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Citymark News

CRE’s Crystal Ball: Executive Predictions, Past & Present

By, ALEXANDRA PACURAR

SOURCE: Commercial Property Executive

NOVEMBER 7, 2017

In this continuing series marking CPE’s 30th anniversary, seasoned executives reflect on past predictions and discuss what’s on the industry’s horizon.

Anticipating major shifts in  commercial real estate and acting on them is a hallmark of successful executives. To mark CPE’s 30th anniversary this year, we are inviting industry leaders to reflect on major predictions that came true, others that didn’t pan out, and offer educated guesses on what’s ahead. This month, we turn to three seasoned executives representing investment, capital markets and development.

Dan Walsh, founder & CEO of Citymark Capital

What have been the most significant predictions about the industry during your career, and which turned out to be true?

I was asked to lead the KeyBank Real Estate Capital Markets division in late 2007, which was right at the time when the subprime crisis was starting to hit. At that time, there were two predictions that were proven to be wrong. One was that because single-family home prices had never dropped before, they never would. That was what led to the whole subprime run-up in the first place, where people continued to put higher and higher values on single-family homes without regard to the fact that the values were being inflated by speculators.

The other prediction was that there wouldn’t be a contagion effect to the commercial real estate sector. But because the capital markets were so intertwined and the financing companies were warehousing all of the debt supporting both subprime and commercial property, once they started to have liquidity problems, it definitely flooded over to the commercial market.

What are your predictions for the next stage of the industry?

There is much discussion about what will happen as Millennials get married and start families and what that might mean for the multifamily industry in general as well as in urban cores, where many young professionals now live. I predict that many Millennials will eventually move to the suburbs for things like more space and access to better school districts, as part of the natural cycle of life and the American dream.

As a national real estate private equity fund manager that invests in institutional quality multifamily properties, our firm continually analyzes both micro and macro trends and we predict continued growth in the demand for well-located urban and suburban multifamily properties. The demographics support the fact that as Millennials age, there is another group coming up right behind them to take their place as the U.S. population overall also continues to grow. The main reason why real estate is a good investment is that people will always need shelter. It’s a core driver of investments stability and that’s not going to change.

Adam Mermelstein, principal at Treetop Development

What have been the most significant predictions about the industry during your career, and which turned out to be true?

My most notable real estate prediction was the market crash of 2008, which, of course, turned out to be accurate. At the time, Treetop Development was heavily invested in ground-up condo development in the greater New York City area. My partner Azi Mandel and I anticipated that a downturn was imminent due to a number of market indicators and we were able to safely exit all of our condo development deals in time without suffering significant losses.

Additionally, Azi and I foresaw the run-up in multifamily pricing that occurred in Upper Manhattan between 2011 and 2016. During that timeframe, Treetop Development purchased, improved and sold more than 2,500 apartments located north of 110th Street, which also contributed to the overall enhancement of the neighborhoods in which we invested.

What are your predictions for the next stage of the industry?

I believe that the real estate industry will remain in a stable plateau state in the near-term. I don’t see the industry rising from here, but, at the same time, I don’t believe that we will experience a market downturn until there is a major political, financial or world event that prompts it.

Josh Schuster, managing principal at Silverback Development

What have been the most significant predictions about the industry during your career, and which turned out to be true?

Predicting market movements can prove challenging. However, there is a herd mentality in the real estate market place that can swiftly change. For example, realizing there was a shortage of oversized (high bedroom count) units in 2011/2012, we were able to build for this end user and sell successfully at 12 E. 13th St. Alternatively, noticing a growing supply that followed shortly thereafter, we refocused on constructing the opposite (more efficient units at lower price points) at 50 Clinton St. and sold 80 percent of those units off of floorplans. In both instances, timing was crucial.

What are your predictions for the next stage of the industry?

I think there will be a growing trend to refocus on structure and spend more attention on the capital stack with alternate sources of capital. Structured credit (preferred equity and mezzanine financing) will be used to fill a shortage of equity in the marketplace as big equity remains hesitant considering overall supply and the potential for a market recession due to external factors (Brexit, conflicts in Korea, rising interest rates, etc.).  Additionally, due to continued construction cost escalation and land prices remaining high, we will see more joint ventures and ground lease structures to make both equity and debt participants comfortable.

 

Citymark Acquires 274-Unit Phoenix Asset

Pool photo               Unit photo               Club House photo

By, ALEX CIOROGAR

SOURCE: Multi-Housing News

PHOENIX, AZ – OCTOBER 10, 2017

West Town Court is located near numerous employers, retail establishments and entertainment centers. Built in 2009, the community comprises one-, two- and three-bedroom residences.

A partnership between Citymark Capital and InterCapital Group acquired West Town Court, a 274-unit multifamily property in Phoenix, Ariz.

The asset is located at in West Valley at 8400 West Virginia Ave., near numerous employers, retail establishments and entertainment centers. Situated on a 16-acre lot, the 2009-built community consists of 22 buildings with one-, two- and three-bedroom floor plans, averaging 853 square-feet. Amenities include a fitness and business center, swimming pool, clubhouse and full covered parking with a total of 512 spaces, according to Yardi Matrix. West Town Court is currently managed by DayRise Residential.

“This aligns with our national platform of investing in leading U.S. markets and taking a disciplined approach to generating solid returns for our investors,” said Dan Walsh, founder & CEO of Citymark Capital.

The firm recently invested in River Edge, a 100-unit New Jersey multifamily property and in the Villas of Vista Ridge, a 323-unit asset in Dallas.

Citymark, CAF Capital Acquire 323-Unit Multifamily Community in Metro Dallas

Villas of Vista Ridge pool               Villas of Vista Ridge with Playground               Unit with garage

SOURCE: REBusiness Online

By, JOHN NELSON

LEWISVILLE, TEXAS – SEPTEMBER 13, 2017 — A partnership between Cleveland-based private equity firm Citymark Capital and Dallas-based operator CAF Capital Partners has acquired Villas of Vista Ridge, a 323-unit multifamily community in the Dallas metro of Lewisville. The property is located at 351 State Highway 121 Bypass near a variety of entertainment and retail centers. Amenities include a pool and a fitness center. The name of the seller was not disclosed.

 

Walsh’s Citymark is ‘built’, ‘working’

SOURCE: Crain’s Cleveland

By JEREMY NOBILE

CLEVELAND, OH – SEPTEMBER 10, 2017

Daniel Walsh left his job as a regional executive with Huntington Bank in 2015 to build his own business, a private equity real estate investment fund with a nationwide scope the likes of which are more commonly seen in metros like New York, San Francisco and Chicago, not Cleveland.

But after a couple years laying some groundwork, Citymark Capital is deploying funds and making deals as the former banker leverages a deep U.S. network to fill a pipeline for niche investments in the multifamily apartment space on which it’s focused.

“We have this national network we can plug right back into to see very significant deal flow, which enabled us to be very selective in picking these first couple deals,” Walsh said. “This is what we were planning on building. Now, it’s built. And it’s working.”

That national network is part of the secret sauce in the Citymark recipe.

Walsh served more than 15 years of his career in KeyBank’s real estate group and five as the Greater Cleveland president for Huntington. The benefits there are obvious.

But Walsh also built out a small team since Citymark’s inception that includes people such as James Strauss, a senior director at Walsh’s firm who helped run KeyBank’s back-office real estate investment business for nearly 20 years. Walsh and Strauss were working together as Key built out its own national real estate investment platform.

“We basically took the best practices of a Fortune 500 company and plopped them down at Citymark,” Walsh said.

Strauss joined back in 2015 as Walsh’s first team member. Throughout 2016, Walsh and company built out the Citymark platform and honed its investment focus, which centers on large, multifamily apartments in the country’s 50 largest metros. Its sweet spot is in the range of $40 million to $50 million in total project cost for an acquisition, Walsh said.

Last year also is when Walsh began raising Citymark’s first fund, with a target of $100 million and a cap of $150 million, according to filings. (The current amount raised was not disclosed.) Its investors are a mix of institutional clients and family offices. Their turnaround is a bit shorter than the usual timeline in private equity, with Citymark expecting to hold its investments for about three to four years.

Now, a few months shy of the three-year anniversary of Walsh disclosing his plans for Citymark, capital is being deployed.

In June, Citymark closed a deal for River Edge, a 100-unit Class A multifamily community in Garfield, N.J. That property was built earlier this year, has oversized floor plans, a swimming pool and two gyms.

And in July, the firm closed on a deal with the Villas of Vista Ridge, a 323-unit Class A complex in Lewisville, Texas, built in 2002 with amenities including resort-style swimming pools, fitness and business centers, a pet park and playground.

And a third deal in Phoenix is expected to close in the coming weeks.

Combined, those deals will put to work about $35 million in Citymark’s debut fund.

That deal flow has been better than Walsh had even hoped for. And while these deals are coming one after the other right now, they’ve all been a long time coming. Walsh said the firm has vetted nearly 140 opportunities before settling on these few.

“I was hopeful old clients would return my calls, and they did — luckily. It’s blown me away how responsive they’ve been. We had good success doing (joint-venture) equity deals in the past,” said Walsh, referencing his team’s past roles in the banking world, “and we’re really just picking up where we left off.”

Regardless, it’s a prime time for Citymark’s investment focus in the real estate market, Walsh said, citing a couple major trends.

Millennials are largely staving off homebuying because of the large burden of student-loan debt. That’s the prime rental cohort.

Meanwhile, Walsh said older individuals and empty-nesters are at an “unprecedented” level, increasingly opting to sell their suburban homes to move into city apartments.

Those trends combined are hyping up demand.

Meanwhile, in the wind-up to the economic downturn in the late 2000s, as a hot subprime market led to a surge in sales for single-family homes, supply for apartments was muted. That trend is flipping back the other way.

“So you have all this demand coming and not a ton of supply,” Walsh said. “So, nationally, we feel good about where the apartment market is.”

And with the $2.2 billion Citymark pipeline loaded with potential investments, Walsh is feeling good about where his new firm stands.

As far as whether a deal could come to fruition in the Ohio market or elsewhere nearby, it’s probably just a matter of time until the right opportunity presents itself.

“We’d really like to do something in Cleveland or the Midwest,” said Walsh, a native Clevelander. “But we’re just excited about the national platform being off and running, and we’re delighted to be doing it here in Cleveland. This is an incredibly sophisticated market, and we just feel great being additive to that continued growth for the city.”

 

C6 Real Estate Partners Acquires 100-Unit Apartment Community in Bergen County, NJ in Joint Venture Partnership with Citymark Capital for $27 Million

Pool               Garfield-Exterior (1)               Pool area 3

SOURCE: PR Web

GARFIELD, NJ – JUNE 20, 2017

C6 Real Estate Partners (“C6”), a vertically integrated real estate owner and operator, announced the acquisition of River Edge at Garfield, a 100-unit Class-A multifamily community located in Garfield, New Jersey. The property was built in 2017 and features oversized floor plans, a large swimming pool and two gyms. Located 15 miles northwest of Manhattan, the property is strategically located with direct access to Route 80, I-95, The Garden State Parkway, Route 21, Route 4 and Route 3.

The newly built property was acquired vacant by C6 in a joint venture partnership with Citymark Capital, an institutional private equity real estate fund manager. C6 will manage all aspects of investment execution on behalf of the partnership.

“River Edge is a rare off-market acquisition of luxury multifamily units in tightly constrained Bergen County, NJ. We are excited to bring institutional ownership and management standards to the value creation plan for this asset. The property benefits from being part of a larger master planned community that includes luxury condos, and is positioned as best-in-class from a quality of life and amenity standpoint,” said Brian DiSalvo, C6 Principal.

“Citymark Capital is delighted to partner with a great company like C6 to bring attractive, institutional quality apartments to the Greater New York City area,” said Dan Walsh, founder and chief executive officer of Citymark Capital. “This aligns with our national platform of investing in leading U.S. markets and taking a disciplined approach to generating solid returns for our investors.”

“Bergen County continues to be a strong draw for a wide range of residents seeking both luxury and convenience,” added DiSalvo. “River Edge provides a spacious and attractive neighborhood feel that distinguishes itself from the competition.”

About C6 Real Estate Partners
C6 Real Estate Partners specializes in acquiring and operating residential, mixed-use and commercial property in New Jersey and the surrounding area. The firm targets attractive markets economically tied to New York City where local relationships and proactive management provide unique sourcing capabilities and control over business plans. C6 prefers existing assets and selectively pursues development and re-development opportunities from $5 to $100+ million.

About Citymark Capital
Citymark Capital is a national real estate private equity fund manager that invests in market rate, institutional-quality multifamily and multifamily-anchored mixed-use rental properties in the top 50 US markets where strong demand for existing and new properties is driven by population growth, household formation and job growth. Citymark creates value for its fund investors by providing joint venture equity to top multifamily operating companies across the US.

Citymark Capital Celebrates Inaugural Annual Meeting

IMG_7600               IMG_7565               IMG_7035

CLEVELAND, OH – MAY 17, 2017

Citymark Capital celebrated its first annual investor meeting. This event, held at The Hilton Cleveland Downtown, marked a very exciting time for Citymark.

The attendees expressed they gained meaningful insights from the speakers covering U.S. real estate markets and the global economic climate as discussed by our CEO Panel moderated by Sandy Pianalto, retired President of the Federal Reserve Bank of Cleveland. Among the accomplished panel speakers were Richard K. Smucker, Executive Chairman of The J.M. Smucker Company, Edward J. Largent III, The President, CEO, and Board Chair of Westfield Insurance, and Lee C. Banks, President of Parker Hannifin. Additionally, Citymark’s Founder and CEO Dan Walsh contributed to the panel discussion.

David Dent, from Yardi Matrix, presented economic and demographic data which illustrated the growth and stability of the multifamily real estate market across the United States. The millennial and baby boomer rental cohorts continue to grow nationally resulting in demand outpacing supply in both urban and suburban markets.

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Dan Walsh Reappointed to The Cleveland Foundation Board of Directors

cleveland foundation

CLEVELAND, OH – JANUARY 31, 2017

Citymark Capital founder & CEO Daniel Walsh received reappointment to the Board of Directors of The Cleveland Foundation for a five-year term beginning April 1, 2017 and ending March 31, 2022. Mr. Walsh was reappointed by Kathleen Ann Keough, Administrative Judge of the Court of Appeals of the Eighth District of Ohio, in compliance with her requirement to take action regarding appointment or reappointment of a member to the Board of Directors/ Distribution Committee prior to March 31, 2017.

Mr. Walsh joined The Cleveland Foundation Board of Directors in March of 2016, and is a member of the Investment Committee, the Grantmaking & Community Engagement Committee, and the New Office Taskforce Committee. His track record of success in the banking and real estate investment industries brings valuable insight to The Cleveland Foundation’s mission “to enhance the lives of all residents of Great Cleveland, now and for generations to come, by working together with our donors to build community endowment, address needs through grantmaking, and provide leadership on key community issues”.

In addition to Mr. Walsh’s Board of Directors reappointment, he has been asked to speak to The Cleveland Foundation donors at an exclusive event in March. He will speak about the 2017 financial forecast, market changes, and socially responsible investing