In his position as head of Cornerstone Real Estate Advisers’ alternative investments group, Jamie Henderson is responsible for raising and deploying client capital into illiquid and less liquid high-yield debt investments on a national level, which includes levered bridge lending strategies, mezzanine debt, and preferred equity.
A six-year officer in the U.S. Navy, the investment vet joined Cornerstone in 2010, and previously worked at its affiliate Babson Capital Management for five years. Before that, he was a partner in a private equity real estate firm that was focused on the acquisition and repositioning of distressed multifamily assets.
A Duke University Fuqua School of Business grad, Henderson recently took time out from his busy day to talk with MHN.
MHN: How would you characterize the multifamily investing space for the first half of 2016?
Henderson: The first half of the year, the pace of investments slowed a little. The capital markets in Q1 were extremely volatile. You had a lot of what I would call geopolitical actions that made spreads very volatile and some investors kind of hit the pause button to observe. It was our opinion and observation that deals slowed down a little bit. I think it’s probably going to accelerate a little into the second half of the year. If you look at where treasuries are today for multifamily, it’s still very attractive and has improved a bit since the first half.
MHN: Where are people investing today? What shifts have you seen in 2016?
Henderson: We do seem to see a bit of a shift away from Class A development into more redevelopment, so it’s more B- rehab, repositioning the B and B+. There’s definitely been more activity in that space. I think folks are looking for yield through renovation strategy.
MHN: What trends are on your radar for the next 12 months that will affect multifamily investing?
Henderson: I think the only major impact is the global volatility, which has reinforced the United States as a safe haven trade. We’re still seeing very significant capital flow into the United States, and a lot of that flow is targeting multifamily. That trend should continue and I think the next several years, due to global micro-volatility, U.S. commercial real estate and multifamily is going to be extremely attractive.
MHN: What is your company working on now when it comes to multifamily? What are you excited about in the year ahead?
Henderson: We really play across all aspects of the capital stack, certainly on the private equity side. We’re an owner/operator of close to $5 billion of equity real estate and that comes in a variety of forms. We’re doing a fair amount of ground-up development and we still see attractive returns in the development space and continue to pursue projects scattered across the United States. We are very active in the mezzanine development space. That’s been a sweet spot of ours for close to 20 years. We still see excellent relative value in that space. Our affordable housing group has been very active, both on the equity and debt side. On our public equities side of the house, they are always following and trading in the public REITs. Cornerstone is playing across all facets of the multifamily trade.
MHN: It was recently announced that Cornerstone was acquiring ACRE Capital Holdings. How will that affect your investment strategy going forward?
Henderson: Our pending acquisition of ACRE Capital has given us even more ability to execute in the multifamily space. If you look at our historic lending footprint, it’s been generally major-metro-focused, balance sheet execution, 10-year-core focus on larger assets of Class A and up. ACRE Capital has done a great job of building a business that gives us more reach into the smaller markets and smaller loan sizes. Our research indicates that there is going to be very significant household formation over the next eight-10 years; somewhere around 2 million new households per year over that time period. Those folks need a place to live and we think the multifamily space, particularly in the smaller markets, is going to see robust activity and ACRE Capital gives us access to that.