Jake Reiter, President, Verde Capital

How has your organization managed to adapt to the current environment and what lessons learned have you picked up along the way?

With a talented team, Verde Capital has responded and adapted to new demands related to COVID-19. We have been partly virtual as a private equity firm since inception 10 years ago, and in the current conditions we communicate internally throughout the day and via weekly virtual meetings. In addition, we meet virtually with external partners at least weekly, working on the existing portfolio as well as considering new opportunities that we find interesting and aligned with out disciplined investment approach. I have always found that the cream rises during times of distress and I could not be prouder of our team and our partners at this moment.

What observations do you have on how the COVID-19 pandemic has altered the real estate and land use industry? What opportunity do you think exists in the Philadelphia region coming out of the COVID-19 pandemic?

In every down economic cycle regardless of trigger, there emerge opportunistic buy opportunities in real estate. Philadelphia has historically been a more balanced and stable real estate market compared to other southeast and west coast markets. Our region has extraordinary educational, medical and transit oriented economic drivers, coupled with bio tech, pharmaceutical, tourism and a relatively affordable cost of living. My focus will likely be continuing the acquisition and development of workforce housing and student housing where price dislocation may result from a lack of liquidity on the part of certain developers that have well located projects and land, but are not able to service debt, maintain their staffs and therefore keep the distressed projects viable. I see myself working with distressed operators and potentially their lenders investing fresh equity to provide both the operator and lender a solution while offering investor opportunities to buy into assets at reduced pricing and higher potential returns. A key is to differentiate better located assets at a discount from just buying because of a discount.

This is also a time when I may move into severely distressed asset classes such as limited service hospitality, and work with the better hospitality operators who are working their way out of a nearly total shut down of their industry.  Again, taking a longer view of the industry, where distressed asset pricing for better located and managed assets can use an experienced hospitality investor and fresh capital providing excellent investor returns.

Cash and patience will be key, and having ample liquidity on the sideline, coupled with three decades of experience working through severe market dislocations, providing debt and equity capital, being able to determine which distressed assets can work – at what prices and recapitalizing these assets – will create tremendous opportunities  for investors that have real estate portfolio allocations, move to hard assets as both a safe harbor with less volatility than the public equity and debt markets for sheltered cash flow, value accretion and wealth preservation.

These types of investments have historically and will continue to be interesting to family offices, endowments, foundations, as well as other market participants.