Sponsors are generally investors' boots on the ground. From finding the right property to executing the business plan, they typically drive the process at every stage. No matter the market conditions, a wrong move by the sponsor can derail a project.
So, how does Crowd Street screen sponsors?
Here's a guide to understanding the role of sponsors and how Crowd Street's screening process helps ensure they meet our criteria.
Sponsors are typically the managing member of the General Partner (GP) entity of an acquisition or development opportunity. They usually oversee all investment and operational aspects of a CRE project.
Their work begins with setting the strategic direction — defining the project's investment thesis and goals, and making critical decisions about property selection, financing, development, and management in collaboration with other stakeholders.
Sponsors may also manage teams by, for example, assembling property managers, contractors, analysts, and advisors to help keep the project running smoothly. They oversee many things such as property due diligence, evaluating market conditions, financials, and regulatory requirements, and commissioning reports like environmental and zoning assessments.
Maintaining strong investor relationships is another key responsibility. On the Crowd Street Marketplace, sponsors are the party that will provide project updates, address challenges, and handle tax documents such as K1s. They are also responsible for ensuring compliance with legal and regulatory standards while working to identify and mitigate risks.
Finally, sponsors lead the exit strategy, whether through a sale, refinancing, or holding the property. This includes determining timing, pricing, and selecting brokers to assist with execution.
If it wasn't clear before, it should be now: the outcome of most CRE deals depends heavily on the sponsor, who manages investments from start to finish.
There are thousands of CRE sponsors across the U.S., and finding the right partner can feel daunting. Many of these sponsors are sub-scale, managing only a handful of projects.
When Crowd Street screens a sponsor, we narrow our focus with five key criteria: years in business, team strength, experience across market cycles, portfolio performance, and historic capitalization.
This narrows the field to sponsors who aren't just relatively well-capitalized — they've generally been through challenging conditions and persevered. In a market that ebbs and flows with cycles, working with partners who've weathered storms is critical.
Once potential partners are identified, the real work begins: sponsor screening.
Although Crowd Street serves individual investors, we strive to perform diligence in line with standards set by many large institutions. Every sponsor faces a nine-step process that includes background checks, structural vetting, and more.
Here's how it works:
This process is driven by a team with decades of CRE and institutional investing experience — and that's one reason why only one in 20 deals screened by Crowd Street makes it to the platform.
Getting started in CRE can be overwhelming for some. The market is loaded with deals, and selecting one to invest in may not be easy.
A good first step is finding an experienced sponsor. Even in what many would consider a great market with exciting properties, projects typically need the right director to bring it all together.
Crowd Street can help make CRE investing easier for many. Every offering on the platform is backed by vetted sponsors. While no CRE investment is without risk, Crowd Street supports investors by handling a crucial step: sponsor screening.
To learn more about Crowd Street's due diligence process — including how it screens individual opportunities — visit our due diligence page.