Jonathan Dulberg has nearly 20 years of experience acquiring and operating real estate throughout the U.S. and Europe for both institutional and privately-held real estate firms. Since 2010, he has been at Time Equities Inc., a New York-based investment and development firm, where he serves as the Director of Acquisitions.
Jonathan focuses on sub-institutional investments ranging from $10 to $50 million in size. Throughout his career, he has acquired more than $800 million of real estate, focusing predominantly on opportunistic and value-add investments across office, industrial, and multifamily assets. Additionally, he oversees the day-to-day asset management of a two-million-square-foot portfolio spanning the Northeast, Midwest, and Northwest.
Prior to Time Equities, Jonathan spent three years at Franklin Templeton Investments working within their institutional fund-to-fund platform.
Insights from Jonathan Dulberg on Opportunistic Real Estate Investing
Jonathan Dulberg understands real estate from the ground up. Growing up with a father in the construction industry, he was exposed to development projects from an early age before transitioning from Franklin Templeton's institutional fund-to-fund platform to Time Equities in 2010. As Director of Acquisitions, Jonathan focuses on sub-institutional investments ranging from $10 to $50 million, having acquired more than $800 million of real estate throughout his career.
In this episode of The Dealmakers' Edge, Jonathan discusses his investment philosophy of avoiding "whatever is the flavor of the month" and instead focusing on yield-driven, opportunistic investments. He shares how Time Equities capitalized on opportunities post-2008 financial crisis when they could find value and work with existing borrowers and lenders. Jonathan explains their move into the Netherlands when U.S. office markets became overpriced, their pivot to short-term credit during COVID, and why he sees current opportunities in the office market where buildings can be bought at significant discounts to replacement cost.
1:51 – How Jonathan's family and childhood influenced his career path
6:11 – Transition from the institutional side of real estate to being a more hands-on investor
11:12 – How Jonathan's investment strategy avoids the trap of chasing trends
13:51 – Examples of finding value in the real estate market (even during downturns)
18:08 – Why the office market is a source for exciting investment opportunities right now
22:24 – How COVID has impacted dealmaking in the multifamily asset class
24:39 – Jonathan's personal approach to managing stress and adversity
Mentioned In Opportunistic Real Estate Investing with Time Equities' Jonathan Dulberg
Transcript
Aaron Strauss: You're listening to The Dealmakers' Edge with A.Y. Strauss, diving deep into stories behind commercial real estate leaders.
Hello, everyone, and welcome to The Dealmaker's Edge. Today, we are excited to have on Jonathan Dulberg, a friend of mine for a while, and he's going to be a great guest on the show today.
By way of background, John has nearly 20 years of experience acquiring and operating real estate throughout the U.S. and Europe for both institutional and private-held real estate firms. Since 2010, John has been at Time Equities, Inc., a New York-based investment and development firm, where he serves as their Director of Acquisitions.
John focuses on sub-institutional investments ranging from $10 to $50 million in size generally. Over the course of his career, John has acquired more than $800 million of real estate, focusing predominantly on opportunistic and value-add investments across office, industrial, and multifamily. In addition, he handles the day-to-day asset management of a 2 million square foot portfolio spread across the Northeast, Midwest, and Northwest.
Prior to Time Equities, John spent three years at Franklin Templeton Investments working within their institutional fund-to-fund platform. Today, we're going to talk about how he finds deals, how he thinks about value, not to chase trends per se, how to be a disciplined investor, and what are the metrics for success in riding different waves in markets, opportunities, and deal management.
So I hope you guys enjoy, and we're going to jump right in.
So here I'm together with a good friend of mine, John Dulberg. I'm really pumped you're on with us today, John. I know we've been friends for a while. We're constantly talking about markets and deal flow, and you're somebody I've really grown to respect and admire in the industry. I'm glad you took some time.
I guess we'll start by just digging in a little bit to your personal background—where you grew up, school, how you broke into the industry—and then we'll get into some other good stuff too. Thanks again for being on.
Jonathan Dulberg: Yeah, of course. Thanks for having me. Obviously, all those same admirations go from my way to yours as well.
So my background was probably not too dissimilar from a lot of folks that end up in the real estate business. I grew up with it in my house in a sense, but not in the family business that gets passed down to. You know, my father and mother emigrated from Israel at a young age for them in the early '70s. He had really started a career from the bottom up. He started in the construction industry back when folks were building garden-style multifamily in New Jersey, built a few high rises, and then over the years worked his way up to be the Director of Construction for a fairly large private family in New Jersey that did a lot of development in New Jersey, New York, and down the Mid-Atlantic.
So I didn't see him much, unfortunately. He was working six days a week, but it was constantly in our house. He was always discussing the projects with us. We had a million different questions for him, and it's construction, right? Something that you could go and see the development of projects, which I had an early interest in. I don't know if it's just because I liked to build with building blocks when I was younger, but watching him and his career develop at a young age was really impactful for me and taught me a lot of the lessons that I carry with me today.
Also, having my mother at home—she started as a secretary, ended up being a school teacher—both of my parents were very impactful in terms of following what you love and trying to figure out what career paths might make sense for you in the future, but also not pushing towards a specific direction.
Then as I got older, of course, I had to do a few summer internships—we'll call it—for my father. So he took me to a few projects in North Jersey. I would be in charge of turning the lights on in the morning, turning the lights off, and just largely understanding what all goes into a development project for multifamily in those areas. I said, "Wow, this is a lot of hard work. I don't know if I want to wake up every morning at four o'clock, go to construction sites, and work until five o'clock in the evening, come home, sweaty and beaten down."
So I said, "Okay, why don't I think about something else?" I kind of, for a while, thought that maybe law was a better way to do it, be a business-minded lawyer in the real estate world. Very quickly afterwards, I got sucked back into real estate while I was in college. Through a good friend of mine, I was able to get a job on the investment side right after school. That was probably the most impactful in terms of me understanding what I wanted to do in my career, also perhaps what I didn't want to do in my career thereafter.
So I think from my family life, it instilled in me the idea that real estate might be the focal point. Then as I grew up, I realized that perhaps it's not in construction, but something that was maybe proximate to it or at least a parallel path on the investment side.
Aaron Strauss: I know you went very institutional. You were at Franklin Templeton Investments right after college, right, for a few years. So you really saw fund-to-funds and the Wall Street underpinnings to fundraising. You saw blue-collar construction. So it really informed the next frontier for you. I mean, you touch all of it in your day-to-day, right? You're not running one thing specifically—acquisitions is a broad title—but you need to understand the entire deal structure. You need to understand the dirt. You need to understand how it's built, how it's developed, how it's leveraged, how investors are going to see it.
So it's really cool to see all that history come to bear. Then speaking of history, shortly thereafter in 2010, you joined Time Equities. It seems to be one of those firms, people come and they never leave. So whatever the secret sauce there is, it's working. I'm sure in the last 15 years, you've got many, many stories to tell.
Maybe you could talk about just the early transition from coming from more of a Wall Street environment to more of, I guess, what you call maybe a deal-making environment? Can I call it that?
Jonathan Dulberg: Yeah, absolutely. Yeah, no, that's the right way to put it.
So, yeah, coming out of school in '07, which obviously, we were unaware of it at the time. I had very little awareness of just the global investment world in general. Going to an institutional firm was a little bit of a shock. Suit and tie every day, really thinking big picture. You know, these numbers that were thrown at you were large and intimidating.
What I realized, at least coming out of school into the more institutional world at Franklin Templeton, was that you get good exposure, I guess, to the base concepts of real estate and the investment world. But there's a lot more that goes into it on that side of it that doesn't really allow you to touch the real estate, right?
In my mind, like I said, growing up, real estate was always something that you buy and you own and you operate. So there's this operational element to it that I always thought was very critical to understanding the nature of the asset class. When you get into the more institutional world, it was more of an allocation model where you raise funds from these large institutional clients—pension funds, sovereign wealth funds, high-net family offices, et cetera—and then you go invest it in some underlying fund that then goes and invests in the real estate.
It took me a few years to realize that—and a global financial crisis in the middle of it—that I was too far removed from the actual real estate. I wanted to be more of an owner-operator. I wanted to really make investment decisions and then have to go and say, "Okay, here's what we bought. Let's go figure out how to execute this business plan."
So as luck would have it, I was sitting at lunch with a good friend of mine, still a good friend today. He said, "Look, I just joined this really great shop. It's called Time Equities. It's privately held. It's been in business for," I think at the time, it was about 40 or 45 years. "Why don't you come and meet some of the people there and at least talk through it with them?"
I hadn't really thought to leave yet, but I knew that I was at this critical juncture in my career where I had to start deciding what the next 5, 10, 15 years would look like. So I sat down with the folks at Time, and I felt a real connection. I felt what they were doing was interesting and more aligned with my thought process and my understanding of what a real estate investor is than the more institutional world and product and what they were doing.
So I started there, took a pay cut, started as an intern, and had to really cut my teeth and work my way up, which I was happy to do at the time because anything that would get me closer to the real estate would be time well served.
It really was the perfect time. 2010, 2011, tremendous opportunity in the market for those that weren't severely impacted by the fallout from the global financial crisis. It was really a good time to just dig in, find good value, and try to execute on business plans that otherwise were stuck with special servicers, lenders, sideways borrowers, and a lot of stories from back then. Obviously, we're going through some stuff now that has a similar echo to it, but the nature of it is obviously different.
And I think I was very happy to have had those experiences for the first three or four years of my career at Time, where you really went in and you were able to find value, work productively with existing borrowers, with existing lenders, with special servicers to try and get deals done that you knew fundamentally were going to be very good investments.
They just needed a new capital stack, a new investment partner, some new equity behind it, not to be burdened by whatever the servicer was doing or what the lender was doing or not doing. So that was a very exciting time and really shifted the way that I think about real estate investing, more broadly speaking, from more of buying product and earning good cash flow to saying, "Okay, this is a problem that's obviously solvable. The building is good. The location is good. All it needs is a bit of fresh capital behind it and a new focus on execution."
From then, that's really dictated how my career has played out in terms of focusing on those opportunities that need a little bit more attention or have this complication that—once you solve that—you can then focus on the execution of the business plans. So it was a very good and meaningful transition in my career at that point.
Aaron Strauss: Fast forward 15 years later, a lot of themes coming full circle. You know, it's two cycles in. John, one of the things we've talked about is maintaining discipline. Everyone's chasing the new shiny object; this year it's multi, this year it's industrial, next year it's retail. But the fact is, you're finding special circumstances, and that's the way you invest in "good markets" and "bad markets." They're almost market agnostic.
You try to avoid those momentum deals. So, how do you analyze a deal as far as protecting against those momentum trades and those chasing-the-shiny-object trades? You also have a very wide scope and mandate. You'll look at deals in so many locations across so many asset groups. So what's your secret sauce to narrow down what deals make sense for you to pursue beyond just, "Hey, it looks like it's got a good return"?
Jonathan Dulberg: Yeah, I think the main part of it, obviously, is just the discipline to not be pulled into whatever is the flavor of the month or whatever all the other groups are doing. I think the best way that we've avoided that—or that I've avoided that over my career—is that we've never really looked at things that have traded at low yields. We're very yield-driven. We're very opportunistic-driven in terms of our investment strategy and philosophy.
Most of the time, on those types of deals or those types of strategy, you're really playing a compression bet, where you're saying, "Okay, it's an asset class, it's just coming into its own. A lot of money is chasing it, so a lot of money will continue to chase it and even more so in the future." So if you buy something today that's a six and a half or a seven in that space, you're saying, "Okay, well, we can get some level of cash flow. We can lever it up. But ultimately, our return is going to come when more capital chases this asset class or this geographic market. It trades at a five or four and a half or five and a half instead of a seven where we own it."
I think we've shied away from that a lot, largely because that exit—or that compression or that result—isn't really guaranteed. So I think in a way, when you're looking at these more opportunistic investments, these very specific points of dislocation, you're saying to yourself, "Well, how can I avoid the trap of getting stuck into something that might not come to fruition at the end of the day?"
That's not to say that it doesn't. Oftentimes it does. I think that there are a lot of very smart people that have executed on those business plans. But for us, it's more specifically looking at a very broad mandate and saying, "Where do we think we'll be most successful while also protecting our downside?"
I think a few examples were obviously that we jumped right back in post-global financial crisis to buying office and suburban office when a lot of people were shying away. Our strategy and our thesis was that the tenants are still there. The buildings are still in very good shape. They just need fresh capital, new ownership, and someone that has the ability to execute it.
Then going forward on that several years later, when the suburban office space—and just the office space in general—became a lot more congested with more capital coming to it and it was trading at prices that we didn't feel comfortable with, we started scratching our heads and said, "Where can we execute this business plan with similar results, but not the similar level of pricing or downside, and get a higher return?"
Entrepreneurially, we were given a few opportunities in Europe, and specifically in the Netherlands, by a potential partner. It seemed to be a very similar situation just a few years later. The markets lacked the liquidity, so banks were leaving the market, and you could buy very good real estate with long-term leases in multiple asset classes at leveraged returns that you would buy in the U.S. with debt, except you were buying them all cash.
So our ability to be nimble, our ability to close all cash and just do our diligence, but also say, "This seems like a good opportunity where there's a good amount of dislocation," allowed us to then wade into Europe more significantly. We built a very substantial portfolio there over the last 10 years that's probably close to a quarter billion dollars of value today. We continue to add to that.
Then during COVID, it was the same thing. We just saw that the market was shut down. There wasn't a clear winner or loser at that point. It wasn't clear what would happen with office. It wasn't clear what would happen with multifamily, industrial, all these assets were being majorly impacted by this large global shutdown.
So we said, "Well, maybe now would be a good time to focus on how we can earn more current returns today that are short-term in duration, that would allow us to then redeploy the capital into the equity markets when we knew they would come back." So the thought process there was to do short-term credit. So we partnered—I found a few institutional debt funds—and we partnered with them to take sub-debt tranches, essentially B-notes, with an existing senior loan.
So we were in a senior-secure position. We liked the collateral. We understood the collateral. We could step in and operate it if we had to. Beyond that, it wasn't the business plan upfront, obviously, but we had the capabilities to do it. We were earning mid-teens returns on two, three-year investments.
That really played out in the way that we thought that it would in the sense that by the time that those loans were all getting paid off or being worked out, the market for investing in more opportunistic deals came back, which is where we're at today.
So I think, again, the discipline to be focused on knowing what you know, executing these business plans, and not necessarily chasing where all the dollars are going is very, very important.
We also structure it in the sense that it's our capital that's going into deals. So we're not taking some large pension fund's money and investing it for the fees or for the promote. We're really saying, "Okay, does this business plan hold water? Are we able to execute it?"
Whether it's on the office side, on the multifamily side, on the industrial side, we have to know that we'll be able to achieve the returns that we expect and execute the business plan. So I think that oftentimes that's really what gives you the focus and the discipline because, at the end of the day, you're the one holding the bag.
The guy that buys the deal at Time is the guy that executes the business plan and acts as the asset manager. So there's no one else to point a finger at. You're coming at the guy that bought the deal.
So all those situations are, in a way, really a testament to how I think, to how the firm thinks, and allow you to race with your blinders on, so to speak.
Aaron Strauss: Well said. It's a lot. I mean, the deal velocity as the firm—and the deals you personally oversaw or played a critical role in—it's a tremendous amount of velocity and constant turbulence. So a lot of credit to the entire team for a really great execution history.
You mentioned to present day, maybe we'll touch a little bit. Again, I know we're not chasing specific deals. We're going deal by deal. But just maybe generally, and without naming specific locations or giving away any secrets, what's exciting to you and the team today?
When you sit in the meeting at the firm and you're gathered around and you bring a deal, or there's something that's talked about regularly, like "This is the time for X" or "We see an opportunity in Y," without chasing trends—obviously knowing it's deal-by-deal and location and dislocation-specific—is there anything macro that's getting everyone excited at the investment table today?
Jonathan Dulberg: Yeah. It's probably—I'm sure a lot of listeners or folks that are out there would disagree with this—but what's been interesting and continues to develop and be interesting, I think, into the near term is really just what's going on in the office market.
We saw a few years of really slow growth, negative growth, uncertainty regarding tenants coming back to the office. Is work-from-home going to stay? Is there going to be a hybrid model? Do these companies need less space or more space on the operational side?
Then on the capital side, we just saw a lot of extend and pretend, kicking the can down the road. Banks or servicers not really willing to resolve these situations or resolve them where they needed to be resolved in terms of meeting the market for pricing.
So what I think is very exciting today—and again, you have to really understand the business in terms of, you've got to buy the best building or one of the best buildings in the best location, because there will be winners and losers here. It's not going to be the post-global financial crisis formula of "buy a building at a low basis, fix it up, put some lipstick on it, and the tenants will come."
I think that that's very not true. I think you have to buy very good buildings that have been improved, that don't have a tremendous amount of capex that needs to go into them, right? Because you want to spend dollars on things that will be accretive to value, meaning tenant improvements and leasing commissions.
If you have to go and you have to start doing a lot of base-building work, that's just going to eat away at your basis and lead to the investment being less attractive. So from my perspective, finding these opportunities in the office market, in perhaps markets that have been challenged over the last three or four years but have shown that uptick in velocity on the leasing side or on the trading side, or even in markets where they're pulling product off for housing development or just other types of redevelopment—I think is very interesting. And the pricing on them has really come down to earth.
It's come down to a point where it's very, very attractive because mainly large lenders, large bank lenders, are just clearing out what they have on their books. I think the clearing prices are a bit jarring and shocking to a lot of people, but they represent good value today, meaning you're buying a current return, which you need in order to finance it, because no bank is financing these deals or very few banks are financing these deals. But you've got the cash flow to support it.
Then if you're going to be taking this risk, so to speak, you need to make sure that you've got upside potential that matches the level of downside that you might have. So I do think that there's going to be a lot of activity, at least for us, over the next few years on the office side. I think we're seeing leasing pick up.
There's a bunch of green shoots in certain markets that we like a lot that have maybe given us the optimism that there's a slower growth potential here. Again, you're not leasing these buildings up in a year or two, but over the next three to five years, I think we'll look back and we'll say, "Wow, could you believe that we bought a building that had $200 a foot of debt on it for 55 bucks a foot at a 13 or 14 cap?" You know, those are the types of stories that I think we'll be looking back and saying, "I wish we had bought more."
It's hard when you're in it to figure out exactly how it's going to play out. But I'm very excited by the prospect of those situations. Then in other classes, other asset classes, it's a little bit less clear, right?
You know, COVID, from my perspective, didn't just dislocate—or the last few years didn't just dislocate—the office market. There are a decent amount of dislocations in other asset classes as well. I think one of them is also multifamily.
So in multifamily, you had a lot of folks that were buying things at low cap rates with very high leverage loans or even just ordinary leverage loans at 60% or 65% that just had very low interest rates. A lot of these deals were done with syndications, and some others just had debt resets that didn't allow them to pay off their loans at maturity.
I think there will be a good amount of activity in that space that we think is attractive. But again, multifamily is an asset class that just has a lot more dollars thrown at it and a lot more available debt. So you really have to pick your deals a little bit better.
It's not necessarily the deals that are the most distressed that are going to be the winners in that segment. I think it's really the deals that—obviously, you buy at a good basis, which is the most important thing to start—but the ones that are in markets that are most poised for growth, or at least no longer have that negative growth because of the large wave of supply that has come on.
So office, I think, is the front runner. But I do think that we'll see a lot of good opportunities in multifamily, especially in markets that have historically been growth markets but over the last few years have slowed because of increase in operating expenses, a large supply of new housing product that came along in the markets. So we're watching that pretty closely as well.
Aaron Strauss: Yeah, we're seeing a lot of clients now dealing with some messes, right? If you don't have messes, you haven't been active over the last few years. You've been out of the market dealing with messes, but on the one hand playing defense and being afraid, and the other side of the house saying, "You know what, now is also ironically the best time to move."
That's really hard to be that schizophrenic professional where you have to focus on the future and also protect your downside. I think you're in the perfect place and the perfect firm and the perfect time with the perfect experience level to capitalize. So if I bet on anybody, John, it's going to be you.
We call this podcast The Dealmakers' Edge, where we also do try to touch on the mental aspect. You've looked at tons of deals. There are a lot of demands on your time. You've got a lot of responsibility, because after you buy the deal too, you got to make sure that it's managed properly—asset managed, property-level management. You got to report up, report down, deal with a million people all the time.
How do you set yourself daily on a very stressful deal or a stressful day where everything's going "the wrong way"? How do you talk to yourself to maintain that long-term healthy view you need to have to continue to execute? Because a lot of people in real estate ride a lot of ups and downs. Well, frankly, the whole world rides a lot of ups and downs. But how do you manage through those more adversity-driven periods and maintain that strong mental health aspect to your game that you need to be resilient?
Jonathan Dulberg: I would say my personal equilibrium has probably helped me deal with a lot of those specific aspects. I never get too low and I never get too high. I always manage to keep a very good balance.
I understand that sometimes deals don't go the way that they're supposed to go. Sometimes you get stressful information or news in the morning or in the evening, or things seem like they're never going to recover from the position that they're in right now. So I try to just always be balanced and think of things from a much bigger-picture perspective.
It's not to quote my mother and my grandmother and my wife, but as long as you've got your health, I think everything else will sort of fall into place on other things. Yeah, it is stressful. It can be stressful. There are obviously days where you wake up in the morning and you say, "I'm not sure I'm going to deal with all the things that I've got to deal with today," or all the issues that I've got, whether it's with a building or a tenant or a deal or a partner.
I think the key aspect is I try to just maintain a good, healthy balance of not getting too emotional, not being too reactive, trying to be able to work through a solution without spinning my wheels too much. Really just going back to saying, "Okay, there's obviously problems here that I can't solve on my own as just an employee that works at a company with a building, but the things that I can solve, I'm going to do my best to and work through them to try to achieve the best result."
It's not necessarily a specific thought process or way of thinking. But one thing that Francis Greenburger, who is the Chairman and CEO of Time Equities, talked about in the past, if I've got things that are going on that might be stressful, he's got way more. Someone was once asking him how he deals with the issues or the stressors of the problems, and his answer was very foundational to me in terms of how to deal with them as well.
He just says, "Look, I deal with them one at a time." I think there's something there that really, when you think about it that way, really helps shift your focus. You try to just get the important things dealt with, and you do it in a way that doesn't overwhelm you, allows you to maintain your mental sanity. And again, you got to just make it to the next day so you can fight another day.
So I think that a lot of it just has to start with not being too emotional and not getting too stressed or anything like that by the situations that are going on. I used to run a lot. I used to exercise a lot more. Obviously, I've got two kids at home. But I think what keeps me grounded, too, is just the family balance that I have.
When I get home with my kids, it all seems sort of, I guess, less important. "Okay, so you had a bad day at work or a few bad things happened." That all works itself out. But to me, just maintaining that balance has really been what's helpful.
Aaron Strauss: Perfect. I really like that answer. I really didn't mean to push that, but we really try to push everybody on that question. So thank you for giving a good, healthy, balanced answer, just like you have a good, healthy balance looking at markets and looking at opportunities and looking at life, frankly, John.
I really appreciate our friendship. Always appreciate learning from you. I know people who listened today will have taken away a ton.
Jonathan Dulberg: Absolutely. Yeah, it was a pleasure to be on.
Aaron Strauss: Thank you for joining The Dealmakers' Edge. Don't forget to follow us on your favorite podcast platform. Please, give us a five-star rating so more people can follow the conversation.
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