Concrete Blueprint: Let’s Talk About Formulating a Strategy…
“Strategy is an integrated set of choices that uniquely positions the firm in its industry to create sustainable competitive advantage.” – Roger Martin
I attended a virtual conference the other day and witnessed something interesting.
One individual on the call asked a leader of a large real estate investment firm about the strategy at his firm. The conversation kept going in circles and it seemed as though each of them was genuinely trying to work out an answer. Frustration continued to build as the person who asked the question wasn’t getting what he wanted, and the real estate leader wasn’t pleased by giving an answer in so many ways, even though he was providing very detailed responses each time.
Then it hit me. There was a clear disconnect in what each had in mind when it came to the definition of strategy.
Some see strategy as a various list of descriptors (both qualitative and quantitative) that typically go along with an investment firm. Others see strategy as choices an investment firm makes to win in the competitive marketplace. Note that these are not the same, but if you provide enough details in explaining a strategy according to one of these definitions, often you answer both (just in a less organized and structured way).
Our discussion today focuses on the latter definition, using a framework developed by a famous businessman and former Dean of the business school at University of Toronto, named Roger Martin.
To establish further credibility, in 2017 Roger Martin was chosen to be at the top of the Thinkers50 list, which includes a select group of the world’s most influential management thinkers. It is believed that working under the famous Michael Porter (the one who developed Porter’s Five Forces) was one of the greatest influences on his career and life. He has also written a number of books. One of which we will touch on today, the bestseller, Playing to Win: How Strategy Really Works.
But let’s get back to the disconnect that the two individuals had during the virtual conference.
I do believe the source of the problem comes from people in the industry using words interchangeably. But perhaps the individual was testing the real estate leader for his willingness to be transparent and thoughtful in his explanation.
With that in mind, we wanted to write to you today to provide transparent details related to our strategy in a clear structure developed by Mr. Martin.
CF Capital’s Strategy
1. What is our winning aspiration?
We aspire to be the best at providing property investment and asset management solutions that help investors maximize their returns by investing in high-value multifamily communities.
We also strive to serve our investors and place a strong emphasis on transparency, trust, commitment, leadership, stability and value, allowing us to foster long-term relationships and deliver superior rates of return.
2. Where do we play?
We target stabilized properties with physical and/or operational reposition opportunities that also provide stable cash flow, capital appreciation, and a margin of safety.
Typically, these include 100+ unit garden-style communities that are well-located, underperforming and/or value-add assets in growing areas throughout the Southeast and Midwest regions of the United States.
These opportunities also carry characteristics of underperformance, mismanagement, and are undervalued relative to the market, yet remain under-the-radar to many other investors (due to size, unique markets, more exclusive deal sourcing networks, etc.)
3. How will we win where we have chosen to play?
Our team’s experience, dedicated leadership, and best-in-class team who all pride themselves on maximizing the value of every asset we purchase with a hands-on approach.
Alternatively stated, our expertise in acquisitions and management will serve as a basis of providing investors with superior risk-adjusted returns while placing a premium on preserving capital.
4. What capabilities must be in place to win?
Superior information, analysis, and behaviors relative to our competition.
Discipline, structure, organization, and craft, coupled with relentless and ambitious attitude that is balanced by humility/intellectual honesty and integrity.
5. What management systems are required to ensure the capabilities are in place
Dedicating significant attention to resources, processes, and the right people.
Resources often involve the most cost-effective and efficient systems available.
Our process is circular and involves five components: evaluation & economic analysis; fostering best-in-class relationships; acquisition, reposition, refinance/disposition.
The right people are partially included in the bullet point above related to process, but these are relationships, both internal and external, that are viewed as long-term partnerships. This means any party connected to CF Capital that regularly contributes (by various frequencies) to our daily operation, and more importantly, our mission.
Summary
“A company must seek to win. If it doesn’t seek to win, it is wasting the time of its people.”
We strive to be the best at serving our investors through outperformance in our select investments in our target markets.
These target markets offer an advantage to us because our strengths are played against our competitors’ weaknesses, and our access to properties that “fit the mold” are often overlooked and undiscovered.
Our strengths involve combining a hands-on approach with our differentiated/regional experience, unique expertise, leadership mindset, team strength, and powerful network of partners.
We believe our competitors do not have this same strength.
By focusing on resources, processes, and the right people we are able to not only achieve superior information, analysis, and behaviors, but greater attitudes and disciplines.
We believe the language is quite powerful, but we want to remind you that these are statements meant to fulfill a set framework. Regardless, we hope that this exercise of transparency provides you all with more clarity on CF Capital and our strategy, so you can decide how it aligns with your own investment objectives.
“It is natural to want to keep your options open as long as possible, rather than closing off possibilities by making explicit choices. But it is only through making and acting on choices that you can win. Yes, clear, tough choices force your hand and confine you to a path. But they also free you to focus on what matters.”
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