Insider's view: What two former CBRE Global Investors are targeting with new investment firm, starting with Indianapolis deal
By Ashley Fahey
Tampa Bay Business Journal
Published: Aug 2, 2021

Two former portfolio managers with CBRE Global Investors have struck out to start a new firm that'll invest in what they call attainable housing.

Los Angeles-based Standard Real Estate Investments LP formally launched this week with the closing of a majority equity investment in a 244-unit multifamily project in downtown Indianapolis. Standard Real Estate will develop the project in a joint venture with Indianapolis-based Arrow Street Development LLC.

Standard Real Estate, a minority-owned private equity firm, will work in joint ventures nationally with local real estate developers, with a focus on partnering with minority- and women-owned firms. The firm is targeting four investments totaling $200 million in asset value within its first year.

At the helm are Robert Jue, CEO and former senior managing director at CBRE Global Investors, and Jerome Nichols, president and former senior director at CBRE Global Investors.

Jue said in the early 1980s, his grandfather started a community bank in Chinatown in Los Angeles. That bank, Standard Bank, was established because Chinese immigrants settling in the California's San Gabriel Valley frequently had difficulty accessing financing from mainstream financial institutions because of language and cultural barriers.

"Standard Bank was very successful in the community and also commercially," Jue said. "That’s something that we're looking to replicate on a national basis."

The Business Journals recently spoke with Jue and Nichols. The following excerpts have been edited for clarity and brevity.

What real estate projects make sense for what you’re doing? What sectors you’re looking at specifically?

Jue: I think the key thing that we're going after is development investments in real estate, nationwide, and we're looking to be joint venture equity partners with local developers throughout the country. We have a desire to work with emerging diverse and women developers, because we think that capital access for those individuals is a key way that we can help accelerate diversity and inclusion in our industry generally. Market-wise, we’re national in terms of our focus. That's what we (were) doing at CBRE and that's what we're comfortable doing now. And, in terms of product types, we're most focused right now on the housing crisis in America, trying to do something to help with the affordability issues that really exist throughout the country. We think that there has been a significant amount of supply added in the luxury space and also in the affordable space but that more housing in what we call the attainable price space, middle income ... as a country, we need to focus (on that) and that's where Standard is particularly focusing its energy.

Attainable housing — can you talk about what that means for Standard?

Jue: 80% to 120% (area median income) is what we're targeting in whatever city we’re in. Some people call it workforce, some people call it middle-income, some people call it essential housing. In terms of what those properties look like, I think they're fairly standard multifamily rental communities. We still want them to be high-quality, we still want them to be managed well. But it's really about finding smart ways to lower the basis on transactions.

What are some of the ways you can lower that basis and achieve rental rates affordable for 80% to 120% AMI?

Jue: It's really hard to do. And we think that, in many ways, the folks that can do it are local folks that have interesting access to land opportunities. We think, in some ways, diverse developers have unique access points (and) they might be able to go into neighborhoods that other conventional developers might not understand as well — that could reduce costs overall. We also think there is generally … a broad mobilization of focus to try to address this issue, whether that's through tax abatements or other types of public-private partnerships that might make new development more affordable.

Nichols: You're not going to see us do a lot of high-rises. We’re focused on more garden, surface-parked investments, a lot of wrapped investments, interesting parking strategies — leasing parking instead of building in some cases, building less parking than has been typical in a market where … we don't need to spend those extra dollars building as big of a parking garage. Maybe increasing density or smaller units in some cases. Each deal tends to look different but we will have one or two components to help lower the basis even more.

Your debut project is in Indianapolis. Why that market and where else are you targeting?

Nichols: (We see) three different types of markets: Coastal, high-barrier-to-entry markets tend to be more expensive — those markets are going to be (for us) emerging neighborhoods, maybe suburban. We’ve got growth markets, like the Sun Belt — a Phoenix or Southeast market — where demographics and job/income growth is a lot higher (and we can be) more flexible in those markets. And then you’ve got under-the-radar gem markets that have been overlooked traditionally by institutional capital. Indianapolis is a very steady market, it doesn’t go boom and bust like the rest of the world does. It hasn't seen the supply that a lot of other markets have seen because institutionals haven’t been there; it’s a local market. Just now, we're starting to see institutional players in that market, capital markets pressure on (capitalization) rates, and you combine that with the lack of supply, it’s a really good opportunity.

What's a good fit as far as the types of developers you want to work with?

Nichols: I think it runs the gamut, the profile of the developers, and what’s key to understand is, a minority-owned development company and an emerging minority-owned development company are two different things. Some minority-owned development companies are emerging, and some are very established. That's kind of key to our process, and we have a place on our platform for both of those.

What’s the vehicle for financing these projects?

Jue: There’s going to be more to come about our capital strategy as we roll into the next few months. But, needless to say, our client base is institutional in nature, so whether that’s pensions or large family offices, those are the kinds of groups that we worked in the past at CBRE Global Investors and are working with now at Standard.