Today’s guest is Whitney Ward.
Whitney is the Principal & Fund Manager at CRE-Endeavors where she leads the strategic growth initiatives of the firm. Whitney oversees capital markets, acquisitions and dispositions with a focus on the firm’s fund management, and real estate investments.
Show summary:
Whitney shares her journey from corporate America to real estate, her business plan, and her belief that real estate rates will decrease over the next three years. She also discusses her company’s focus on 10 to 75 unit deals, their strict criteria for co-investing, and the challenges of raising capital in the current market. Whitney also touches on the importance of educating investors about market conditions and the opportunities they present.
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The Journey from Brokerage to Fund Management ([00:00:58])
Focusing on Niche Multifamily Deals ([00:04:36])
Seizing Opportunities in the Current Market ([00:07:22])
Opportunity for arbitrage and acquiring deals at higher rates ([00:10:08])
Classifying deals as distressed and the impact on sellers ([00:11:07])
Selling assets at a discount due to high cost of debt ([00:12:54])
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Connect with Whitney:
LinkedIN: https://www.linkedin.com/in/whitneywardcre/
YouTube: https://youtube.com/@WhitneyWard-CRE-Endeavors?feature=shared
Web: http://www.cre-endeavors.com
Connect with Sam:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Facebook: https://www.facebook.com/HowtoscaleCRE/
LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/
Email me → sam@brickeninvestmentgroup.com
SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson
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Want to read the full show notes of the episode? Check it out below:
Whitney Ward ([00:00:00]) – I mean, a lot of our, our business plan is derived from our belief that, you know, in the next over the next three years, we’ll see rates decreasing. They might not get down to where they were in 2020. Right. But we see an opportunity where some people might be fearing we’re seeing lower, lower values. More deals come into the market as an opportunity for us to acquire these deals.
Sam Wilson ([00:00:24]) – Welcome to the how to Scale Commercial Real Estate show. Whether you are an active or passive investor, we’ll teach you how to scale your real estate investing business into something big. Whitney is the principal and fund manager at CRA endeavors, where she leads the strategic growth initiatives of the firm. Whitney, welcome to the show.
Whitney Ward ([00:00:46]) – Hey, Sam. Thanks. Thanks for having me.
Sam Wilson ([00:00:48]) – Absolutely, Whitney. The pleasure is mine. There are three questions I ask every guest who comes on the show in 90s or less. Can you tell me where did you start? Where are you now? And how did you get there?
Whitney Ward ([00:00:57]) – Sure.
Whitney Ward ([00:00:58]) – I started in corporate America. I’ve entered the real estate business in 2016 through, you know, starting in the brokerage business focused in multifamily assets at this, which since 2016, I’ve done everything from multifamily brokerage transactions to some passive equity investments into deals. I’m currently now, like you said earlier, the principal and fund manager for my own firm that I launched in 2019, which since then we’ve done over 100 million in acquisitions and sales transactions and multifamily investments. And we are now dipping into the fund management space.
Sam Wilson ([00:01:38]) – That is awesome. I love the the journey there. It’s pretty fast, really. I would think, you know, going 2016 brokerage. I mean by 2019, did you feel like you had really understood everything you need to understand and just decided to pivot or why why did you go? Maybe that’s even a better question. Why did you go from brokerage into then becoming your own principal and run your own deals? What what happened then that made you say, this is a good time to do that? Yeah.
Whitney Ward ([00:02:03]) – I mean, good question. So we’ve kept brokerage. We’re still in brokerage. So CRE endeavors is a licensed brokerage firm in Georgia and in Maryland. So we that’s something we kept. Um, I would say the real reason I pivoted, I was at a national brokerage firm in 2016 through 2019, and my real reason for pivoting was just the autonomy to do more deals in the way that I wanted to do it. You know, most brokerage firms want you to focus just on selling, you know, doing transactions. And, you know, we look, we understand that investing is very important in building your portfolio. And so the, you know, brokerage business allows us to service our active clients. But then we also are able to invest in deals. And we have that autonomy that not every brokerage firm allows you to do.
Sam Wilson ([00:02:47]) – How do you decide when a deal comes across your desk that maybe is off market, what what you’re going to list, and then what? You’re going to actually take a stab at yourself without making your brokerage clients upset, seeing you kind of cherry pick off the top.
Whitney Ward ([00:03:04]) – Sure. I mean, multifamily is unique, right? Because all the other asset classes you really have, you represent a lot of buyers and you represent a lot of sellers and multifamily. It’s really focused on having the relationship with the owner of the property. So we don’t we never really have a host of buyers that are like, hey, we need deals, right? Because there’s so many outlets, you can sign up for all the big firms and get a bunch of deal flow, right? So not to say we don’t have deal flow for those buyers, but we don’t we don’t necessarily say, hey, we’re going to be your source for finding those deals for you necessarily. So that that in itself kind of takes away some of that conflict. But with with the fund itself, it has a very strict criteria. We are we co-invest with experienced managers and developers, so they tend to already have that deal, and we co-invest with them when there’s a deal that we’re, you know, right now, my commercial real estate advisor, she’s brought, she’s sourcing some deals off market.
Whitney Ward ([00:04:02]) – And those deals would be directly what we would market to, to, to the public. So unless there came a situation where we market a deal and nobody was interested in it, which highly unlikely that would happen, that we would then buy it. But then, you know, then we could consider buying it. But the, the, the types of deals that we get as a brokerage company are typically smaller deals. I mean, we’re we’re a niche shop. So our deals are anywhere from ten to on average 75 units. So we service a specific clientele. So we’re not really competing. You know.
Sam Wilson ([00:04:36]) – Right now that’s an interesting segment to focus on. The 10 to 75 units. How did you decide to focus on those size of deals inside of the brokerage firm?
Whitney Ward ([00:04:48]) – Well, I mean when you think about like every market’s different, right? So I said we’re licensed in Maryland and we’re licensed in Georgia. A lot of our deals in Maryland, we do in Baltimore. And that markets is a little bit smaller.
Whitney Ward ([00:05:01]) – And so as a smaller firm, market share is relatively easier to gain than in a market like Atlanta, where we’re headquartered, where the large the top three firms, they’re getting 80% of all the market share, especially over 100 units. So if we’re going to, you know, eat and then be able to live and take care of ourselves, we had to figure out what’s a niche that, you know, those large firms are taking, that there’s opportunities that a lot of times residential agents will will we’ll get some of those leads for, but not really understand what commercial real estate is and how to service those clients. And so we’re able to kind of make us a niche specialty in that space.
Sam Wilson ([00:05:41]) – Got it. Oh, that’s really, really cool. Well let’s talk about the transition in 2019 when you guys said, okay hey we’re going to go out and start doing our own deals. It’s been an interesting run 2019 to today in multifamily. Tell us, give us some color on your guys’s journey and kind of how your how you’ve changed over the last, I guess four years.
Whitney Ward ([00:06:03]) – Well, I mean, I tell people I was like, I’ve actually been through like three market cycles, you could say, before Covid and then whatever we’re in right now. So it’s it’s been a heck of a ride. I’m not going to lie. It’s been very difficult. But it’s also exciting because we’re we’re all where we are right now. We’re seeing a lot more opportunities, like when I first launched the firm in 2019 and we were prospecting business, we were hearing a lot of no’s because people were comfortable, right? They were used to their brokers. There’s nothing, there’s no need to change. Why go to CRE endeavors now? You know, people have either debt maturities coming up or they need to find liquidity in some in some way. And they’re they’re more open to entertaining what we have to offer. And quite frankly, being a niche firm and having our own source of lenders and equity providers outside of the fund, it has allowed us to be able to position ourselves to serve service clients pretty much the same way that a larger firm would just on a on a smaller scale and more boutique focused.
Sam Wilson ([00:07:08]) – What about the stuff that you guys are buying in house? You say that now is a great time. Of course, you mentioned a few reasons why now might be a good time to be investing in multifamily, but what what is that journey been like for what you personally are buying and acquiring?
Whitney Ward ([00:07:22]) – Well, right now, like I mentioned, we’re I’m raising capital right now. I’m raising capital because we are seeing valuations down 26% versus last year. We’re seeing transactions have slowed down, but they’re starting to pick up. And they’re expected to pick up here in Q4, especially in Q1. But we’re raising capital. And we’re telling our investors, listen, you invest alongside us. We’re going to we’re going to we’re going to have a pipeline of business that comes in not only through our leads, through our managers and developers, but we’re already boots to the ground. We already know what’s kind of going on. We already have a pipeline of business of of some owners that are going to need liquidity over the next 6 to 12 months.
Whitney Ward ([00:08:00]) – And so we’re just having those conversations now. But for the as far as the fund goes, and on that investment side, I mean, we are looking generally for, you know, 75 units to 150 units on size, so we can have a third party property management company in place. And, you know, your typical value add opportunities that you’ve heard a lot of groups say, we just think there’s going to be more value add opportunities to look at.
Sam Wilson ([00:08:25]) – Yeah, absolutely. No. And I want to touch on I guess a couple of things. Let’s talk about the you mentioned the term need liquidity groups that need liquidity. What are some situations that people are finding themselves in that need liquidity, that don’t necessarily mean that they have a bad investment?
Whitney Ward ([00:08:42]) – Sure, I mean mean. So liquidity in its sense, like if you if you invest in real estate, the only way to generate liquidity is to sell or refinance the property. So there’s there’s like I mentioned earlier, you have some owners that have purchased properties with short term debt in 2021, 2022, and they have debt maturities coming up.
Whitney Ward ([00:09:04]) – And they’re going to need to sell. Whether the market, whether the interest rates are high the way they are today or not, they are going to be forced to sell or refinance, and not everybody’s going to be able to refinance if they if they haven’t been able to generate enough income to service that refinance, then you have people that might be fund managers that have their funds expiring, and they have to close out that fund. And so they’re going to be looking to exit out of the deals that they have to end their funds. You’ve got developers, you know, people who have constructed have construction loans out. They’re going to need to refinance out of those and put stabilized debt. So you have a variety of different scenarios right now that are foresee that show people needing liquidity.
Sam Wilson ([00:09:46]) – So what’s the I guess, what’s the opportunity for you in that?
Whitney Ward ([00:09:50]) – Well, we want to be there to say, hey, we want to buy it. Right? So so I mean, with rates as high as they are and valuations down, we’re we’re projecting or we’re seeing first of all values are down the lowest they’ve been since probably I would say 2016 at least probably earlier than that.
Whitney Ward ([00:10:08]) – Right. And so for us we just see that as an opportunity. You know maybe some groups are like, hey, the interest rates are high. I’m scared. But we see a potential opportunity for arbitrage. I mean, even the institutional investors are looking at possibly acquiring deals right now at higher rates, right. And maybe even doing a short term type of floating debt, putting a rate cap on it, and being able to refinance because we believe rates will be down in 2025, 2026. And that’ll be a space where you can, you know, refinance or, you know, exit a deal however you want to, whatever your strategy is. So I mean, a lot of our, our business plan is derived from our belief that, you know, in the next over the next three years, we’ll see rates decreasing. They might not get down to where they were in 2020. Right. But we see an opportunity where some people might be fearing we’re seeing lower, lower values. More deals come into the market as an opportunity for us to acquire these deals.
Sam Wilson ([00:11:07]) – So would you classify these deals you’re looking at as distressed and. Yes, I guess the answer for those of you were listening. Whitney shaking her head. Yes, they are they they are indeed distressed. And I guess what’s happening to those sellers? I mean, they’re taking a haircut on what they.
Whitney Ward ([00:11:25]) – They got, they have to do. I mean, you have to you’re going to have lower returns than what you expected. And that’s the unfortunate thing about, you know, market cycles in some ways. I mean, you know, many people believed that we were in a low interest rate market forever. And, you know, it’s just it’s just kind of the way the, the cookie crumbles. And and that’s why we want, we’re, we’re saying to our investors, listen, we’ve been in this market and we’re seeing trends that we haven’t seen in a long time. And I think, you know, you know, in scary times presents opportunities. And yes, to your point, I would say it’s it’s stressed and distressed owners because anytime you’re forced to do something that you don’t have a decision to make, I consider that to be somewhat stressed.
Sam Wilson ([00:12:08]) – Right. For sure. You mentioned that valuations are down 26%. I guess that’s probably a maybe a nationwide percentage there that we’re using. Would you say that even valuations are down 26% even on performing deals? Or how are performing deals working out right now? I mean, let’s, let’s, let’s use your scenario and say, hey, they have a short term debt. You know, they’ve got debt maturation coming up and they need to either sell or refi. Are we seeing deals that are doing really well? I’m thinking of one I’ve got and we’re not looking to sell. We don’t than the debt’s not maturing on it. But it’s doing really well. It’s like 99% occupied were way above pro forma. But if we had to sell that, is that also something that people are selling assets like that at a discount because they have to.
Whitney Ward ([00:12:54]) – You’re going to have to I mean, the cost of debt is too high. I mean, I mean, the bid is spread between what buyers are, are able to pay and make it make sense for their investment and what sellers want to sell at, you know, it’s it’s shrinking, but it’s still there.
Whitney Ward ([00:13:08]) – It still exists. So I mean, with with right now with you come if you get in the market and you really you know, place agency debt on a multifamily property, you’re looking at probably 6.5% interest rate on a good on a good on a good deal. I mean, I mean, if someone’s trying to sell it a five cap, you’re immediately at negative leverage. I mean, there’s like a buyer can’t make that work, you know what I mean? And so it’s now the decision on you guys, if you guys put your property on the market, which I’d assume if your property is performing, why would you sell? Why wouldn’t you just hold it? You know what I mean? Like, there’s no reason for you.
Sam Wilson ([00:13:40]) – Well, unless, you know, and I was using our property as an example, but unless we had, you know, debt maturities coming up that we just couldn’t avoid, and it’s like, okay, well, we’re gonna have to refinance this or sell it.
Whitney Ward ([00:13:52]) – Or are you knocked it out of the or you knocked it out of the park. And even if you sold at a six and a half cap or seven cap, you still killed the returns that you were projecting, right? Yeah. Right. Right.
Sam Wilson ([00:14:02]) – That’s interesting. So you mentioned something there I hadn’t really thought about and didn’t plan on going down this, this rabbit trail, but I’ve seen some deal sponsors advertise buying it negative I guess negative leverage is that the term is there. Yeah. Where they’re where they’re buying it at a six and a half cap. But they’re going in cap rates of five cap. What do you think about that strategy.
Whitney Ward ([00:14:24]) – I mean I mean you know, I was just up in New York last week. I global had a global leaders and commercial real estate conference. And it was just a bunch of institutional investors. And personally, I think anytime you can get in front of institutional investors and just compare notes and listen to them, they’re the smartest in the game. So and just hearing their feedback, I mean, it depends on the strategy and how long that negative leverage lasts.
Whitney Ward ([00:14:50]) – Most most people are most institutional investors would say no. Right. But it also it’s going to depend on your business plan. If you could if you go in at a five but you think you can exit at, you know, an eight, I don’t know. It really just depends on your arbitrage. Like, um, you know, for us, I’m not we’re not looking at anything like that. We’re being patient because we think there’s going to be situations where a buyer or a seller is not going to have the option to continue to push their price. Right. It’s going to come down to they’re going to have to sell. So, you know, whoever is going to be positioned well capitalized experience as closed deals. And that’s one of the reasons our fund is is a 506 C fund. So it’s accredited investors only. But that’s one of the reasons why we’re partnering with managers and builders that have done deals and have taken them full cycle. Because, you know, I think with that, having the equity, having relationships with lenders, obviously, you know, those experienced sponsors would have those.
Whitney Ward ([00:15:50]) – I think it’ll be easier to transact and get those sellers to agree to prices that they may have not normally agreed to.
Sam Wilson ([00:15:56]) – Right, right. Tell me about the fund and raising capital in well, in today’s market and today’s economy, what’s that like. And yeah, give us some insight on that.
Whitney Ward ([00:16:07]) – Yeah I mean it’s tough I mean everyone’s afraid right. And so one of the things that I have made a focus is educating. People on what the market is doing and where and why. Why we’re seeing right now as a time to start raising capital. I mean, I’m not the only group raising money. There’s tons of groups. I see funds popping up here left and right, you know, um, so it’s a matter and what we we’re trying to separate is say, hey, we’re already building a pipeline. We already have. We’re already boots on the ground. We already know what’s happening. We’re in the business every day through our brokerage company. We’re interacting with investors all the time. And so raising capital has been difficult.
Whitney Ward ([00:16:45]) – But, you know, if you follow any of the trends and seeing some of the larger institutions like Blackstone or whatever, they’re starting to get less redemption requests. They’re starting to be able to raise a little bit more capital. We’re being we’ve had some success raising capital on the on the family and friends side. And now that we’re 560, we’re we’re entertaining institutional partners as well. And so I mean, it’s it’s a consistency. Um, you know, people if you ask me what I really do, I feel like I’m, I’m in marketing and sales because that’s what I’m really doing now, you know, and, and trying to get people to understand the opportunity and see not only, like what the market is showing, why this is an opportunity, but with sort of like, why us and what we’re going to do different than other groups.
Sam Wilson ([00:17:29]) – No, I think and that’s that. That’s a like you said, it’s a marketing position as much as anything because you need to come up with a compelling story as to why.
Sam Wilson ([00:17:37]) – Why now is a great time. And I’m hearing that. I mean, we’re hearing that from several people in the industry now where they’re saying, hey, you know, we’re seeing opportunity. We are positioning ourselves, you know, to take advantage of this opportunity. I just it’s yeah, it’s I think what you’re doing is great. It it is really interesting, though, how you have to craft that message to your investors and share that. So so tell me about that. When you when you’re out raising capital in a fund, which I think is uniquely challenging in and of itself, but then also that fund is deploying capital into several other deals and sponsors, maybe that your investors don’t know or have a direct relationship with. What is that process like, and how do you instill confidence then in your investors?
Whitney Ward ([00:18:18]) – Yeah. So a strict criteria for what that manager and developer would have to have from a background experience. So all of the groups that I would consider, I’ve known them since getting into real estate.
Whitney Ward ([00:18:30]) – So I’ve seen them grow, I’ve seen them manage, I’ve seen them manage this market cycle. I’ve seen them execute right. And so what I try to help others understand is, you know, we’re doing our due diligence on these sponsors and these managers by by requiring them to have at least done that specific deal full cycle. Right? Whatever that deal is, we’re considering, you know, having an experienced third party, third party property management company in place, if not in-house, they’ve had to have done agency financing deals, they’ve had to have experience in any type of bridge or construction loans for us to consider it. So it’s a background like we’re we’re doing a thorough background check on any of the sponsors. And again, like I said, these are these are people that I’ve had relationships. I share the same investment thesis as them. I mean, it would be almost as if I’m a partner with them on a lot of their investment philosophies. So we’re not going to go really out of the box on any of this and, you know, do a development deal in Milwaukee when we don’t know anything about it.
Whitney Ward ([00:19:36]) – I mean, that’s another thing. Our geographical focus is very specific as well. Being the southeast, our asset type, all those things kind of help our investors feel a little bit more comfortable.
Sam Wilson ([00:19:47]) – That is fantastic. Thank you again for taking the time to come on the show today, and really tell us what it is that you guys are working on, where you see opportunity love here, and people get excited about what it is that they see, the opportunities they see in the marketplace and how they are, again, taking advantage of that. If our listeners want to get in touch with you or learn more about your fund, what is the best way to do that?
Whitney Ward ([00:20:08]) – The best way would be to visit our website. It’s CRE Dash endeavors. You know, we did a really good job of just making things very simple. Anyone can understand it and you can. My contact information is on there as well.
Sam Wilson ([00:20:24]) – Awesome. Fantastic. Whitney, thank you again for taking the time to come on the show today.
Sam Wilson ([00:20:27]) – I certainly appreciate it.
Whitney Ward ([00:20:28]) – Thanks for having me, Sam.
Sam Wilson ([00:20:29]) – Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
