Richard C. Wilson talks with Marcus Ridgeway of F6 Partners about earning institutional investors' trust and building a platform that can scale. They discuss risk, controls, reporting, long-term thinking, and housing investment opportunities.
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About the guest
Marcus Ridgeway. Marcus Ridgeway is a real estate entrepreneur and investor who founded F6 Partners in 2020, which manages over $600 million in equity across multiple real estate sectors. He co-founded Invitation Homes, the first and largest institutional single-family rental company in the U.S., and served as its COO; the company was backed by Blackstone and grew to more than 80,000 homes.
Key takeaways
- Institutional investors focus on downside risk and how a business will protect their capital. Ridgeway says risk mitigation should shape the investment framework.
- Build the company's systems and architecture early so it can absorb large allocations. Ridgeway describes using institutional software even when the company was small.
- Use an investment committee and clear roles, even for smaller investments, to add controls and reduce moral hazard.
- Trust is earned through precise, consistent reporting. A spreadsheet with the wrong date made investors question the accuracy of other information.
- A differentiated, transparent platform and a repeatable process can support growth at scale. Invitation Homes was buying $200 million a week in individual homes at its peak.
- Prepare for volatility by preserving optionality. Ridgeway describes optionality as an insurance policy against volatility.
- Reduce dependence on the founder by moving decisions into the business's systems and team. Ridgeway says businesses can struggle to scale when too much depends on one operator.
- Separate personal identity from deal outcomes. Ridgeway says his firm returned $200 million to an investor when changing rates and inflation undermined a strategy.
- Think strategically over a 10- to 20-year horizon and distinguish strategic discussions from tactical ones.
- F6 Partners is focused on student housing near major markets with positive enrollment trends, as well as senior housing opportunities.
Best quotes
"Big institutions don't look at pitch decks. They don't look at deals. They don't even look at IRR. They look at downside risk. How are you going to protect their money from going away?"
"And what's really important is you need to build an architecture that creates results and creates money. And so, we often think of work as work equals money, whereas it's really architecture that equals returns and income."
"And so, from a very early stage, we decided that we were going to use institutional software."
"And so, you know, you have to change who you are. I mean, you have to realize you're not the smartest guy in the room."
"And so, it was a simple lesson like that that really taught me that exactness is critical in this process."
"I mean, at our peak at Invitation Homes, we were buying $200 million a week in one-off single-family houses. It can go off the rails really, really quickly."
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