Randall Starr, as the CEO/President of a major NNN REIT from 2015 to 2024, and now Co-CEO at Front View post-IPO, have navigated the complex path from foundational corporate growth to national scaling. Randall Starr quickly learned that, raising capital in the commercial real estate sector is more than just a function of sales; rather, it is a strategic corporate function that defines the scale, sustainability, and ultimate value of a firm. For sponsors seeking to transcend transactional one-off deals and achieve national-scale acquisition targets-the very operational mandate that characterized the foundational growth of entities like North American Development Group’s NNN REIT-accessing institutional capital is the non-negotiable next step.

These are institutional investors who provide capital on a scale that can take a regional player and create a national platform. But to attract this level of sophistication, there needs to be a corresponding level of corporate maturity, governance, and proven execution. This is the deep strategic accountability that Randall Star maintained over five direct and fifteen indirect reports; it goes far beyond property-level analysis to encompass the entire financial and operational framework of the sponsoring entity.

1. Understanding Institutional Investor Psychology

Institutional investors are not after the highest possible return; they are focused on risk-adjusted returns that fit within a long-term, fiduciary mandate. In other words, their lens is one of fiduciary duty and portfolio diversification. To get the commitment from this group, your pitch has to satisfy the following three core tenets:

A. Predictability and Scale

An institution must efficiently deploy significant capital, often in tranches of tens or hundreds of millions. A deal-by-deal approach is not feasible for them. They are looking for programmatic or programmatic-adjacent strategies-vehicles such as programmatic joint ventures, commingled funds, or managed accounts-that can absorb large amounts of capital over several years. Your platform needs to have sourcing capacity and operational bandwidth to execute these strategies on a consistent basis, proving that the opportunity is scalable and repeatable within a well-defined market or asset class. For a firm focused on NNN REIT properties, for example, this means demonstrating a strong, nationally-based acquisition pipeline founded on advanced internal infrastructure.

B. Alignment of Interests

The institutional relationship is a partnership based on mutual trust. The alignment of the financial waterfall and governance structure is the most important single factor in structuring a deal.

• Sponsor Co-investment: Institutions expect the sponsor to have significant skin in the game, meaning that the size of the sponsor’s co-investment signals confidence and allows their interests to be directly tied to those of the investor.

• The Waterfall: Fair and industry-standard distribution mechanism, including a preferred return, return of capital, and then profit split with an appropriate hurdle-the so-called “promote.” Only reward performance after the investor has attained the expected returns by demonstrating a commitment to the fiduciary partner first.

C. Governance, Transparency, and Reporting

The institutions have sophisticated internal compliance and reporting requirements. They need comfort that the sponsor is operating with corporate discipline. This requires best-in-class reporting: detailed quarterly statements, going beyond simple financial numbers to asset management commentary, market updates, and forward-looking projections. Transparency in the valuation methodology, debt management, and decision-making processes is mandatory. They are investing not just in the real estate, but in the corporate governance of the sponsor.

2. Mastering the Foundation: Sponsor Excellence and Corporate Depth

Before an institution underwrites the first property on your term sheet, they do a deep dive into the sponsor entity. This is where operational accountability and strategic direction-the qualities embodied by a firm’s initial, high-level corporate hires-determine success, Randall Starr believes. Institutional capital is essentially a bet on your management team and platform.

A. The Undeniable Track Record

A track record is more than just a list of deals; it’s the proof of concept for your defined strategy. You need to clearly delineate a historical sequence of successful investments that mirrors the strategy that you are currently pitching.

• Demonstrate Consistency: Show how you executed, managed, and exited previous investments, detailing underwriting assumptions versus actual performance.

• Acknowledge failures: No track record is perfect. A mature sponsor confronts past performance in a straightforward manner, discussing lessons learned and showing either an ability to pivot or mitigate risk. This speaks much more to credibility than a tidy one-sided narrative.

B. Organizational Infrastructure and Human Capital

The institutional investor needs to know that the platform won’t break with serious scale, so there’s a deep dive into internal systems:

• Key Personnel: The team should be deep and specialized, with due diligence performed on the backgrounds and roles of key personnel in acquisitions, asset management, finance, and law. They want to see redundancy and institutional experience—people having operated within similar structures before.

Systems and Controls: They will also review your technology stack, financial modelling tools, and the internal control environment. What is your accounting software? Can valuations be consistently produced? Are there internal controls and checks and balances to avoid fraud and operation error?

C. Corporate Structure and Fiduciary Accountability

Randall Starr says, this is the ultimate test of readiness. The sponsor’s structure must mirror the seriousness of the money they are taking on. This means:

• Robust Corporate Structure: Well-defined corporate hierarchy, proper boards, and a formal process of internal decision-making.

• Best Practice Governance: Operating under the financial discipline and strategic oversight commensurate with a public or quasi-public entity. When someone is held ultimately accountable for strategic direction, operational performance, and financial results-as in the case of the first corporate hire at a major REIT-it means that, from its founding date forward, corporate accountability is encoded in the firm’s DNA. It is this level of execution and governance that differentiates a scalable platform from a deal shop.

3. Crafting the Compelling Investment Thesis

The pitch document-the PPM or Offering Memorandum-is your formal invitation to the partnership. It must distill your operational excellence into a clear, irresistible financial and strategic argument.

A. Narrow, Defensible Strategy

Generic real estate pitches fail. Institutional investors want to fund niche expertise. Your thesis has to be very specific and defensible.

• Marketplace: Concentrate on one sub-sector, for example, last-mile logistics, single-tenant net-lease retail in secondary markets, cold storage.

• Arbitrage: Clearly articulate the source of your outperformance: superior sourcing, unique operational knowledge, development expertise, or something else. Demonstrate how your firm has an informational or execution advantage that the general market does not have.

B. Financial Projections: Detail and Sensitivity Analysis

Your financial model needs to be impeccable. It has to involve detailed projections over the expected hold period, with very clear assumptions for rent growth, vacancy rates, cap rate exit, and capital expenditure. Crucially, the pitch must include a sensitivity analysis showing how the returns hold up under adverse scenarios-e.g., a 100-basis-point increase in cap rates, or a prolonged recession. Institutional capital providers are stress-testing your deal before they commit.

C. Due Diligence Readiness: the Proactive Data Room

When institutional investors commit to diligence, they move fast. A prepared sponsor will have its VDR organized and populated before the first meeting. This includes:

Entity Documents: Corporate formation documents, operating agreements, and organizational charts.

• Historical Financials: Audited financials for the sponsor entity and representative assets.

• Legal & Compliance: Summary of litigation history, compliance certificates, and key contractual agreements.

A fully populated, well-indexed VDR is a signal of professionalism, transparency, and respect for the investor’s time.

4. The Capital Raising Process and Sustained Partnership

Raising institutional capital is accomplished in stages and requires both patience and a long-term perspective.

A. Strategic Targeting

Not every institution is the right fit. Utilize consultants and gatekeepers (investment banks and placement agents) to identify those investors whose mandate/risk tolerance/fund size align perfectly with your proposed strategy. A global pension fund looking for core-plus multi-family assets is not the right target for a value-add industrial strategy. Research their prior investments and current allocation targets.

B. The Roadshow and Relationship Building

The pitch is made by the senior leadership-those with ultimate strategic and financial responsibility. This shows commitment and gives the institution confidence in who will be calling the shots. The whole function of a roadshow is to turn the document into a human relationship based on mutual respect and a shared vision.

C. Post-Commitment Partnership

The capital raise is just the beginning. The ongoing reporting, communication, and governance post-closing define the health of the partnership. Rarely is institutional capital a one-time transaction; it’s a cornerstone to a multi-decade relationship. It’s the sponsors who can provide accurate, timely, and honest reporting that get their institutional partners to re-up for Fund II, Fund III, and beyond, scaling their platform to the highest tiers of the commercial real estate industry.

Raising institutional capital for commercial real estate represents the pinnacle of building a truly institutional-grade platform. It requires sponsors to think beyond the asset and focus on the entity: establishing a world-class track record, ensuring robust corporate governance, and demonstrating an unwavering commitment to financial transparency and accountability. By viewing the process as a strategic corporate imperative—akin to the high-level, foundational work done by the first corporate executives at leading national platforms—sponsors can unlock the deep pools of capital necessary to achieve enduring scale and leadership in the marketplace. It is a strategic act of corporate transformation that underpins all long-term success.