Turnbridge Equities’ vertically-integrated investment strategy

Transcript

Hi, I'm Andrew Joblin, managing partner and founder of Turnbridge Equities. Turnbridge Equities is a direct operator real estate fund where we source execute the business plan, invest capital on behalf of our investors. 

Turnbridge Equities is a value add opportunistic real estate fund. We're a very thematic investor. Our fund today is about 65 to 70% last mile industrial, and we've got about seven and a half million square feet, particularly in New York, New Jersey, and DC, because they're high barrier-to-entry markets that have obviously huge demand, and so that's always a pillar of our business and will continue to be as far as the markets that we invest in, mixed-use development like Austin and Music Lane and Nashville and really the Research Triangle of North Carolina, we look for population growth, low cost of living with great education. And our third pillar, which has always been what we've done, is invest in distressed debt. And so when opportunities present itself in markets, we tend to make bets on real estate that may be impaired for one reason or another and invest the debt to ultimately get to the equity at a deeply discounted value.

We've always sort of been higher octane investors. What that means is we have an intense focus on the business plan, and we really try to mitigate risk upfront. We do like to target sort of value add to opportunistic type return. Generally, we underwrite very conservatively, and we like to, you know, ultimately end the investment much higher than that, like we have in our historical track record. 

Traditionally real estate funds have been allocator models, and today, to a large extent, still are, but we wanted to do it direct. And the reason why we wanted to do it direct investor to operator without the allocator or in between is to really change the double promote. And so what I mean by double promote is that we're giving to the allocator, we’re then giving to us an operator, and two promotes and fees were creating a misalignment of risk-adjusted returns. So operator was taking opportunistic type deal risk, let's call it, you know, 20 to 25% return risk, and after the double promote and fees, the end investor was getting a net ten. So if you cut out that allocator in the middle, then you know that 20% deal risk becomes net 16. And we think that’s a much better alignment of risk-adjusted return. 

Turnbridge Equities is a direct operator real estate fund where we source execute the business plan, invest capital on behalf of our investors. We're not relying on someone else to execute the business plan. It's all done in-house with our team. And so we've got a really well-rounded group of individuals on our team that have experience in many different facets of the investing cycle and the execution cycle. I think the best investment we ever made is probably right down the street here at Music Lane on South Congress. What attracted us to Austin was UT's engineering program, and we saw a shift from San Francisco and their engineering campuses. They were moving them to Austin in hopes that they could find stickier engineers. Right. And what a lot of these big tech companies found in Austin is that, you know, the folks from UT were staying at the job. They were very loyal, hard-working, and pretty smart. We came into the market in 2015 to try to see what the micro-investment was. Everyone knew that the macro of Austin was very good. And what I saw was that Austin was really starving for its High Street experience. There was no downtown adjacent, walkable street that could bring the Austin community together for, you know, 18 hours of activation. So what we set out to do is find a street that had the makings of that in the early parts of that. And so, to me, it was South Congress; there was great restaurants, there was a sprinkle of shops, there was great walkability and foot traffic there, which didn't exist anywhere else in downtown. So what we wanted to do was curate two great anchors in that project, and we found that Soho House and Equinox were potentially two of the best. And once we were able to get those two as the anchors, the rest really fell into place.