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.”