Episode 13: How I Lost a $75 Million Deal

So an update in my world… You can’t win them all. I always try to, but sometimes even with the best real investment strategies, you’ll still lose. Recently, I was chasing the deal of my career. It was a 20 property portfolio in the Midwest in a major metro area of over 750,000 sq ft. Worth $70 million acquisition price, I was eager to meet the owner right away. Conveniently, the owner’s brother-in-law follows me on Twitter, which is how he found me, and out of the blue he calls, asking me to sit down and visit to discuss the deal. So, I went to his office, met him, drove around a couple of his properties that were within a three-hour radius, and spent about 4 hours discussing with him and his business partner what they’d want. Everything sounded promising and the benefits were going to be phenomenal.

So, we started the underwriting.

I figured the property was worth quite a bit more, especially after me operating it for a couple years. I talked to a couple of big LPs that I thought would be able to help me finance the deal, and after talking to two debt brokers about the capital markets, it was going to be one of the best real estate investments of my career if not the best. Now, I put up a strong offer, pretty close to what he was asking. A week later the owner came back saying that they got four other offers, and instead of doing a “highest-invest situation” they were going to counter with the terms and price they wanted. If both of the parties accepted the counter offers, they were then going to pick the group that they thought was better, and if we couldn’t accept, we could counter back and then they’d then select the winner from there.

My thinking was that we were in a pretty good spot and that I’m in the situation to close this deal. After waiting 24 hours, we signed the counter and we thought we had it. Three days passed with nothing. That’s when I knew something was off. Last night we got an email saying, “Hey, thank you for being involved in this process, but the other party countered way above what you offered. They’re going to close in cash, are going to keep a lot of our employees, and so we’re going to go with them”.

I lost the deal.

I tried to ask if I could come back with another offer, but the owner’s mind was already made. It was frustrating to say the least because of the way it was handled. Communication was poor across the board. I’ll own up on my end, I should have gotten him on the phone to talk things out to get a better feel for the situation, but it was unprofessional to say that they “weren’t looking for a highest-invest situation” when in fact that’s exactly what happened, but stuff like this happens. I was respectful and professional when replying back, but I’m gutted. This could have been a career-defining deal. It would have generated tens of millions of dollars in value over the course of the next three years, but I blew it.

I’ve been assessing the situation.

I think one mistake on my end is that I didn’t necessarily sell myself well enough–I didn’t put my best foot forward. I managed expectations on the employees, and I was very honest with the owner that out of the 25 employees, we’d probably only keep five or six with the rest being absorbed by our team and our staff. Obviously, it was something important to him to keep the employees he hired, so, here I am. I missed the deal of my career, and now I’m wishing that I would have handled it differently, or that I would have gotten luckier.

On a positive note!

Our acquisitions team is doing extremely well. We’re sending out two to three LOIs every single day, and I know that we’re going to meet our goal of acquiring $100 million in self-storage over the next twelve months. Maybe even more! But it is super, super frustrating to miss out on something like this. To throw in hard work day in and day out on something that doesn’t come through is a tough pill to swallow. But, you get back up! You keep grinding, and you win some despite the fact that you will lose some.

Three Key Takeaways:

  1. You can’t win them all! You can try, but naturally some deals will fall through despite all the hard work you’ve put into it. That’s just part of the game.
  2. Communicate, communicate, communicate. Make sure to always put your best foot forward and take every opportunity you can to feel out the situation of the deal. Do everything in your power to avoid being blind-sided.
  3. Get back up! It’s okay to analyze failures. In fact I encourage you to figure out what went wrong on both your end and the other, however, you do this for too long and you can spiral, losing the go-getter mindset. Keep grinding. You win some, you lose some.

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About Me

I started the Sweaty Startup in December of 2018 because I believe the Shark Tank and Tech Crunch culture is ruining the real spirit of low-risk entrepreneurship.