Bonaventure Founder and CEO Dwight Dunton On Investment and Development

Dwight Dunton has spent the better part of 26 years building Bonaventure into a top-flight vertically integrated multifamily property management, development and investment firm. As CEO and founder, Dunton oversees a business of $2.8 billion worth of assets under management in markets across the U.S. and 500 employees across nine different regions, 

But the firm’s bread and butter is its assortment of investment vehicles, which include BMIT, Bonaventure’s private NAV Real Estate Investment Trust, and several exchanges for  tax-efficient investing that have generated $1.5 billion of value for clients. Dunton’s firm excels in co-investment with clients and has put $590 million of its own capital into deals across its platform.

Dunton sat down with Commercial Observer to discuss his firm, its investment strategy, and why his business is nothing like multifamily syndication that has generated controversy in recent years. 

This conversation has been edited for length and clarity. 

Commercial Observer: Tell us about your business. 

Dwight Dunton: Our development business builds four-story, surface-parked properties in suburban locations. We primarily partner with existing landowners who might have a great piece of land they want to build an apartment building on, but for whatever reason they don’t have all the pieces, so we bring the rest of the pieces together. Then our property management business is really focused around providing best-in-class outcomes for private capital owners. We have a handful of clients, and we give them the outcomes as if they had an in-house property management company, but without dealing with all the headaches. And we’re able to offer better economies of scale than you could get if you worked alone. 

We are all about solving problems at Bonaventure, and some of the problems we solve are ones that other people don’t even see. I think most people wouldn’t see internet service in a multifamily environment as both a problem and an opportunity to solve. They just kind of accept the status quo. At Bonaventure, we have a bunch of curious people here who say, “There’s got to be a better way.” 

Bonaventure built an internet service provider. How did that happen?

We basically built the tools when we didn’t have or we couldn’t find a vendor to do it. So we have a property management arm called Vest Residential that’s out of Charlotte. We have a development business that’s been in and out of the general contracting, based on market dynamics. We have an investment management business, and we also found that there was nobody providing great internet service at our properties. The usual suspects of Cox, Comcast and Verizon weren’t getting it done. They  were making tons of money while providing subpar service. So we built our own internet service provider called Internet Subway, and that’s been a huge hit for our residents and has simplified the life of our property staff, so now we’re providing that to others. 

How do you view real estate development as a business line?

Development is a cyclical business. Sometimes it’s a great time to develop, other times it’s not. And so what we have here is a situation where there’s always an opportunity to acquire assets. The type of assets to acquire and the time to buy them might differ, but development is very cyclical, where half the time it’s a great time to develop, the other half of the time you can’t. 

What’s your main investment strategy?

We’re primarily focused on finding markets where there’s steady to positive population and employment growth, and very little supply growth. We discovered that the No. 1 determinant of future rent growth [in multifamily properties] is lack of supply. And so, we would gladly trade some population growth and economic vitality for less growth in units. Our job is to find those submarkets where there’s positive employment, economic vitality, limited supply, but that there’s still a significant discount between what people earn and what rent levels are. This is so that we have the ability to find assets where we can continue to reinvest in them, and then raise the quality and caliber of those assets. Moreover, it’s important that the population in that submarket can afford to pay for those additional benefits. 

How do your investment arms work?

If you step back and ask, “What are we awesome at?” it’s long-term, tax-efficient compounding interest in the apartment space. We realize that it’s not a one-size-fits-all approach: Different investors need different things. Even if they say, “I need apartments in my portfolio,” some people say, “I want to invest in one apartment building and really feel good about that particular apartment building.” And so, you can invest in a single asset with us, but others sleep better knowing there was some diversification. And that’s why we have BMIT [the firm’s private REIT]. And then others are like, “I have a piece of real estate that I’ve owned, I need to sell it, but I have a huge tax liability, and I’m tired of being a landlord and managing it.” And so, they can roll their capital over from the last asset that they owned through a 1031 exchange into an institutional-quality building, and that’s where our 1031 tax advantage solutions in Promenade Point [a 183-unit multifamily asset in Norfolk, Va.] is an example of that. 

Are your typical investors mom-and-pop businesses, everyday folks? 

They’re not mom and pops. Certainly, some of them are folks that you would not identify as being uber-wealthy. We run the gamut, but I think the common denominator in our investors is that all of them have a heartbeat. Meaning, we don’t cater to institutions, pension funds or private equity firms. Everybody that we do business with is a person or a family, and that’s because of our roots of Bonaventure being my family’s capital, our family’s investments. It’s just how we grew the business, by allowing other families to go invest with us.

We feel like our responsibility is to families, to help them build their wealth in order to afford their dreams. It’s a calling for people here at Bonaventure, and it’s not really a calling when you say, “Hey, here’s some real estate private equity fund that just wants to make money.” That doesn’t get us excited. But if you can say, “We help this family to achieve their dreams,” well, that is super motivational, and that’s what drives everybody at Bonaventure. 

How have you seen multifamily evolve in 25 years? 

There’s been a lot of things. First, it’s certainly become more institutionalized. It used to be very local, and now you’ve got national companies, you’ve got recommended allocations for alternative investments and different investment funds in the space. Second, new developments have become much more like hotels and resorts in terms of their amenity set. So that in previous generations, people rented as a stepping stone to own. Now, there’s a large cohort of people who are choosing to rent. They could afford to buy a home, but they like the flexibility that comes with that, and they want an amenitized environment. 

And then, there’s the use and evolution of technology — this was a very grey-color industry. There were still ledger cards being used regularly 25 years ago by some of the old school family firms. And now, our industry is racing to catch up with the rest of the world in terms of integrating technology and software. The level of sophistication has grown, and the caliber of team members we need to have, along with the variety of jobs, has also increased. There was no social media marketing coordinator 25 years ago. I remember when we put up a website very early on, people were like, “Why would anyone need a website to run an apartment?” In those days, they would just stop by in person, or they’d pick up the guidebook at the supermarket, and those guidebooks are now gone. They’re all online. 

How do you view all of the large-scale syndicators in the multifamily space?

We are really very different. Whenever you have an excess of liquidity, there’s a whole cavalcade of people that show up and want to sell investments to people, because there’s money to be made in fees. And it has happened with internet stocks. In the 1990s everybody was starting an internet business, and so on. It happens in real estate periodically. And so, to me this is the symptom of the underlying issue of too much money and not enough assets that came from the COVID-era liquidity. Whereas, we look at ourselves very much as co-investors. We make our money by investing our capital alongside our clients. Making money off fees is not our motivation. Making money with our clients very much is our motivation. And, so, I think that distinguishes us, as we think of ourselves, first and foremost, as investors, and second, we partner with other people and other families to co-invest alongside us. It’s a different mentality than somebody who’s a co-sponsor and wants to sell people stuff. 

What’s the best commercial real estate investment advice that you give others? 

I would rather buy in a rising market than try to catch the bottom in a falling market. 

Brian Pascus can be reached at bpascus@commercialobserver.com.