Feb 27, 2018

Updating my review from Feb '17......not as impressed with Fairway/SBRE in terms of the funds they manage and the individual deals they offer via SBRE/Markus platform. Their funds are basically funds of funds which leads to slow reporting and slow payment of distr. Their recent individual offerings (as sponsor or co-sponsor) seem to have high fees, investor UN-friendly waterfalls etc. Fairway owns Redwood fund admin and I perceive they are good at what they do for various 3rd party fund admin but I'm losing some faith in Fairway as sponsor and/or fund mgr. 

Mar 17, 2018

Please let me offer some observations. While it is accurate that our funds do have an allocation to invest into other 506 Regulation D funds, categorizing them as "basically funds of funds" is simply not correct. In fact, our current allocation toward investments in other funds ranges from about a high of about 35% to less than 10% of our fund’s assets (depending on which fund). More precisely, our funds invest opportunistically in a variety of real estate based assets including newly originated and/or seasoned mortgage loans, equity in a variety of commercial, multifamily and other investment real estate (both GP and LP interests), as well as into other funds (selectively). Our funds have a mixture of debt and equity investments in a variety of asset types, managers, and geographic locations, all done with an eye toward generating the very best risk-adjusted returns we believe we are able to find amongst a large possibility set.

To truly understand our fund’s investment strategy, it is important to understand our overall business model. Fairway has an advisory practice division whereby we consult and advise other fund managers and real estate sponsors on the business and economic structure, architecture, and creation of their investment vehicles (including some well-regarded managers that have appeared on this site) as well as other strategic elements of their small balance real estate (SBRE) business. Over the past 5 years, we have performed well over 100 engagements in such consultation and have seen, read, reviewed, and/or considered investments in literally hundreds of private offerings, both pooled investment funds and individual syndications and deals. It is fair to say that we are intimately familiar with fee structures, waterfalls, economics, governance, and every other aspect of 506 Regulation D real estate asset based funds and syndications and extremely in tune with overall market conditions and competitive offerings. With all due respect, it is an unfair blanket characterization to say our investment structures are investor UN-friendly. Rather, our funds (and syndication offerings) are very deliberately and carefully architected to provide aligned, fair, reasonable, and appropriate fee structures and waterfalls for both the manager/sponsors who are doing all the hard work to originate the assets and produce the returns and the investors who are putting up the capital. Based on what I believe are the high quality (and thoroughly underwritten) assets into which we invest, our funds and syndications are more than competitive from a fee and waterfall standpoint with other comparable offerings in the marketplace. As our funds near the $100,000,000 mark in total AUM (a milestone we expect to exceed sometime in 2018), clearly plenty of investors do not consider them to be UN-friendly. We welcome any thoughtful discussion with investors around fees and waterfalls and why they are what they are.

Fairway does in fact own Redwood Real Estate Administration, which functions as a completely separate operating business. Redwood has nearly 100 clients and continues to grow (nearing $1B in AUA, assets under administration), providing real estate entrepreneurs and fund managers with professional accounting and administrative back office support that allows them to focus on their real estate strategy and efforts. In addition to providing our clients and their investors with the added comfort of a third party preparing their financials, this business also affords us and our Funds even more visibility into capital and fee structures, asset types, asset and fund performance, investor reporting standards and practices, and many other elements of the private 506 Regulation D marketplace. This business, combined with our advisory practice, provides Fairway with deep relationships with many quality fund managers and real estate entrepreneurs around the country and helps our origination and deal flow platform for the investment side of our business, an aspect both our SBRE entrepreneur clients and our investors enjoy and appreciate. It also provides us direct and real time feedback and superior information in a highly fragmented market, allowing us to leverage these relationships to locate high quality deal flow and to enhance our underwriting and asset management capacity. It is largely from this platform that we are able to selectively and opportunistically originate and acquire what we believe are excellent asset opportunities that provide our valued investors with what we believe is as good a risk adjusted return as is available in the private 506 Reg D market. Many of our long time and repeat investors appreciate and see the benefits of this strategy and continue to invest with us, as do many new investors.

It is absolutely true that it takes us longer after the end of each accounting/reporting period than some other managers and funds to do our investor reporting. This is due solely to the fact that we must obtain ALL of the financial information from EVERY underlying investment in order to calculate the fund's income and thus individual allocations of that income to our investors prior to finalizing financials, capital account statements, and reports. While we can influence the timing of the underlying reporting to us, we cannot completely control it and thus our own reporting tends to lag behind that of other funds who directly manage every asset they own (e.g. mortgage pool funds that own only loans, or funds that own property directly, etc.). In order to create appropriate expectations around the timing of our reporting, we try to be very clear with investors at the outset of their investment with us that this condition is endemic to our investment strategy. Despite our best efforts to communicate this reality, however, some investors may get frustrated by this element. If you are an investor who absolutely must have highly expedient reporting at the end of each period, our funds may not be the right fit. We believe the quality of our deals and underwriting, the depth of our understanding of our sponsors, managers, syndicators, lenders and other real estate entrepreneurs from whom get our investments, and the extremely high level of visibility we have into them and their deals offset the slight delay in reporting. We acknowledge, however, that this may not be a good fit for everyone. 

Developing and maintaining credibility to engender faith and confidence from investors takes a long time. Like anyone, we make mistakes from time to time. But I believe that we have earned and continue to ean that faith, trust and confidence from investors during more than two and a half decades in the alternative investment SBRE business. I encourage anyone to check out Fairway's extensive 20+ year track record of managing multiple pooled investment funds and individual deals and assess our performance, including net returns to investors. I believe it compares extremely favorably with just about any other investment during that time period and will more than hold its own with virtually any 506 Reg D fund in the marketplace (many of which have not been around nearly as long or through as many market cycles). Through hundreds of deals and hundreds of millions of dollars in total investments, our overall performance has been stellar by anyone's standards. We believe that this track record speaks to our underwriting disciplines through multiple market cycles, including the extremely challenging 2008-2012 period, and we are happy to share details with any legitimately interested investors. 

Thank you for the opportunity to respond to this post. 

Matthew Burk, CEO/CIO, Fairway America

Feb 03, 2017

the leadership at Fairway/SBRE seem to be well regarded in the SBRE segment of the industry and very knowledgable in general. I perceive that their interests are aligned well w/investors. I've spoken to a couple of the sponsors they work with and those people have nothing but praise for Fairways' fund admin services, advice etc. 

Jan 30, 2017

They are a listing platform for small balance funds. By definition they will be the smaller sponsors.  However, they are a few gems mixed in with the many listed funds.  It's a nice alternative if you are looking for a niche fund for diversification.  I invested in one fund and it is hitting their projections. A little extra digging and due diligence is required here.