MBA NewsLink Q&A with Berkadia’s JV Equity & Structured Capital Group

(Images courtesy of Karolina Grabowska/

MBA NewsLink recently interviewed Chinmay Bhatt, Noam Franklin and Cody Kirkpatrick from Berkadia’s JV Equity & Structured Capital Group about the state of the equity market.

Chinmay Bhatt is Senior Managing Director with Berkadia’s JV Equity & Structured Capital Group; Noam Franklin is Managing Director – Head of Eastern U.S. and Cody Kirkpatrick is Managing Director – Head of Western U.S.

MBA Newslink: What is the state of equity at the moment?

Noam Franklin

Noam Franklin: Institutional investors were extremely cautious in 2023, but we are currently seeing a renewed sense of optimism going into 2024. This positive outlook is largely due to the Federal Reserve’s seemingly putting a halt on raising rates into the near future.

Institutional investors are looking for rate stability so that they can gain confidence in underwriting opportunities, and it seems like the trend is moving in the right direction. Many of the most active funds deployed very little in 2023 and they have indicated some duration pressure. As a result, they appear more interested in evaluating opportunities that we are working on, compared to 2023, when a lot of groups were putting pencils down, no matter the return profile.

Cody Kirkpatrick

Cody Kirkpatrick: In 2023, we witnessed a significant rise in the number of capital groups that had historically been focused on common equity opportunities approaching us with pitches for their new Preferred Equity strategies. However, they found that their cost of capital was still not meeting the market. Consequently, these groups may need to revert to common equity strategies to deploy capital in 2024. If this happens, we can expect more groups to be interested in Joint Venture (JV) opportunities that do not have a capped upside.

The overall living sector, which includes multifamily, build-to-rent, and student housing, has seen a significant increase in appetite from many of our relationships – both domestic and abroad. They are looking to partner with best-in-class sponsors that have a track record of operating through multiple cycles with a laser focus on certain geographies. We are also seeing a massive opportunity for capital to upgrade the quality of the sponsorship by partnering with new players, as many of the household names are now open to identifying new partners and are realizing that they can’t rely on the same sources of capital they have leaned on over the last few years.

MBA Newslink: How are local foreign markets playing into U.S. interest?

Chinmay Bhatt

Chinmay Bhatt: Our team recently came back from meetings with investors in Japan, South Korea, Dubai, Abu Dhabi and Kuwait. With the current lack of real estate capital available in the U.S., we wanted to see if they were looking to fill the void. We believe it’s essential to have relationships abroad to ensure that clients’ opportunities are getting looks from as many qualified groups as possible. During our meetings, we were surprised to find out that many of the leading investors in the region had the same concerns as our U.S.-based clients.

Many of the groups are showing interest in structured investments such as mezzanine debt or preferred equity, in existing assets. They have been hearing that it’s possible to achieve equity-like returns in the credit space with a much safer position in the capital stack. However, the challenge is that many of the overseas real estate markets have been performing exceptionally well, so investors need to be paid a premium to invest in a market like the U.S.

The outlier was Japan, where investors were very keen on joint venture equity opportunities in the U.S., as they have a deep track record of investing here and are highly focused on partnering with many of the household names in multifamily. Although the real estate market in Japan has improved recently, investors see the need to diversify and still look at the U.S. as the number one place to deploy outside Japan, especially given the decline in Japan’s population. Japanese institutions take a while to build trust with sponsor partners, however, once the first joint venture is established, they are reliable capital partners. Therefore, they look for experienced groups with a considerable track record and pipeline.

Noam Franklin: Middle Eastern investors prioritize in-place cash yield when considering investments in the U.S. They are increasingly open to exploring smaller markets, as they recognize the need to expand their market selection to get the outsized returns they are looking for.

Since our return to the U.S., our team has already had multiple overseas groups providing term sheets and showing very significant interest in several deals. They include both development and existing multifamily projects in markets including Nashville and Denver. We are currently in dialogue with a handful of overseas groups that are looking to become programmatic partners with experienced sponsors in the U.S.

Keeping your finger on the pulse of foreign markets is crucial to achieving success. As the U.S. markets continue to evolve, we believe that diversifying portfolios and exploring a wider range of opportunities will be critical to foreign investors in 2024. In this context, global capital will be more important than ever, and those who can navigate this landscape confidently will reap the rewards.

(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)