How King & Spalding’s John D. Wilson Advises On Fundraising Opportunities

John D. Wilson knows a thing or two about investments. As partner of corporate finance and investments at law firm King & Spalding, where he works as a real estate finance attorney, Wilson has been representing real estate fund sponsors for more than 20 years. His expertise lies in the creation of open- and closed-end private investment funds, as well as CRE mergers and acquisitions and “sponsor-level” strategic transactions. 

Wilson sat down with CO earlier this year to discuss the ins and outs of strategic fundraising for real estate assets, the differences between foreign and domestic investment capital, and how the space has changed in recent years. 

This article has been edited for length and clarity.

Commercial Observer: How do you coach your clients into making smart investment decisions, and how does that differ when it comes to  foreign and domestic investment?

John D. Wilson: There’s almost no substantial fundraise that we’re involved in that’s purely domestic anymore. Even if it’s a U.S. fund sponsor that will only invest in U.S. real estate, there’s still a global element because significant portions of capital come from sovereign wealth funds, pension funds, and other non-U.S. investors. And what that adds is regulatory and tax complexity, in particular. U.S. fund sponsors have seen their businesses grow and they’re investing outside the U.S., and we see the opposite as non-U.S. fund sponsors that we represent either here or abroad. We have a base in London, and our firm has significant Middle East practice, representing foreign sovereigns coming into the U.S. but also fund sponsors raising money from a wide range of investors. 

The most significant issue for most of those investors is understanding tax and understanding how investments will be taxed. They’re often not taxed at home, either because they’re sovereign wealth funds and they’re not subject to taxes or their home countries don’t have the same type of taxes we do. One of their most significant objectives is to minimize tax to the greatest extent possible. That’s a significant piece of our practice, educating them on tax strategies they can employ, and the investment vehicles they can be involved in. Generally, those investors have investment staff of their own with westerners being the business people or they partner with U.S. managers. 

How was 2024 for their clients?

It was a mixed year, it was certainly difficult in the fundraising environment. In some cases, the fundraisers were taking longer, some were getting done, and those that got done, not surprisingly, happened in multifamily,  in housing, in data centers, and to a lesser degree industrial and logistics deals. There was some new money coming in but it was harder to come by. There was repositioning of assets, and the clients overall weren’t as active as they hoped they’d be in 2024. But by the end of the year, people saw more activity and more engagement from investors, feeling like we would be going into what will be a more active 2025.

What are your expectations for 2025? 

We continue to be optimistic in the asset classes where there are other reasons that there will need to be investment. Housing, for example. There are demographic reasons, there’s demand for housing, and there needs to be more multifamily. And then data centers, even the recent news [with DeepSeek] and questions on how much capacity will be needed for AI, there’s still significant need there. And then industrial, we’re still optimistic. Interest rates have come down, they’ve stabilized, it’s made people more bullish about investing, but it doesn’t mean investment has started yet.

Talk to me about fundraising tactics — how do you go about raising the most money in the shortest amount of time? 

It’s always important that they’ll want to be approaching repeat investors—existing investors— as they’re the most likely to invest, so it’s somewhat essential. A new investor will want to see that old investors are continuing to invest with the manager. A basic strategy is that sponsors typically go to an existing investor base, make sure they understand their desires, and they launch a fund only when those investors are in a position to invest. A significant limitation in recent years is there haven’t been many dispositions, there hasn’t been much money going back to investors. That goes into the strategy of timing. But we’ve continued to see investors focus on managers being experts and specialists at what they do. That means fewer funds that are multisector and there’s a range of investor profiles, wide geographic reach, all those are now less common, and what is more common is greater focus on a geography, investment profile and maybe an asset class or two.

What are the closings of these fundraising like?

One thing that’s happened is fundraising time periods have extended greatly. Historically, the maximum timeline that could pass from first closing to last closing was 12 months, but that’s been extended in recent years, and it’s now very common to be stretched over 18 months. That’s the period from first closing to final closing, where the sponsor would be out raising the fund for six to nine months before they get that first closing. These are very long cycles, where you’re in the process of raising that fund for a couple years. 

So it’s getting enough of the investors into the same point at the same time. Often, investors will have limits on what percentage of a fund they can be, or they want to invest when there’s a mass of other investors investing, so it’s trying to get all those investors to the finish line at the same time, while balancing what structures they’ll need. Some might need bespoke tax structures and others might invest in the plain vanilla part of your fund, or it may be you need multiple structures to get those investors in. And then there’s some balancing: Does a sponsor want to spend money to add a particular tax structure to a fund if it’s only going to service a small amount of capital? Do I need a Luxembourg vehicle in addition to a U.S. vehicle? Do I need all these tax alternatives and sizing them relative to the amount of capital coming in? 

What’s your best CRE finance advice? 

Real estate people are very good with data. They go deep. It’s inherently what they do. They know all numbers on occupancy, vacancy, cap rates and growth rates and all those things, and this data is wildly important. But fundamentally, the people who succeed develop their people skills. People who succeed in fundraising, it’s because people trust them. They’re trusted because they are honest, open, genuine and transparent, and they develop strong relationships and deliver what they say they’ll deliver.

Brian Pascus can be reached at bpascus@commercialobserver.com