EquityMultiple Investor Interview

This learning series on Modern Commercial Real Estate Investing first appeared on the EquityMultiple blog. Please check in there for updates and additions to this series.

EquityMultiple Investment Manager Jonathan Lesser interviews Taresh Batra, a hedge fund manager and EquityMultiple investor.

This discussion touches on Taresh’s views on real estate investing, overall approach to portfolio management, and what makes for a compelling real estate investing platform.

Questions? Feel free to contact us at info@equitymultiple.com

Video Transcript

Jonathan: I’m Jonathan Lesser, a real estate manager on the investment team here at EquityMultiple. I’m joined today by Taresh Batra, who is a Senior Hedge Fund Analyst at Glen Hill Capital. Taresh is also an EquityMultiple investor and today we’re going to talk generally about real estate crowdfunding and online investing.

Jonathan: Tell us a little bit about your background, your current role, and your approach to investing.

Taresh: Sure. So, I’m a Senior Analyst at a long short equity hedge fund. I have been working in the hedge fund industry for the past seven and a half years. I primarily look at public companies across the United States, Europe, and sometimes Asia.

Jonathan: Got it. As far as how you look at investing, types of products, and asset classes you’re interested in — can you talk a little bit about that?

Taresh: Yeah, sure. On a personal basis, I think about portfolio allocation and I’d say about 60% of my portfolio is allocated to equities, about 15% is allocated to real estate, about 15% in cash, and about 10% in speculative or illiquid private type investments.

Jonathan: Before we dive into the actual platform, I’m very curious to know what your preferences as far as real estate goes. Obviously our platform is focused entirely on commercial real estate, but I’m interested to hear your take as to what you feel to be the most compelling asset classes.

Taresh: Yeah. Real estate, I think, is a very attractive asset class. It’s an asset class that I definitely want to find a way to have exposure to. It’s tangible, it’s a hedge against inflation, it’s a way for you to often get growth and yield. For me in particular, it diversifies away from equities. Obviously there’s a big portion of my personal portfolio within equities, but also my livelihood is very dependent on the public markets and the public equity market in particular, so it offers that kind of diversification. I think real estate generally is something that is interesting.

I think it’s fun; I obviously like looking at businesses because it’s what I do for a living, but real estate gives you the opportunity to look at places and we all go places and have a point of view on a place that you are or place that you know about. People within that market, social dynamics and things that go into it — I think it’s kind of interesting that you can participate in that growth and wealth creation through that lens.So it’s definitely an asset class that I want exposure to.

Jonathan: Historically, access to real estate was really for individual investors provided through REITS and in certain cases direct investment in rental multifamily properties. Whereas today, with the proliferation of the real estate crowdfunding industry, you could actually invest directly in office, industrial, self-storage, etc. Obviously as an investor on EquityMultiple, it makes sense you would find that compelling, but I guess I want to dive a little deeper into the types of commercial asset classes that historically individual investors have not had access to.

Taresh: That’s actually a really, really good point. I think access is something that is probably underappreciated. I’ve found as I’ve gone through my career that there is an element to investing that obviously doing the proper analysis, doing the right work, being able to be right in the decisions that you make… but that’s only one aspect of investing. For better or for worse, historically, access to good opportunities has been a huge part of investing in wealth creation. Whether it’s in any industry, it could be in private equity, in the hedge fund industry, in certain projects or ventures, not everyone necessarily has access to what could be potentially great investments. It’s a little bit of a tangent, but that’s part of the a reason why I’m attracted to public equities- generally because it is a little bit more accessible for just about anyone.

There’s been a lot of inequity historically and those that already have that network and wealth often get the opportunity to participate in more wealth creation. So, these platforms are phenomenal kind of evolution in allowing more and more people to access potentially great investments. I think generally it’s been a really positive thing for people in my generation that are early in their careers and area trying to get some kind of wealth creation started. It allows us to access real estate on a project specific basis. So, whether it’s REITS or on a personal level, which is where a lot of people get, is exposure to real estate, people buy their house or do a project within a neighborhood that they know, they can touch and feel. But that is obviously different. It’s something I think is still interesting but requires a lot of work, a certain commitment, and obviously constrains you to things to you can actively be involved in.

So, a platform like EquityMultiple that gives you projects in other markets that most importantly allows you to invest alongside established, institutional investors that do this for a living and that themselves have access to some of the best deals available. It’s really attractive and historic, the fact that I can do that with a relatively small check size. So, I think that platforms have been groundbreaking in that way and I’ve definitely taken advantage of them and gone through different iterations trying to find the right platform over several years. Obviously I’ve utilized EquityMultiple quite a bit and almost exclusively in the last few years.

Jonathan: So, let’s talk a little bit more about that. Obviously, every investor has different preferences and there are a lot of real estate crowdfunding platforms out there. Since the JOBS Act passed several years ago at this point, I personally have found that each platform has its own take on the industry. So, I’m curious to know from your perspective, apart from experienced sponsors and institutional quality transactions, which is the name of the game as far as we’re concerned… what else are you looking for in a platform? What types of investment opportunities on a property by property basis? Also, what kind of experience are you looking for in a real estate crowdfunding platform?

Taresh: Yeah, it’s a good question. Broadly speaking, attractive opportunities in terms of risk and reward, are something that I’m always looking for. Having the managers behind the investments of the platform, having the background and ability to evaluate and see the merit of an opportunity is the most important thing. For me, trusting the people behind the platform that are sourcing the ideas and making the decision to go ahead and raise capital for a particular idea. Beyond that, usability, the fact that i can go look at a new project and you guys do a really good job of putting everything that you really need to know about that project in an intuitive screen that you can scroll down and understand the background of the project, the sponsor, the projected financials, the cushion. It’s done pretty efficiently.

Then, if i want to participate it’s very easy to actually go ahead and participate — it’s literally a few clicks. Having those kinds of documentation and memorandums that are right there — I can easily read and access (them) and then participate in a fund. So, again, that usability and interface within the platform is important. Personally, being able to access the people behind the platform has been pretty important too. You guys at EquityMultiple have been really great about that. I’ve been able to get on the phone with Marius or others to ask certain questions about an investment or to better understand some of the economics if I need to and that’s been really helpful as well. So, that’s kind of broadly what I’m attracted to in certain platforms.

In terms of specific projects, I’m currently looking for a specific thing that is more things that are shorter duration with some level of income and growth. If I see something that kind of fits that profile come up on the platform, I’ll obviously explore it and take a look. I’ve recommended the platform or certain projects to others that have different financial goals and criteria. Others are looking for more of a place just to get income and have money work for them that’s diversified away from maybe income stocks or other kinds of methods of doing it for five, six years — what you guys also provide. So I think the different projects do provide opportunities for different kind of financial goals and where you are and what you’re looking for. So, those are the types of things that I’ve experienced with you guys so far.

Jonathan: Obviously you have a lot of experience investing in real estate through various crowdfunding platform, I’d like to hear from you what your advice would be to accredited investors who are just starting out or just learning about the space or exploring different opportunities/platforms.

Taresh: There are a lot of platforms now. I think that they come up — I don’t know all of them but I’ve seen quite a few and you know I guess my advice would be, and what’s been important to me is — try to understand who is behind the platform. Especially in a time like today, there’s a lot of capital to go around. I think a lot of projects can be funded pretty easily and having a steward of your capital that isn’t going to compromise on quality of a deal just to be able to have more volume and more dollars that they put to work is really, really important. So, Marious’ background has been really important to me in dealing with EquityMultiple and having a lot of respect for where he’s come from to be making these decisions on my behalf. Obviously I invest on a project specific basis, but to know that what he’s generally putting in front of me is quality enough for him and your team to put on your platform. I think that is something that is probably very important because the world goes through cycles and ultimately that’s what differentiates performance. I think that besides that, taking advantage of the fact that this is out there — the fact that all of a sudden we have access to projects and deals that historically we’ve never had access to and be able to write check sizes that again, really broaden that perspective pool of investors, so there’s no reason not to take advantage of that. I think it’s one of the great innovations of finance that has happened in the last several years. So, dive in and do your diligence.

Jonathan: Yeah. Definitely. I think that’s a great point to end on. Thank you for coming in today. I really appreciate your input and great to chat.