When it comes to real estate financing, some think it’s better to focus on both debt and equity, while others prefer to delve deep into one area.
Berkadia‘s JV Equity & Structured Capital team focuses exclusively on the equity side of the capital stack. The group marked a record-breaking year in 2021, having capitalized more than $2 billion in property transactions.
Led by Chinmay Bhatt, Noam Franklin and Cody Kirkpatrick, the team sourced institutional equity partners for 49 commercial real estate transactions across the country last year, including market-rate multifamily acquisitions, ground-up multifamily projects, single-family-rental/build-to-rent communities (SFR/BTR), hotel-to-multifamily conversions, student housing assets and property recapitalizations.
Since the team’s previous platform — Central Park Capital Partners — was acquired by Berkadia in 2019, the team has capitalized more than $3 billion in property transactions, consisting 12,927 apartments, 1,280 student housing beds and 1,754 SFR/BTR units across 18 different states.
In the second half of 2021, they also secured a platform-level joint venture partner for SB Real Estate Partners to acquire more than $250 million of multifamily assets located in Arizona, California and Nevada.
Commercial Observer spoke with Bhatt, a senior managing director, to find out how he’s built relationships with foreign and domestic investors during a global pandemic.
This interview has been edited for clarity and length.
Did a record-setting year in 2021 come as a surprise?
That’s a good question. If you go back to March of 2020, when a lot of this COVID situation first came through to the U.S., all of a sudden there wasn’t much happening in the equity world. A lot of transactions were on hold, and people were trying to figure out what the new reality was. In the summer of 2020, it was more preferred equity and structured capital deal flow getting done, but towards the end of the summer in 2020 and into the fall, we started seeing joint venture activity return.
By the end of 2020 and in early 2021, there was a lot of appetite for the housing sector — which we define as multifamily, student housing, single-family — and there was a lot of interest from domestic and overseas groups who were quiet for most of 2020. So we had a sense that 2021 was going to be an active year. From our team standpoint, we’ve been building up our systems and our processes over the last few years to really execute on larger and larger volumes. So we were ready as a team for the activity levels that 2021 brought.
Your previous firm, Central Park Capital Partners, was acquired by Berkadia in 2019. What was the impetus behind its launch?
When Noam and I met in New York, we had both been overseas for a few years. I was in Dubai working at an investment firm, and getting my MBA. Noam was at one of the sovereign wealth funds in Abu Dhabi, and then he came to New York to go to Columbia for grad school. We met in New York in early 2015, and we both had a similar idea around having an advisory business focused on the equity side for real estate. [We] saw that for a lot of the folks in the market who work in the equity space, it’s not an exclusive focus for them. They’re either debt originators or investment sales professionals who do a little bit of equity, and we thought there was a room in the marketplace for a group that was only focused on the equity side and really operated coast to coast. We saw an opportunity to have a national team where you can be talking to one group like our team within Berkadia, and we can help you on the equity side across the country. So that was something that we saw as an opportunity and the two of us started working on that under the Central Park Capital Partners banner. Our third partner, Cody, joined us as an equal partner in early 2016. He was an equity-focused investment banker in the real estate space and also very knowledgeable about the West Coast market. Noam and I were based in New York, so Cody was a great addition to our team. We met the senior management team at Berkadia in the summer of 2018 [when] more and more clients were asking them for help on the equity side. We ran a pilot program for about nine months, and that was going well. So they acquired us in March of 2019. Since then we’ve been the joint venture and structured capital section of Berkadia.
How would you describe the professional relationship between you and your partners?
It’s a very strong personal and professional relationship. The joke we have with clients is that we talk to each other more than our wives, unless one of us is on vacation. One of the things we’re really focused on is being aligned on decision making, which could be day-to-day decision-making but also big-picture strategies. All three of us have to agree to move forward with something, and that’s been really helpful for us. One of the other key items is that there’s a lot of respect between the partners, and we all come from a variety of backgrounds and bring a variety of experiences to the table. Cody used to work at a large development firm earlier on in his career, Noam was in Abu Dhabi, I was an investment banker on Wall Street before I went out to Dubai. Having that respect between the partners is very important to drive the business forward and help the team grow and achieve all of our goals. So the whole dynamic is really working out very well for us. We always joke with our clients and our capital relationships that we plan on doing this for the next 30 years. It’s boring to not be working every day, and we enjoy what we do.
What is the one major thing that you and your two partners strongly agree or strongly disagree about over the years?
One of the things we agreed on is making sure that our families are safe. It’s not always about work and closing the next deal. If you need to take time off because you’re dealing with something, please go right ahead. That’s something we focused on and really agree with among all three of us. We’ve been working together for a number of years. As we’re bringing on more team members, we want our team members to realize the positive culture. It really helps them join the team and feel they’re part of the team very quickly. It’s something that we’re very proud of — that it’s not just about dollars and cents; it’s about making sure that everyone’s doing well and having fun, not just grinding away.
How do you build exclusive relationships with both domestic and foreign capital sources?
One of the things we always say is that there’s constant dialogue and communication that has to happen to really build a relationship. Obviously, some of this was hard during COVID, when you can’t meet people face to face. Before COVID, we would regularly go out to the Middle East, Europe and Asia. It’s not just about sending emails with deals, it’s about making sure you’re having dinner or lunch with them and understanding their motivations and concerns — where would they like to deploy capital in the near term? We’ve been back on the road since the second half of last year, and in 2022 we’re planning several trips overseas to go see our relationships. In terms of meeting new capital sources, a lot of that happens quite organically, people reaching out to us because they know this is our focus. And our goal is to always continue to meet new groups so we can continue expanding our network.
Was building relationships with clients difficult at the beginning?
We were old enough when we all started working in this new venture together. We had deep personal networks and we basically brought those to the table. But really even in the early days, we had access to a lot of capital, both domestic and overseas, just because of our personal networks. We’ve been around for a while on Wall Street and in finance, in various jobs and careers. So it was a natural extension of our personal networks.
What trends are you seeing in the market today?
One of the trends that we’ve seen coming in the last 12 to 24 months has been a lot of interest in the single-family rental space, both scattered-site as well as built-to-suit single-family developments that are focused on rentals. More and more capital sources, whether they’re sitting in New York, L.A. or Dubai, or in China, are telling us that this is a space they’d like to learn more about or have access to. I think the other thing is that multifamily development continues to be very active. We’ve done quite a few deals in multifamily development and we saw that continue in 2021. Just in general, the housing sector is getting a lot of attention right now from the capital side.
You mentioned there’s more capital than ever chasing multifamily deals, including foreign capital sources. How are you planning to win multifamily and industrial opportunities today?
We have a full team here to underwrite every opportunity that comes in the door, and we stress test the models and get an understanding of the comps, basis, cap rates and everything else. We have very detailed conversations with our clients around those opportunities. We’re asking ourselves the 30 questions that we think somebody will ask our clients. We put our capital source hat on when we’re looking at these deals. We’re then able to have the best chance of getting capital comfortable with an opportunity.
What do you think differentiates your team in today’s competitive landscape?
We like to listen more than we talk at a lot of meetings because it’s not just understanding an investor’s appetite today, but also understanding where they want to take their business. A lot of what we’re doing is really advisory, whether it’s on the capital side or the client side. We are trying to listen to what people are saying and help them as they’re growing their businesses. Overseas capital groups, especially the family offices, want to learn — they want information and data, and Berkadia has a strong technology tools and research department in Phoenix, where we are able to create a lot of interesting data and reports for our overseas capital relationships and family office. We take the long view with our capital relationships. It’s not always about, “We need to get a deal done this month.” Let’s try to figure out how we can help you meet the right developers and operators in the U.S., and in that process, if you want to learn about markets, trends and what’s going on in different sub-sectors, we’re happy to have those conversations.
Emily Fu can be reached at: firstname.lastname@example.org