come on the show or send them into our group at the investor relations podcast.com. But let's dive in today.

Mike, welcome to show. 

Mike Kron: Joshua. Great to be with you. 

Joshua Wilson: Yeah, absolutely. All right, so what side of the table do you sit on? On the investment side? On on at the investment table. 

Mike Kron: Oh, on the investment table, I'm a sponsor for sure. You know, obviously I run a family, a large family office that owns and manages a bunch of apartment complexes.

We have about 14,000 units under that we own and manage currently, but I also more recently launched my own private equity shop and we're out raising capital for our first a hundred million dollar fund. 

Joshua Wilson: Oh, very cool. All right, so kind of walk us through, you know, you run, run your, you know, run and manage your own family office.

You said it's pretty large, right? Then you, you started doing other stuff and now you're raising money for private equity group. Walk us through the whys of why you're doing this. 

Mike Kron: Well, you know, it's, it is interesting. I've been, I've been with the family for 32 years. I started as a real estate lawyer, realized very quickly I wanted to be on the other, other side of the table and got into the real estate.

You know, when I joined the the patriarch was my first wife's father. As it turn, you know, as it turns out. Mm-hmm. You know, we had about 2000 units mostly in California, mostly older sea stuff. He was just starting to expand into Texas. And once I came on board, we started getting rid of all the junk and moving into a quality assets a plus quality assets, and moving in more into Dallas and San Antonio and Austin, and then into Phoenix in the mid nineties.

We even at that point started developing property. We had a piece of property that we didn't know what to do with we kept trying to sell it and couldn't sell it, and finally we just said, well, we own an apartment complex right next door. Why don't we build some more units, 4,000 units later? You know, we're now.

Serious developers. But again, only for our own account. But you know, having said all of that the patriarch is now on in years and, you know, he still likes to run things a little bit like he did 40 or 50 years ago.

Joshua Wilson: Mm-hmm. 

Mike Kron: And I had a lot of bandwidth, so I decided that. It is kind of something for me to start doing that I've always wanted to do and something that would segue into the next chapter of the family office.

When the patriarch was no longer with us, I launched my own private equity group and that led us to obviously our first private equity fund to raise money and invest. And we're, we're, we're into the. We're investing in single tenant, net lease retail properties, high credit tenants. And you know, for me that was a perfect segue because.

I would love to do an apartment fund when the family passes, but I wanna start gaining a track record. I wanna start gaining investor confidence and all the other things that you need to do if you're gonna start you know, why am I doing that in my mid sixties? That that would be an entirely longer story.

And, you know, we can, we can do whatever psychological analysis you want. Right. But I love doing this. I love, I love being involved in real estate and it's been fun going out. Raising money. 

Joshua Wilson: It's been fun raising money. Said one person ever, right? Like I, there's a very small group, group of people who actually, myself included, love the, the, the investor relations and the conversations and the, the deal between.

You know, the investor and stuff. So why, why do you think you love that now you're coming from a family office perspective where people pitch you all day and now the tables have turned my friend where you're now pitching the deal, right? 

Mike Kron: Absolutely. I, you know, it, it is funny. I, I am, the eternal optimist in my glass is always three quarters full.

So I, you know, I've met a lot of great people. It has it been hard? Absolutely. I mean, I, I've, I share with you that sentiment that most everybody else shares that this is difficult to, to talk to people and get them to gain your, gain their confidence, and get them to trust you enough to wanna invest their money with you.

But I think of all the people that I've met, I mean, I'm sitting here talking to you that I wouldn't have met had I not done this. And you know, when you look at it from that perspective, yes, I wanna be successful. Yes, I think I'm going to be successful, but I'm certainly richer for the experience and all the great people that I've gotten to meet along the way.

I. 

Joshua Wilson: Man, I, I think that's so awesome. And I so many times forget the, the journey of the pausing, the being grateful for the moment being, you know, focusing on the, the connections now. 'cause a lot of times as a sales guy, you know, investor relations is sales. You're just selling opportunity and, and potential future.

Right. The one of the things that's so hard to do is, is take a moment and go, man, this is actually fun. I enjoy this. When, when you were making the decision, talking to your family, and you're going, okay, running the family business, thousands of units, right? We're doing well, been doing it for a long period of time to going out and let's start our own PE group.

Raise a hundred million dollars. What fears did you have in your head? What, what thoughts did you have in your head? What resistance did you have before you said yes to do it? 

Mike Kron: You know, you, you, you kind of think back on it and I, I've done a lot of things in the real estate world and I wouldn't say that fears are the right words.

You always have a little bit of trepidation when you're starting something new and everybody has a fear of failure. But once you sort of put that in the back of your mind and you just start taking one step after another. Going down a road to prepare yourself to go out and raise capital to decide on what you're gonna do.

You know, look, we had to, I would've liked to have launched this in 2022, but we were into an interest rate. Yeah, increasing cycle. And that would've been horrible for our investors. And I just said, no, I'm not gonna do that. I don't want this. Hey, I don't wanna fail at it. And I would certainly have failed, but I don't wanna do that to the investors.

I, I will be patient, I will wait. It was expensive, but, but I did. But when you, when you look at it, you just go, okay, this is something new, but I've got a direction that I want to go, and I've always lived and, and even investing in real estate, you do this where if you wait for the time to be right for everything to align and look perfect, you're probably way too late and you probably missed what you should have done.

I just look at it as, okay, here's an opportunity, here's a chance to build something for us. Something that I really want to do, something that's got my name solely on it, and you know, you just start moving and. You know, I haven't, I haven't looked back. I mean, there's, there's tough moments. There's always tough moments.

It's been the capital raising environment has not been great over the last 24 months.

Joshua Wilson: Yeah. 

Mike Kron: But here, here we are, and I really feel like 2026 is a brand new year and people are really starting to pay attention to where to put their money now. 

Joshua Wilson: Yeah. And we have to be mindful. First of all, I want to tell all, you know, all listeners in, this isn't financial advice.

Go talk to your attorney and accountant and, you know, seek professional, you know, one-on-one advice. This is to, to kind of get in the mindset of investor relations and maybe some of the strategies and tactics of, of the processes of this. So, you know, as you're listening in, man, I really want you to. To latch onto these different things and learn, but also if you're learning stuff out there, I'd like you to teach it to us.

Mike, as you're knocking on doors now before the doors knocked to you, what, what had a shift in the mindset for you? 

Mike Kron: You know, you have to, when? When you're doing it for yourself or the family office. You don't really have to answer to anybody. You can go out and make decisions and do what you think is right, and that's where the buck stops.

If you're wrong, you, you know, you pick yourself up off the ground and you move on to the next deal and you go, I blew that one. Let's, let's do something. Well, I mean, knock out wood, thankfully, I haven't blown any badly yet. But but when you're doing it, taking an investors. You're building up a relationship with somebody who's going to invest with you.

You know, I've been lucky to have a lot of family and friends who wanted to start me out down this road. But now I'm talking to people who didn't know me before we started the conversation, and I like to work and build up the trust, but you also have to have. Absolute commitment to what you're doing and meaning the product that you're trying to sell 'em and why you're doing it, and you know what makes you different than the other guy who's doing this.

And we spent a lot of effort getting to a point where we thought we were doing something, even though it is in a relatively core boring area, something a little unique for, for how we do it versus how others are doing it. And that was, that was kind of my starting place honestly. I, I looked at a lot of other offerings and I talked to a lot of other people and I got a read on what the marketplace was like from the sponsor standpoint and I said, you know what?

We can do this differently. I don't need to charge. Fees for every last thing that, I mean, some, some things you see, they're charging fees for everything under the sun. And at the end of the day you wonder how the investor is not only making money but even getting their money back. And I just said, you know what?

I don't need to do that. I can do really well charging a very simple, creating a very simple fee structure and. Taking my piece on the backend, if I do well for the investors, and I'm gonna hang my, I'm gonna hang my coat right there. 

Joshua Wilson: So are you guys only focused now fundamentals, if someone wants more information, they could connect with you, but like, are you sure primarily focused on the carry or the, the profits?

Like how, how did they, how do you determine how they get paid then if you're not using some type of fee structure on the front end? 

Mike Kron: Well, we, we, we charged a very simple management fee of one and a half percent on, on equity, not on assets. I've seen that game far too often where guys want to charge on assets and they inflate the assets to get better fees, and then when the deal sells, all of a sudden the assets weren't worth that much, and you sort of scratch their head and you go, well, what just happened?

Joshua Wilson: Okay. 

Mike Kron: And then we, then we take 10% of the backend. After all the capital is returned. And I don't count the, you know, we're gonna pay a distribution paid out quarterly. We'll, we'll be between five and six and a half percent. These are triple net deals. It's cookie cutter. Once we buy the deal and put the loan in place, the the return is set.

It's not gonna change, but I don't count those distributions as a return of capital. I've seen that game. We say, no tho, those are separate. At the end of the day, if you gimme a million dollars. I don't care what the distributions were, I'm gonna give you back a million dollars before I even look at my 10%.

That, that's just the way it's gonna be. 

Joshua Wilson: Yeah. Interesting. Go ahead. 

Mike Kron: Yeah, no, and to me that was pretty simple. I mean, it, it, you know, I even went so far and, and I've had other people go, Mike, you're an idiot. I go, well, maybe, but I'm, I'm gonna go down this road because I believe in it. I own a brokerage, that's my acquisition department.

We're gonna collect a commission from the seller of all the properties that we buy. We're kicking back the buy side costs. As part of that, I just felt that the investors could never look at me and say, you don't have skin in the game, because I'm giving them a benefit right off the top. 

Joshua Wilson: So that buy side cost goes into the fund or goes into reducing the fee.

Mike Kron: It just, it reduces, it eliminates the, the buy side costs for the investors. Okay. Interest. So they get more interesting. Pure investment. Right, right off 

Joshua Wilson: what. How do you expect to maybe one day bring on, you know acquisition support within the company? You know, like if that was a part of their, you know, their, their compensation package or something like that?

Or is this maybe just in fund number one? Or, you know, how, what are your thoughts on that? 

Mike Kron: Everything, everything has been modeled into how we're doing business internally. What, what we have left in the way of commissions is plenty to be able to support. My team over there what we have is the sponsor in terms of our interest in the fees is enough to support my team.

You know, growth cures everything. 

Joshua Wilson: Yeah, it sure does. Man. Sales, sales surely does cover a multitude of challenges. Now with the, as you guys are building this out, why did you choose that asset class, right? Because you, you kind of got your, your start in multifamily and you've got a, a lot of runway there that you've built over the years.

Why single net? 

Mike Kron: I, you know, it, it really was a couple of things. The first and foremost was. Everybody who starts down this road in private equity knows one thing for sure. If you wanna have fund two, you better be successful on fund one. And I wanted to do something that I knew I could execute, that I knew would be successful, that I wasn't worried about, gee, how am I gonna make these distributions to my investors?

How is that gonna work? Mm-hmm. Core real estate to, to me, was really an ideal place to do that. But I added a couple of layers on that in the, I mean, it wasn't just, gee, I'm gonna do something safe. Let's just go do something safe. Mm-hmm. There were two things that really stood out to me. One, we decided on doing.

Only high credit tenants. That in and of itself separates us from everybody else. I mean, if you look at agree realty and you know all the big players, the best of 'em are about 67% credit, and the rest of the tenants are. Who knows. So that that started us down that road and I didn't figure I had to give up very much, if anything, to get my distribution where theirs is.

The second thing that we looked at was where are we in the lifecycle? Where, where does this asset class fit in? It had been beaten up for a while, but I've been around long enough and I followed it. You know, I own, I don't know, Walgreens on my own. I've looked at buying others, and for one reason or another haven't, but when I looked at the lifecycle, it's so highly correlated to news and interest rates because they act as much like bonds as real estate.

That I felt that when the Fed got to a point where they were likely to start lowering interest rates. That we were in another cycle for this product class. That was going to be a good one. How far the cap rates are gonna drop, how far interest rates are gonna drop. Nobody knows. And anybody who says they do is lying.

Joshua Wilson: They don't. 

Mike Kron: But, but, but we know that it's in a downward trajectory. At least from the Fed standpoint. And I think the tenure will follow that after a while. To us that was a very good entry point. The same reason I didn't start in 2022. We were in the exact opposite cycle and what happened? Cap rates went from the mid fours, five up to six and a half, seven, seven and a half, and you know that that just kills value.

Now I think we're going the other direction. And I think that we're in a place where for two or three or four years, we can not only produce a pretty good dividend, but have a pretty nice little return, you know, mid to upper teens on a relatively safe, stable asset class. And when you layer in high credit tenants, now you're talking about, you know, these, these are businesses that are gonna be around, I don't have to worry about the tenant paying the rent.

Joshua Wilson: Yeah. Final question. We'll put your contact information so people can follow your work, maybe connect with you and, and talk shop. But, you know, final question. You've been on the family office side for the majority of your, you know, real estate career and investing career, right? You've been on the, the family office side, being on the what did you learn?

Give us one piece of advice when it comes to raising money with family office that you've learned on that side that you. I think you'll have a, an advantage over on the private equity side. 

Mike Kron: You know, I, I've always been a keen proponent of reinvesting your money and not taking the money to spend it on your own lifestyle.

You know, some of that is fine, but what we've been able to do on the family office side is redeploy. Capital either from distributions or income from the multifamily assets, or from refinancings or from strategic sales and redeploy it into and grow the multifamily portfolio. I think we can do that on the private equity side.

Patience is to me to be rewarded. I, I don't look at the world, you know. For the most part in a timeline. Real estate's long term is always gonna be a good asset class. And if you, if you can do those things, you can take advantage of that. 

Joshua Wilson: Cool, cool, cool. Mike, thanks for coming on the show. Fellow deal makers in the audience has always reached out to our guests.

Hey, thanks for being on the show. Their contact information will be in the show notes. If you have, you know, conversations around investor relations or if you have some tactics or strategies or tools or, or you know, things that you can share with us here on the show, the investor relations podcast dot com's a great place to go.

There's a quick form at the top. Maybe get you on the show next, so then we'll talk to you all on the next episode. Cheers, everyone.