An operator brings a capital partner its sixth project together. The first five went well. The partner runs the numbers conservatively, can’t make them work, and passes.
To Brian Seidensticker, co-founder of Last Best Partners, that is what a healthy partnership looks like. The firm’s fund, Mount North Capital, partners with real estate operators on renovation and development projects, and each project is evaluated on its own merits, even with partners the firm has worked with many times.
Understanding why a partner might pass on a deal, and when a capital partner makes sense in the first place, can help operators choose the right kind of funding for each project.
When a Capital Partner Adds the Most Value
Seidensticker sees two common situations where a capital partner earns its share of the profit.
The first is capital. The deal is sound, but traditional lenders aren’t able to fund it.
The second is time. An operator running several projects at once can spend hours managing financing and cash flow, which he calls necessary evils. Those hours could otherwise go to finding properties and managing crews. When that overhead is what limits growth, a partner who handles the capital side can free up the operator’s calendar.
If neither situation applies, a profit share can be an expensive way to fund a project, and Seidensticker encourages operators to consider other options first.
Why Experience in the Same Type of Deal Matters
Every capital partner is built to do certain things well. Seidensticker is candid that Mount North isn’t designed to be a coaching program. It works best with operators taking one step up from what they already do, scaling a model they have already proven.
That’s not a judgment about newer operators. It reflects how capital partners manage risk: they are betting on the operator as much as on the property, and a track record in a similar kind of deal is the clearest evidence of how a project is likely to go. For operators earlier in their journey, it’s a useful reminder that completed projects, even small ones, become the foundation for larger partnerships later.
A Partner Can Bring More Than Cash
Last Best Partners owns Tax Sale Resources, which holds about 15 years of tax sale and property data. The firm uses it to bring partners properties that fit the model they already run, and to open acquisition pipelines that have given operators better deal flow than they had before. The operator still has the final say on whether a deal is a good fit.
Trust Matters Most When Things Get Hard
Seidensticker calls trust “more important than everything else,” and it shows up most when a project hits a rough patch. He values partners who are comfortable with open collaboration. When either side has a concern, he says, the best approach is to talk about it early rather than push ahead quietly.
In a profit-sharing arrangement, that openness benefits everyone, because both sides do well only when the project does.
Why Conservative Underwriting Helps Everyone
Seidensticker expects more rate hikes and a harder market. A few years ago, many buyers assumed a property would be worth more in six months. He now expects the opposite: a purchase that looks great today may be only good by the time it sells.
That’s why the firm underwrites carefully, making sure a deal works for everyone even on cautious numbers. For operators, it’s a helpful exercise to run their own projections the same way and see whether a deal still works without assuming prices will rise during the renovation.
How a “No” Can Protect the Operator
The operator does most of the hands-on work, often managing contractors for months. If a deal is too thin, that effort may not produce the profit everyone hoped for.
“If we say yes right now, you’d be happy temporarily, but in a year, when you’re through that project, and there’s no money being paid because there’s no profit, you won’t be happy with us,” Seidensticker says.
Questions Worth Asking Before Approaching a Capital Partner
Is the main need capital, time, or both? What do the numbers from completed projects show? How does the partner approach underwriting, and how does it handle deals that don’t quite work on paper?
A partner that answers those questions openly is one whose yes is more likely to lead to a good outcome for everyone.
