7,500+ Multifamily Units (and Huge Returns) by Going Where Most Operators Won’t | Ep. 1010

Episode Summary

Matt Frazier, founder of Jones Street Investment Partners, explains why his firm concentrates on multifamily investing in the Northeast and Mid-Atlantic while many investors pursue faster-growing Sun Belt markets. His central argument is that restrictive development conditions, fragmented municipal approvals, and limited housing supply can support stronger rental fundamentals—but only for operators equipped to manage the complexity.

Frazier compares supply growth and rent performance across regions, then describes how Jones Street has expanded to approximately 7,500–8,000 apartment units, including its development pipeline. A 236-unit Boston development illustrates the importance of local relationships, zoning knowledge, and patience. He also explains how vertically integrated property management improves underwriting and due diligence: one inspection revealed an unaddressed septic-system problem, while another acquisition was abandoned because of unacceptable ground-lease risk.

The discussion also explores investment screens for oversupplied neighborhoods and rent-control exposure, including how regulation can shift opportunities to adjacent communities. Turning to financing, Frazier explains the preference for long-term fixed-rate debt, how floating-rate borrowing impaired otherwise sound investments after 2022, and why interest coverage, leverage, and potential supplemental loans matter.

Finally, he outlines possible institutional capital structures, including value-add funds and a long-term core-plus evergreen strategy. Multifamily investors, sponsors, and prospective limited partners can use these examples to evaluate market selection, operator capability, diligence standards, debt risk, and investment-horizon alignment.

Key Takeaways

– Compare housing deliveries with demand and absorption before treating strong population growth as evidence of attractive multifamily rental fundamentals.

– Evaluate the operator’s local relationships and in-house management capability; both can affect execution, resident service, and investment performance.

– Involve operations and facilities specialists early in underwriting and due diligence, and be prepared to renegotiate or abandon deals when unfixable risks appear.

– Screen regulatory exposure and micro-market oversupply separately from broad regional trends; adjacent submarkets may have different economics.

– Match the debt structure to the property’s business plan and hold period, accounting for the risk that floating-rate borrowing can undermine otherwise strong real estate.

Key Topics Covered

– Northeast and Mid-Atlantic multifamily supply constraints

– Sun Belt apartment supply, absorption, vacancy, and rent growth

– Local zoning, entitlement, and development relationships

– Vertical integration and in-house property management

– Multifamily acquisition underwriting and operational due diligence

– Septic-system diligence, ground leases, and deal retrading

– Rent control, regulatory risk, and micro-market selection

– Fixed-rate debt, bridge financing, interest-rate caps, and debt service coverage

– Fannie Mae and Freddie Mac financing and supplemental loans

– Core-plus, value-add, development, and institutional capital structures

– Multifamily fund series and evergreen investment strategies

– Hands-on real estate investing and local market knowledge

Episode Chapters

00:00 Intro

Kevin Bupp introduces Matt Frazier and Jones Street’s strategy of investing in Northeast markets where operational and regulatory complexity may discourage other buyers.

01:20 Why the Northeast?

Matt explains the investment thesis around constrained new housing supply, rent growth, and the tradeoffs between Northeast and Sun Belt multifamily markets.

06:22 Multifamily Case Studies

A Boston development, local relationship-building, and examples of due-diligence findings illustrate how Jones Street evaluates and manages difficult transactions.

10:30 Jones Street’s “Local” Edge

The discussion explores in-house property management, proximity to assets, resident relationships, and how operations teams inform acquisitions.

18:31 Identifying High-Risk Markets

Matt describes investment red lines, neighborhood-level oversupply, rent-control exposure, and potential opportunities outside regulated city centers.

24:58 Structuring Debt (Post-2022)

Matt compares long-term fixed-rate financing with floating-rate and bridge debt, and examines how rising rates affect leverage, returns, and transaction activity.

33:17 Matt’s 5-Year Vision

Jones Street’s potential evolution toward institutional capital, dedicated value-add funds, and longer-term core-plus investment vehicles takes center stage.

38:21 Advice for New Investors

Matt draws on his experience buying and managing small properties, emphasizing hands-on learning, supply and demand, and understanding local markets.

41:52 Connect with Matt!

The conversation closes with how to find Jones Street and Matt’s personal explanation of the company’s name, logo, and focus on community.

Full Transcript

[Transcript begins]

Kevin Bupp: Some real estate investors completely avoid the Northeast. You know, you got more regulation, longer timelines, harder local politics, and a lot more complexity. But for Matt Frazier with the Jones Street Investment Partners, those same barriers can also create the opportunity. Welcome back to the Real Estate Investing for Cash Flow podcast. I’m Kevin Bupp, and I’ve been looking forward to today’s conversation with Matt I want to unpack how Matt decides when complexity is actually worth taking on, why some deals get better during due diligence while others get killed entirely, and what the last few years have taught him about one of the easiest ways to ruin good real estate. Matt, welcome to the show. I’ve been really looking forward to having you on here.

Matt Frazier: Well, thanks for having me, Kevin. I’m looking forward to meeting you.

Kevin Bupp: You know, a little bit of your backstory here. I know that you founded Jones Street Investment Partners back in 2014, I believe, and built a business around multifamily investing, development, and also property management, specifically and geographically throughout the Northeast and the Mid-Atlantic regions. You’ve intentionally built a platform in markets that can be… some would say that are harder to operate in. They’ve got more regulation, maybe more barriers to entry, to new supply coming in, and just maybe even just generally speaking, more complexity than that of maybe some of the faster-growing markets, the southeastern region where it seems like a lot of investors tend to chase and flock to. So there’s a lot I want to unpack with you today, so let’s just dive into it, my friend. So I know I’ve heard you say on multiple occasions that you describe the northeast, the geographic location you guys invest, the barriers to new supply as both a… I think you’ve said it’s a blessing and a curse. And so I guess what has to be true before the curse actually becomes an investment advantage?

Matt Frazier: I guess the blessing of it is that the supply and demand imbalance in our markets is so severe and it’s so systemic that it creates the opportunity. A lot of people like to go to the Sunbelt for a very good reason. There is more demographic growth in those markets than there are in the ones in which we invest. Yeah. But it’s not true that our markets are declining. Our markets actually grow equivalent to the national average. What we don’t have though, is a huge supply reaction in our markets. And our markets don’t become oversupplied then that deteriorates and really destroys not just rental fundamentals, but ultimately investment returns. If you go back to start like 2014 and look up into the present day, Markets in the Sun Belt had delivered somewhere about 130, 140% of the supply that existed at the beginning of that period. Whereas in our markets, it’s less than half of that. They’ve both absorbed about the same percentage of the supply that has been delivered during that period of time. But when you’ve delivered so much more, as they have in those Sunbelt markets, it’s harder to absorb. And that higher vacancy of new units destroys rental fundamentals. It doesn’t allow for rent growth. And so all that demographic growth in those markets doesn’t translate into rental growth as it does in ours. And it’s that contrarian play, looking a little bit more at the fundamentals instead of following the investor psychology that we think allows us to differentiate what we do.

Kevin Bupp: What are maybe some of the specific barriers that you actually like to see that ultimately might make another investment group or the majority of them go to the Sunbelt regions and not maybe deal with some of the complexities that you’ve been able to embrace?

Matt Frazier: Well, there are many, right? There’s the stuff that we’ve all heard about with the NIMBYism and certainly local regulations, hostile, if not just difficult to navigate. We have a very parochial market here. There are a lot of small towns, each with control over zoning and permitting. And you have to know how to navigate those. You have to have the relationships in each of those areas for if you’re, in the case of development, trying to develop something new. But even if you’re buying something existing and operating, establishing those relationships, it’s just a lot harder to do. And it requires local presence and local expertise that a lot of people just don’t have.

Kevin Bupp: How do you make the determination that you’re being compensated fairly enough for the additional complexity that you guys take on? Is there a financial calculation behind that?

Matt Frazier: Yeah, well, we think that the investment performance is the compensation. So you look at the rental fundamentals, which drive the investment performance. That’s the compensation. Yeah. Whatever the current performance in markets like Austin or Florida, the whole state of Florida or Atlanta are right now, ours are going to stand out in stark contrast. Those markets have been going negative on their rent growth for some years. Their vacancy is very high. Our portfolio has grown 5.5%, 6% a year for four, almost five years running now. at the exact point in time when those markets in the town South have nearly been hurting. And again, I’m not arguing that people shouldn’t be investing in those markets. There are a lot of good reasons to go do it. You just have to understand the risk profile is different and the returns that we can deliver, we think we’re doing it with less risk. And so on a risk-adjusted basis with those superior fundamentals, we really like what we do and we think it stands out.

Kevin Bupp: Given some of the barriers that you guys face on an ongoing basis, how has that impacted your ability to scale your organization? I mean, I’m assuming there’s got to be more difficulties with, you guys say, growth goals, but ultimately there’s a lot of nuance there, right, as you have to deal with these different municipalities, these different townships. How have you been able to navigate that?

Matt Frazier: That’s a really good question. I’m not sure that anybody’s ever asked me that before, but it’s real because deals take longer. And particularly in the world today with the capital markets environment, deals take longer. We’ve been able to grow, I think, from the outside looking in pretty quickly. We started the company 12 years ago. We’re now 75, 8,000 units, 7,500, 8,000 units. We include our development pipeline, and that’s a two and a half-ish billion of real estate. So it’s not zero to nothing, but it certainly feels like we could have grown a lot faster if markets were a little bit more liquid. And certainly if the deal environment in some of the places in which we transact were a little easier. And that’s really true on the development side. Development can take a very long time.

Kevin Bupp: Yeah, no, that makes sense. Well, that’s quite impressive growth in a fairly short period of time. So kudos to you and the team. I love case studies. And I think that just paints a real world picture of your business and kind of an inner look as to what you guys do and how you do it. So maybe there’s an example you could share with us where maybe a regulatory change or a zoning issue or permitting challenge. I know you probably have literally each one of those in every single deal you do to a certain degree, but where, where something, you know, some type of local issue of that nature materially changed what maybe you’re willing to pay for a property or how you ultimately had to structure or restructure the deal. Is there, is there an example that you might be willing to share?

Matt Frazier: Yeah, sure. I mean, so development is a part of our business. It’s maybe 15 to 20% of what we do. We transact across all of the risk profiles within multifamily. So we’re, we’ve got infrastructure and, and practice around value add as well as core plus in addition to the development. And we like to say to an investor, you know, this is why you should be investing in our region, this is why you should do it with us. And now we’ve got a risk profile product that works for you, depending on what your investment goals and your risk tolerance is. To answer your question specifically though. We encounter this on development all the time. And we are in process right now, breaking ground on a pretty sizable development here in the city of Boston. It’s 236 units. It’s kind of on the edge of the neighborhood of South Boston and the seaport. And the regulatory environment here in the city of Boston, where I’m located, has been really, really difficult to navigate. And it’s been a moving target along the way in terms of what’s required for affordable, you know, what climate resiliency is required. Even just get navigating, you know, what should be pretty straightforward processes in city all for entitlement. I’ve been moving targets along the way. It required a lot of local relationship capital to get things done. Ultimately, what drove our decision-making and our willingness to keep moving forward was going back to that very beginning that I was talking about. It’s the market fundamentals. And we believe in that as a North Star and think that if we can navigate all these hurdles, these are the hurdles that we’re getting paid to navigate. there will be a payoff on the other side because if we can deliver something that others can’t, we will have less competition and enjoy the fruits of those labors.

Kevin Bupp: Speaking to that relationship capital, that’s obviously a huge piece of it. And I don’t know if you guys already have a presence in that part of Boston or not, but assuming that you didn’t or if it was a new market that you were going in, What’s the secret sauce to establish that relationship capital to get in front of the right person that has the connections? And I’m sure that’s a big piece of it.

Matt Frazier: That’s a good question. There’s always like there are some phone calls that need to be made. There’s some inquiries. There’s a, you know, who do we know that knows somebody kind of thing and get that warm introduction to that local council man or woman. Or, you know, here’s a land use attorney that’s active in this market. It’s one of the great things about real estate. It’s it is a connected business. And if you’re not real ready, established relationship with somebody, you’re only one degree removed. And so it’s doing that, but it’s having the reputation that is one that people are happy to facilitate those introductions for you. If we came into those conversations with sharp elbows and, you know, knocking people between the eyes all the time, thinking that we’re smarter, better, tougher. We’re not going to people are going to want to work with us. Right. So we make a point when we do get in those meetings and we’re finally sitting down and understanding what’s important. We’re actually listening. You know, we’re not coming in trying to tell people we know what’s better than you do for your market. We’re not trying to teach people on this is why you need more housing. We’re sitting down and listening. Hey, what matters to you? What’s important in this community? What’s important to you as, you know, whatever role that you’re filling here and on the local scene so that we can be responsive to local needs and start to build something for a community, not necessarily for us.

Kevin Bupp: Yeah, no, that’s fantastic. And, you know, obviously that’s a big, big piece of your edge, especially when you guys are operating in markets where you’ve done other deals and you get to establish that, those relationships and ultimately they pay dividends over a long period of time. But outside of maybe the relationships, you know, again, I… what I’ve identified here is like a big piece of your edge is that you intimately know these markets better than an outsider myself, right? Based in Florida, you know, investment group in Florida comes into your space and, and attempts to do a deal. What are, what are some of the other areas where you feel that given your localized knowledge and the intimate feel for the marketplace that you guys operate in, what are some of the other big contributors to that edge that you feel you have?

Matt Frazier: Well, just, just being here has, is huge, particularly as operators. Right. So we’re vertically integrated. We’re managing all of our own assets. We do that so that we can control the business plans, the investment theses on those deals. And we don’t accept third party theme assignments to manage other people’s deals. But we’ve found over and over again, and I have a laundry list of investments like this, where we are buying something from someone who’s not based in the market. And even though they might be self-performing, they might be operating it themselves, or they could have a third-party manager in place. They’re not present. They’re not here. They don’t have the relationship with the residents. And we can do that. We’ve had deals that we were buying just recently where we’re on site doing due diligence in advance of a closing. And we’ve had residents following our maintenance team around who are literally just there trying to understand systems and structures. We’ve had residents following our maintenance team out around asking for help on maintenance requests. That’s a huge competitive advantage for us because when we ultimately close on that deal and we get to start delivering the service and the performance and building a community that people are happy to be a part of, we can actually deliver better investment performance without spending any money. It’s just being better operators. But being here local is the key to that.

Kevin Bupp: No one’s going to care about your property or your residence as much as you.

Matt Frazier: That’s right. We’ll hardly believe that. We had a funny story. We were buying one deal not too long ago with my business partner. We were touring the asset a couple weeks before closing. And the community manager at the time said, started telling us about the unit renovation program and some changes that they had made. And he said, you know, the last time ownership was here in 2023, they didn’t like this package and yada, yada, yada. And he went on for a couple of minutes, but I stopped listening after I heard the last time ownership was here in 2023. I was shocked. I couldn’t believe it. Like we’re there all the time, once a month at least.

Kevin Bupp: I think when you hear something like that, it’s like ding, ding, ding, opportunity, right? I mean, there’s an area to improve upon. So I would love maybe let’s expand upon that a little bit. Being that you guys are vertically integrated, where does that come into play with your ability to make a better judgment call or your decision-making ability and whether this would be a good fit for us or it might not be?

Matt Frazier: Well, there’s some pretty straightforward stuff like in due diligence and even sometimes before due diligence, while we’re still bidding on asset, bringing an entire team in. So we’ll bring our operations personnel. We’ll bring in a lot of our facilities. People will look hard at things. And that’s particularly true in due diligence. And it has meaningfully changed investment decision making multiple times. There was one time recently, a couple of years ago, we were buying an asset. We were in due diligence. Our maintenance team, the facilities teams were on site doing some work. We were looking at the septic system because this property, not a huge property, had its own captive septic system. And we discovered that it was not only not fully functional, but it hadn’t been brought to code. They didn’t know anything about this. That revelation was important, but then during due diligence, we were able to work with the seller to design what the fix was going to be, what needed to happen. And obviously that wasn’t our responsibility financially. That was, we hadn’t bought it yet. That was still the sellers. But had we not had a team here vertically integrated to figure that out during due diligence, we would have missed it. At some point during our investment hold, it would have reared its head when something failed and we realized the problem was so much bigger than just a simple failure. And it would have cost our investors a lot of money. We were able to identify that beforehand.

Kevin Bupp: Yeah, no, that’s great. Has there ever been an occasion where the acquisitions team, excited about a deal, obviously looks great on the financial model, understand the market, and from outside looking in, looks brilliant. But ultimately, once your property management team gets boots on the ground, gets deep into the weeds, due diligence, and outside of finding any like you know, environmental contamination or something like that. But ultimately they dig into the operations and maybe see some red flags or some skeletons that we didn’t know existed. Has there ever been an occasion where that property management team has changed the end acquisition decision for you guys just to simply walk away from a deal?

Matt Frazier: I mean, there’s certainly been deals that we walked away from. It’s hard to say that it was entirely because of a property management insight, but it’s certainly part of the soup. And ideally, we’re bringing property management into the consideration of a deal well in advance of us actually agreeing to buy it. And so whatever feedback or input the property management team might have is incorporated into our decision of whether or not we want to pursue it in the first place. As we get into diligence, absolutely then we’re going to have, you know, the full breadth of our management operation as part of that diligence, not only on site, but, you know, going through all the records and everything like that. And ultimately, yeah, weird things happen. We had one deal. It was another one that happened to be here in the city of Boston, small asset. A few years ago that we discovered we knew it was on a large ground lease with the federal government. But as we went and started unpacking some things in City Hall, we realized that the risk was a little bit deeper. And we did end up basically putting a condition to the seller that you need to either solve this or we’re walking away. And they couldn’t solve it at times that we did walk away. So that the integration spans, you know, across all parts of a potential deal profile.

Kevin Bupp: That example you just gave there with the ground lease, is there a, would an adjustment of price, would that have, you know, made you guys maybe more comfortable with it if they’re willing to retrade and come down on price? Would that have got the deal done or no?

Matt Frazier: On that deal, no, because ground lease is all or nothing, right? Like if you lose the ground, you lose everything.

Kevin Bupp: Okay. So there were some material challenges with the ground lease itself. It sounds like.

Matt Frazier: Okay. But there have been other times. Actually, there’s a deal that we bought three years ago. It was in central Connecticut where our operations and facilities teams together flagged an issue that we ultimately went back to the seller with and, um, know, we don’t like to retrade out of sport. We want to be good transaction partners, uh, and feel that we have a good reputation as like, as transaction partners. But when things are warranted, they’re warranted and we felt it was warranted and the seller ultimately agreed with us. Um, That mitigated a pretty substantial risk for our investors. And we’re now turning that deal back around in three years at a pretty good investment outcome, which is pretty rare in the world today to be gone full cycle on a deal that’s only three years old with a really good return.

Kevin Bupp: Yeah, no, you found the magic wand that worked. Which is a phenomenal team, obviously, so.

Matt Frazier: Yeah, that’s right.

Kevin Bupp: So I want to better understand, Jones Street, your investment thesis, I guess more specifically where it might not work. And so hypothetically or theoretically, is there a Northeast market or a type of property or – some type of regulatory environment where you simply don’t think the risk is ever worth taking. Again, we’re talking about supply being constrained and that’s one of the big reasons why your business model works so great. But assuming that supply constraint is really, it’s there, it’s present and it’s real. Are there any other regulatory issues or again, a type of property itself or a particular market that comes to mind that you’d say, no, I don’t have an interest for X, Y, Z reasons. And if so, what are those reasons?

Matt Frazier: Yeah. Well, so, I mean, we are multifamily only and we don’t really like to do a lot of small deals. And if we’re going to do small deals, it needs to be kind of clustered around the Boston core so we can get some management efficiency out of it. Okay. But having said that, yeah, there are all sorts of reasons that, you know, we might have a red line over something and, and. My comments about supply and demand apply broadly across the regions in which we invest. But when you start zooming into micro locations, there are definite pockets that we kind of have red lines on as oversupplied now and into the near future. And some of those are here around Boston. Some of those are around greater New York. We have a red line through New York City for regulatory reasons. So, you know, we take regulatory risk, but we don’t take all regulatory risk. Sure. We’re not going to go to New York for that risk. So, yeah, there are lots of reasons that, you know, things just won’t get past an initial investment screen.

Kevin Bupp: What’s your philosophy around rent control markets? Do you guys own and operate in New York? Markets that have rent control regulations in place?

Matt Frazier: No, we don’t.

Kevin Bupp: How do you keep your finger? I’d be curious to know, again, I’m sure that that is something that you guys have. I mean, I know that we do. Manufactured housing has gotten a lot of attention over recent years. More specifically, maybe some of the northeastern markets. But I mean, it’s definitely a topic of conversation that seems to pop your rear tuggly ahead often in our space, more on a statewide scale. And so it’s something that we have to keep our finger on the pause on as we can try to stay ahead of it. But I guess I’m curious to know what that looks like internally, because you guys are obviously operating a lot of, I don’t want to say this wrong, but like regulatory challenge markets, right, where there’s just a lot of complexity. And so like there’s surely always a potential fear and probably some of the markets you operate in of rent control coming to roost. How do you manage that?

Matt Frazier: Yeah, we’re in blue states, right? I’ll say it. Like we’re in blue state environment. There’s going to be more government intervention and regulation.

Kevin Bupp: I didn’t want to offend anybody.

Matt Frazier: Well, look, I’m here. I can say it. We’re not investing intentionally into markets where that exists, but it has almost come to us. Like here in Massachusetts, there was a statewide rent control initiative that was prepared. It was almost going to go on to the ballot this November for a statewide referendum. It was ultimately thrown out by the highest court in Massachusetts this summer, but potentially could come back in a couple of years. In that instance, we obviously own assets in Massachusetts. Anything that we own here would be subject to that. And so then we would have investments with rent control. We’ve not intentionally gone into a market though, where rent control already existed. And we danced very carefully around some markets where we thought it might come. Providence, Rhode Island is a good example. You know, we’ve pursued deals in Providence in the past. We’ve liked the fundamentals of the city. We have other investments in the state of Rhode Island. But we’ve always been a little nervous about politics in Providence. I talk about, like, parochial politics, but it’s really true there in Providence. Yeah. And that’s always made us nervous. And now Providence, almost certainly just last week, new elections. They’ve got a very progressive mayor coming in. Rent control will be in Providence at some point next year. And I’m happy that we’re not invested there because that would be a problem.

Kevin Bupp: Yeah, that would be a problem. So, yeah, I’d be curious to know, in the event, one of the markets that you currently own and operate in today, if, you know, rent control. came down the pike and got put in place, how would that change your forward-looking investment thesis as it relates to the expansion in that marketplace? Would it change the long-term outlook or would you just navigate around it?

Matt Frazier: Well, we’d be forced to navigate because we’d be operating there already.

Kevin Bupp: Well, I guess I should have expanded, maybe as it relates to additional acquisitions within that marketplace.

Matt Frazier: Yeah, we probably wouldn’t be doing any. Gotcha. But those markets where that risk exists, obviously here in Massachusetts, as I mentioned, but it’s more about urban centers. And what we try to do, and this is kind of really fundamental to our thesis, at root, when we talk about investing in the Northeast and mid-Atlantic and that being a contrarian play to a lot of the capital that’s chased the growth in the Sunbelt, we try to bob where others are weaving. We try to think contrarian. And so if there’s rent control coming into Providence, we might start looking outside of Providence and figure out where can we pick off opportunities there because there’s probably going to be more growth there. Portland, Maine has had rent control for a few years. Best deal we ever did was in South Portland, Maine. The people that we sold it to, we were enjoying tremendous growth there when we were operating the asset. The people that we sold it to pushed that envelope a little further. They actually invited some regulation into the market just through their management tactics. But we’re finding other opportunities in that metro area where rent control is not at play. But the fundamentals exist and are actually benefiting from the overregulation in the city center. So with every, you know, every yin has a yang and there’s always opportunity somewhere. And we’re just trying to think, you know, look in the direction that others aren’t. And that’s a huge opportunity, like broadly right now, when you think about capital markets and what risk capital markets are taking and how they’re thinking about the interest rate environment.

Kevin Bupp: Oh, I love it.

Matt Frazier: We see opportunity screaming at us right now all over the board.

Kevin Bupp: Yeah, no, that’s fantastic. I love not following the herd mentality and going the opposite direction, so that’s beautiful. Would be curious to back up a couple of years and talk about how you guys navigated through I guess the post-2022 capital markets reset that came about, obviously now we’re in, as we recorded today, we’re watching the treasuries continually, their upward trend and it’s like a moving target. But I guess going back to that point in time again, late 2020, 2021, late 2022 and then the years thereafter and the major shift in the rate environments and the capital markets. How did that change your outlook on structuring debt or did it not? I guess how do you look at things today versus how you might have looked at them back at that point in time?

Matt Frazier: Good question. Something that everybody’s kind of reckoning with over the last couple of years. To answer it, let me take a step back in time a year or two prior coming out of the pandemic. We were looking as everything reopened, we were trying to figure out what’s the investment opportunity in the world right now. And our theme at the time was that, you know, there was a renter profile out there that had probably actually benefited financially from COVID, you know, not commenting on all the other socio disruptions and obviously health disruptions, but just dollars and cents. There were some people who benefited because they were not commuting, they’re working from home. They’re saving money. They’re getting stimulus from the government. They’re probably getting more money from their employer. We wanted to go invest where those people lived. And so we really intentionally were targeting class A assets in high-earning zip codes. And then we were looking at financing them. I’m getting back to your question. We were financing them with really long-term debt because rates at that time were so low. And so we bought a handful of really high-quality assets in incredible zip codes And then put 10, 12 year debt on them. That’s locked in somewhere between three and three and a half percent today. Those deals now are all performing incredibly well. Like, you know, we’re getting high single digits, low double digit yields annually to our investors in those deals. And that’s for core real estate. As. You know, 2021 rolled into 2022 and the world started to change a little bit. We weren’t immune to what was happening in the debt capital markets. Our foundational thesis is that we always want to have fixed rate debt. And it’s with this simple premise that we are buying a floating rate asset. And because of the supply and demand fundamentals in our markets, we have a very high degree of confidence that our floating rate is going to be resetting higher and higher every time we’re turning leases over. And so if we can finance that with a fixed rate cost of debt, that arbitrage is one of the ways we can create investment returns. It’s pretty simple at root, right? But. that got hard to execute on in 2022. And we were not immune to using some bridge financing or floating rate financing and a couple of deals and retrospect, gee, I wish we hadn’t because we had really good real estate that we were buying, but bad financing decisions at the time they felt sound. And we had interest rate caps that, and you know, they turned out to be speed bumps, uh, with what happened with rates. But, um, that those financing decisions in retrospect really hurt because they took away the investment opportunity on the real estate. And so a long-winded way of answering your question is, it re-emphasized for us our foundational thesis of fixed rate debt for what we do. And it’s true even now, as we’re looking at the 10 year at 5% today, That’s obviously a lot more expensive than what it was four or five years ago. However, it does come with other opportunities. What it means is that you’re not getting as much debt on a deal because you can’t size it. We’re generally borrowing from Fannie Mae, Freddie Mac. And so the debt service coverage restraints are going to be there and we’re not going to get as high leverage. But we’re also looking at much longer terms of interest only, which helps our yield. It’s certainly preserving opportunities as particularly on deals that are more value add in profile, thinking more creatively on down the road about how we finance them, where we could put supplemental loans on. Fannie and Freddie both have programs. We can put B pieces on top of the acquisition A piece. We think that while it always needs to be a fundamental focus on the real estate, The financing follows, but financing provides opportunities no matter what it is. And we just need to be flexible and creative thinking about it and making sure more than anything that we’re not taking risk with the financing that’s going to force us into a bad investment decision later on. And that’s why we think fixed rate and it’s why we generally think longer term. We want to use that financing to create opportunity and enhance returns, not risk.

Kevin Bupp: Yeah, no, no, very valid points. And thank you for sharing. I’d be curious to know with, again, just with the upward trend we’ve seen as of recent months and quarters with the treasuries and how that’s pricing out with new debt, whether it be Fannie or Freddie. Have you seen the new opportunities slow? I mean, have sellers been, have they adjusted to the new norm or to what the capital markets have done? Or have you seen your acquisition pipeline slow down quite a bit as there’s volatility out in the capital market?

Matt Frazier: Uh, I mean, it’s real time. And so I don’t, I don’t know that we fully can answer that question that a lot of it depends though on the asset itself and the buyer profile. I think more core oriented capital is less interest rate, less leverage sensitive. They’re generally thinking about, you know, very longterm holds. And so they’re not going to be ones that are going to be overly impacted by interest rates. They’re looking more at, you know, real estate and operating fundamentals. Um, Leverage buyers, shorter term holders are going to be more sensitive. Everybody’s got their own opinion on, you know, what a good terminal exit cap rate should be. Um, I think we’re still trying to develop hours, but it’s certainly interjected some uncertainty into the market. I think there’s, you know, the, the buyer list is shorter on deals that are transacting or trying to transact. And I think there is some reticence from sellers, but you know, There’s been a lot of reticence from sellers for the last couple of years. Everybody’s been waiting for rates to come down so they could refinance or get a better cap rate at exit. And at some point, that music’s going to stop. And I think this reset higher on rates that we’ve experienced over the last three, six months. is actually going to force the music to stop sooner rather than later. I think there’s going to be a bit of a capitulation where people are going to be like, all right, we all want a race to go down. It’s not happening. It’s time to go. And people are just going to accept that, you know, I thought I could get X on a deal and now I’m going to have to settle for something less. But what am I really going to get benefit from waiting more? And so I think the market’s going to start to clear, or at least I hope it is. It’s got a crack at some point. And again, the upward trend is definitely not helping the cause.

Kevin Bupp: Have you seen maybe some of the in the last year or two of any of the opportunities that that you guys have acquired? Have they been a result of maybe a capital structure distress?

Matt Frazier: Yeah, for sure. And and that’s where I expect to see more transaction activity. I. You know, in other markets in the country, that’s going to combine with some operational distress, too. And so I think there’ll be some real opportunistic investment plays there. For us, because our fundamentals are so good, we’re not expecting to see a lot of distressed real estate. Maybe we will here or there, somebody’s really screwed something up, or there’s some spoke reason for this deal of this market. But by and large, I think what we’re going to see is just more balance sheet forced exits, whether that’s debt or JB partnerships or fund needing going blind, whatever it is. It’s going to be capital looking to bring a deal to market, not necessarily the realization of an investment plan.

Kevin Bupp: Matt, what do the next five years look like for Jones Street? You know, wave the magic wand. All goes perfectly as planned. What does that look like for you guys?

Matt Frazier: So when we started the business, it’s me and a partner also named Matt and a family office from the Midwest that I met back in 2014. And, you know, I mentioned the growth that we’ve had previously. Most of that has been on the backs of private fundraising. We’re making a transition now away from private capital, or not away from private capital, but into more institutional capital structures. It can include the private capital that’s always been with us, but certainly bigger pockets and more structure to the vehicles and the strategies. Five years from now, I’d like to think that we have dedicated pockets of capital for each of those risk profiles I was mentioning, development value add and core plus. Development probably continues to look, you know, a little bespoke because it’s hard to have dedicated vehicles for development. But maybe there’s a partner that we have that we keep going back to. Value add is a fund series where we’re raising every few years, a 500 million-ish dollar value add fund and a separate ultra long-term kind of evergreen strategy for Core Plus. Um, that’s the plan, but we’re not foolish enough to think that, uh, just because we have a plan that that’s exactly how it’s going to be. We know that there are going to be curves and ups and downs along the way. We’ve been experiencing them for years. Um, we’re pretty creative and nimble and, uh, can figure out, you know, we, we have an idea on point A to point B, but if we need to, to, you know, twist the root a little bit, we can do that.

Kevin Bupp: Is the evergreen strategy, is that a vehicle to essentially roll up existing assets, not necessarily have to sell them, get out any capital that wants to take their chips off the table and then be able to hold those assets for the long term? Is that part of the idea behind that?

Matt Frazier: It could be. That’s part of it. Really, we see so many opportunities where we’re just such long-term believers in the real estate fundamentals and the real estate itself that – You know, we’ve always been beholden to we’ve got to have an exit. We’ve got to have a hold period. But that’s actually kind of real estate that you’d like to own for generations. Yeah. Right. So at root, that strategy would be for that. There are other strategic benefits to it. It could be a takeout vehicle for new developments. And we don’t want to necessarily exit the development, but might not be a forever hold, but it could certainly be a 10 or 15, 20 year hold.

Kevin Bupp: Sure.

Matt Frazier: It can be a currency itself to attract other capital or other deals in. So there are a lot of strategic benefits to doing it that we’re interested in, too.

Kevin Bupp: I’m curious to know the catalyst of – because we’ve had this internal conversation many times over again. It seems to always come back up at least once or twice a year about – expanding our reach, our horizons, and finding a more institutional partner. We’re all retail capital today as well, so we don’t have necessarily just one dedicated large investor. We’ve got quite a large number of retail capital partners that have funded our endeavors, and it’s worked really well for us. We haven’t found a point in time where we’ve hit a ceiling and we’ve got quite a bit more autonomy with the capital that we have, and so that’s kind of kept us, I guess, in our current lane. But You know, there isn’t a lure of, you know, bringing a more institutionalized capital partner. But I’d be curious to know from your perspective and your internal conversations, what is that catalyst?

Matt Frazier: It’s just growth. And I don’t mean to say just growth. Like it’s simple and nothing more. But we don’t really have much ability to grow the company beyond what it is now if we’re not doing that. We also know that we’ve got it in us. So we’ve, we retrenched a little bit over the last couple of years and really institutionalized the investment management platform here. It’s not just the property management, but it’s the entire investment management infrastructure. So that as we are now talking to name your pension fund or endowment, and they want to come in and do operational due diligence on Jones street. we know we’re going to pass with flying colors. So we’re ready for that capital. We see the investment opportunity out there. We see a hole in the market where, you know, so many of those investors have been so exposed to the Sunbelt over the last couple of years. And as that market starts to clear and people start to revisit, you know, how do I want to access multifamily? Yeah. Our goal is to be standing there knocking on the door saying, I’m not telling you not to invest in the Sunbelt anymore. I’m telling you to think a little bit differently about how you access these opportunities. And a more bespoke regional focus where you’ve got a concentration of assets in the Northeast and Mid-Atlantic that have a different risk profile than what you’ve been experiencing elsewhere might be a smart way for you to think about allocating capital in the future.

Kevin Bupp: Yeah, no, no, fantastic. I appreciate the additional insight there, Matt. You know, I guess as we round this out here today, I guess we’re speaking to the institutional conversation and kind of your desire and the plan to bring in a larger capital partner and help you with the growth side of the business. You know, I guess a lot of folks that are listening might not be operating an institutional platform. And so maybe for the investor perspective, you know, with a few apartment buildings or, you know, someone looking to, to maybe enter a more difficult market, you know, similar to some of the markets that you’re in, what lessons do you feel that you guys do at Jones Street? Like the strategies that you guys put forth in your own business, what do you think translates down the line to some of these smaller investors?

Matt Frazier: You know, it’s a good question. And it’s the two things aren’t dissimilar. Uh, My start in real estate, I had been in venture capital and private equity for most of the 2000s. I got my start in real estate just by doing it on my own. I was buying little mixed-use assets. I was buying triple-deckers in Boston with mostly my own money, but some friends and family money, and I was managing them myself. And so to answer your question, the advice I would give is just go do it and learn it. There’s nothing like doing it yourself and being on the ground and understanding what it is. I was turning units over. I was leasing them myself. I was responding to the maintenance calls. My oldest son’s first birthday, I spent the afternoon cleaning out a bathroom that had a problem.

Kevin Bupp: Oh, boy. Never forget that one, right?

Matt Frazier: No, no, I’ll never forget that. But doing it yourself, that’s where you learn the best lessons. And you really can’t repeat that. You can’t put that in a textbook. You just got to get out there and experience it. Um, the investment fundamentals though, they’re, they really are universal and that real estate at root is a pretty simple business. It’s supply and demand. And that applies broadly across the United States. It applies in regions. It applies in towns. It even applies all the way down to a specific block. And so you got to know your market. You got to learn those lessons and you got to get your hands dirty and you do all those things. You’re going to walk away with pretty valuable experience that you can repeat. And whether you’re trying to build your own personal investment portfolio or you’re trying to do it at a larger scale, you’re going to have what you need to do.

Kevin Bupp: That’s great advice. Very sound advice. And I guess one addition I would add there is this is just my opinion, is that if you are just if you’re truly just getting started, you know, but your intent is to scale an organization, you know, grow a company. and, uh, build a portfolio is that I always think it’s also good. Get out there and do it yourself, you know, get your hands dirty a little bit, understand the, the actual operational side of the business, what works, what doesn’t work. But I also think it’s important to actually risk your own capital before you go pulling in capital from outside sources. And, um, learn on your dime before learning on maybe someone else’s dime. Again, that’s just my personal opinion, but, and that might not be possible. You know, you might not, you might be not start with anything, but I think where there’s a will, there’s a way. And again, I do think that you’re correct. I mean, the general fundamentals of real estate, they are pretty straightforward and simple in nature when compared to maybe some more complex operating type businesses. And there’s a lot of creative options and creative structuring and finance strategies that one could put forth as well to actually get their foot in the door without maybe having a big outlay of capital. So yeah, So in any event, well, Matt, I do appreciate you coming on the show, my friend. I think there’s a tremendous amount of value for anyone that tuned in here today that’s just given your business, given the unique strategy you guys take in the marketplace. And really, it is how you speak to, you know, the complexity of what you do and how it allows you guys to create your real competitive advantage in the markets that you operate in. And so I think it’s beautiful. It’s been a phenomenal conversation. And I guess before we wrap it up here, give you a moment to share any closing thoughts that you might have. And most importantly, just let everyone know, you know, where they can connect with you and learn more about Jones Street Investment Partners.

Matt Frazier: Well, yeah, we’re online, jonesstreet.com, all spelled out. I guess closing thought, and it kind of speaks to the Jones Street name, is, you know, keep it close to you. Jones Street, to me, it’s the street I grew up on. I grew up in a very small town in central Pennsylvania. And when I first started making those personal real estate investments that we were talking about, I needed to set up an entity to take title to it. And I called it Jones Street. My mom obviously understood the reference, but asked why I did it. And I joked with her that. Well, this way, when I built a big and successful real estate company, I would always remember where I came from. And she loved that. And she bought me this little hokey nameplate to sit on my desk that I actually have right on the other side of the screen still. And so it’s very personal to me. Our logo, which is two trees, were the two trees in front of the house that I grew up in. And we used to tell people, you know, just drive down Jones Street to see the house with two trees because the trees obscured the house and even the street number that we were on. And, you know, the beauty of that is we’re in the business of providing housing and building communities for people. And there’s a Jones Street probably in every town in the United States. Jones Street could be home to anybody. And I carry that with me very closely. It’s very personal to me. And for anybody, whether you’re just doing it on one deal by yourself or you’re trying to be, you know, growing a company on your own or being a part of a growing company, be authentic, be real. Because that’s the stuff that matters more than anything else.

Kevin Bupp: I love it. I love it. I appreciate you sharing that, Matt. I was unaware of the name and the logo and the reference back to basically your childhood. So that’s a beautiful thing and does keep it close to home. So, again, appreciate you coming on the show, my friend. It’s been a pleasure having you.

Matt Frazier: Thanks, Kevin. Enjoyed the conversation a lot.

Kevin Bupp: And as always, to each and every one of you that tuned in, I hope you enjoyed today’s episode. And please do us a favor, subscribe to the show on your favorite podcast platform and leave us a rating review if you haven’t done so already. And also, lastly, just share the episode with someone that you feel would benefit from hearing Matt’s perspective. And so until next time, this is Kevin Bupp. Take care. Formatted

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