Former Yale Investments Office Director of Real Estate Alan Forman explains how legal term negotiations act as a manager due diligence tool.
Insight
Reference calls are less useful for real estate diligence than venture capital
“We found that the due diligence calls, which is very common, underwriting venture firms, wasn't as helpful in the real estate business. It's a less collegial business. On a venture deal, two venture firms can be on the board of a company, and they're working t…”
Disclosure
Yale endowment rejected Steve Jobs' pitch for the first Apple Store
“They wanted to open up their first Apple store in our building, and we were very close to wrapping up a deal with someone else. We spoke to Steve Jobs, and he explained his vision for the business, which, to be honest, is exactly what turned out to be the case…”
Assertion Not checkable as stated
Yale economists advised the endowment to prioritize manager selection over theoretical portfolio modeling
“And it's funny, because we went to all these very impressive Yale professors and asked them, how do we create a portfolio? How do we Find the efficient frontier, all these economists like Ibbotson and Stephen Ross and people like that, and they just said, find…”
Insight
The best way to decline fund managers is citing unchangeable structural constraints
“One thing I learned from David was there are certain things that managers can't respond to in a way that would change the outcome, and if you could come up with examples where there's nothing they can do about what their structure is, then you have an easy way…”
Insight
LPs have a limited window to become a new manager's primary advisor
“When we back at an early stage manager, there's a window where you need to be the person that they call when they have an issue. And that window doesn't stay open forever. And you need to take advantage of that window so that when they're 20 years later, you'r…”
Assertion Supported
David Swensen modeled Yale's real estate strategy on private equity and VC
“David Swenson was a first principles investor, and he looked at the real estate business in the eighties and said, this doesn't make any sense. And he thought that the fee-based nature of the business, there was no alignment of interest. There was lots of sepa…”