Our Street Beat series features industry thought leaders, experts and luminaries talking about their corner of the world of commercial real estate and their thoughts on where the industry is headed. We’re bringing fresh perspectives and unique insights to help investors better understand the nuances of CRE from all angles.
Jill Homan is a bit of a rarity in the commercial real estate world–a woman in a position of power traditionally held by men. She’s the President of Javelin 19 Investments, a Washington, DC-based real estate investment and Opportunity Zone advisory firm with more than $400 million in investments and transactions. But for Jill, commercial real estate is not just about development, it’s about changing communities. And for the would-be investors out there sitting on the sidelines, she wants to help them learn just how much of an impact their investments can make.
You have undergraduate degrees in Mechanical Engineering and German, but also a Masters of Public Policy and an MBA. How did you find your way from mechanical engineering to congressional press secretary to institutional real estate investing?
When I graduated from college with degrees in Mechanical Engineering and German, I realized I didn’t want to work as a professional engineer–I did well in the classroom but it just wasn’t my passion. While I was a senior in college, I became interested in current events and politics, so I started volunteering on a political campaign after college. My candidate ultimately lost, but party leaders in Maryland saw what I did as a campaign staffer handling media relations, and connected me with the right people to land a job as a Congressional press secretary on Capitol Hill.
I spent several years on the Hill and then left to pursue my Master of Public Policy and my MBA degrees. I’ve always had an interest in urban areas and how they changed–it was actually the subject of my Master’s Project at Duke University (“What is the impact of small to medium revitalization projects on the surrounding residents?”). Getting involved with local businesses and local neighborhoods became the nexus of my entire career, combining my education with my public policy work with my personal interests. I wanted to more fully develop my ideas in the private sector. So after the Hill and graduate school, I connected with a developer and started focusing on real estate developments and their impact on the community.
The alternative investment industry is expected to grow by 59% by 2023, reaching $14 trillion in assets. What factors do you think are driving this dramatic increase in asset allocation?
I speak with many wealth advisers, investors, and family offices. I’ve found that investors are in search of higher yields and diversification. Many investors would like to increase allocations outside of public equities in part given the market’s volatility and significant highs. Investment opportunities like alternative investments that can offer strong risk-adjusted returns with diversification will attract more capital.
The Opportunity Zone incentive is a very attractive option for these investors who are also seeking long term holds. These wealth advisors and family offices, the folks who are responsible for managing the wealth of high-net individuals, share with me that they may increase their allocation of real assets. Even an increase from, say, 10% to 12% would represent a significant amount of capital being invested through this incentive. In fact, some advisors relayed they may want to even double their allocation–from 10% to 20%. Opportunity Zones have the potential to be one of the most substantial real estate programs in a generation. That’s where I see a lot of excitement and growth potential, particularly with family offices.
Why does Javelin 19 choose to focus on multifamily investments?
Since its founding in 2011, Javelin 19 has focused on multifamily due to the growth in that industry segment. Since the recession, there’s been a significant decline in home ownership and an increase in the percentage of renters. For every 1% increase in the percentage of renters, that’s one million family units needed. This demand driver in multifamily also required more development and capital improvements in rental housing. We add value in the multifamily industry to benefit renters’ lives and provide strong risk-adjusted returns to our investors.
I should mention that our interest in multifamily is not at the exclusion of other asset types, it’s just that those investments have been the most compelling for our investors.
You helped bring together a consortium of women investors in real estate. What do you think are some of the barriers female investors face and how could the CRE industry best overcome them?
I realized that I had very few accredited women investors in my network that I could reach out to when we were raising friends and family equity to capitalize a project. I was very curious how this happened: were accredited women not interested in investing or were they not being asked? I set about investigating this and found that overwhelming accredited women investors were very interested in directly investing in real estate deals. They simply weren’t being asked.
A friend in the real estate industry, Jenna Kirkpatrick Howard (Lockton Insurance Vice President) and I started our Women’s Real Estate Investment Consortium with a few friends, and now it’s over 80 women. We get together every few months to discuss a specific topic and focus on having women developers present about their companies and projects. We’ve had the women invest in several real estate projects and are receiving more investment opportunities.
I believe the intent of the industry was never to exclude women, but we all stick to our network when raising money. If you have a network comprised of women, more women will get asked. Our intent is to attract high-quality real estate investment opportunities and connect interested women with the deal sponsor. We’re a bit like an informal investor club, sharing information with each other and networking. There is a significant amount of real estate experience in the group. Though, some women may not feel comfortable investing yet in an opportunity, because she only understands one aspect of the deal given her work experience. But another woman in the consortium might have experience and knowledge she needs. If we can facilitate the two women connecting with each other, we create a learning environment that empowers women to act and invest.
Do you have any advice for individual investors looking to branch out into alternative investments, specifically CRE?
I’ve done a tiny bit of venture capital investing and wouldn’t dream of doing it just by myself. I joined an Angel network and am learning by working with very experienced VC investors. It’s the same with real estate investing. It doesn’t have to be a formal relationship. Just find people who have been successful and learn from them. Ask questions. Work with experienced investors. Utilize others and their experience to help you make better investment decisions. That is what Jenna and I are trying to create with our Women’s Real Estate Investment Consortium. A group where we can learn from each other and enjoy ourselves too.
With crowdfunding enabling the democratization of CRE, do you have any predictions regarding the growth of CRE investing over the next decade?
I expect we’ll see a higher volume of investors wanting to make their alternatives allocation through a crowdfunding platform. As prospective investors find high-quality investments and sponsor on the site and see how it works, there will be even more activity.
In addition to co-developing a $52 million multifamily project in an Opportunity Zone, Javelin 19 also provides customized solutions to investors, developers, and real estate companies who seek to utilize the Opportunity Zone incentive. What is one thing you wish more people understood about Opportunity Zones?
There are a number of investors on the fence and they can’t quite articulate exactly what they are waiting for. I suspect they need to feel that there is a critical mass of adopters. So let me say–plenty of investors have already allocated capital using the Opportunity Zone incentive! Arguably, hundreds of millions of equity capital has already been invested using the incentive. Given this is a place-based incentive, there are a limited number of sites. Further, since the benefits of the incentive start to decrease the end of 2019, it is critical that investors make decisions now on how they will allocate their capital.
At the same time, it’s critical that would-be investors utilize strong team members who have been working on the Opportunity Zone incentive for a long time. These folks can help investors and developers understand the risks, open questions, and connect with others in the Opportunity Zone industry. Since there is no central repository for Opportunity Zone information, we learn how the deals are being done and what funds are in the market by connecting with each other. Accordingly, working with Opportunity Zone-focused partners can both help potential investors and developers learn about the marketplace and help them properly execute transactions using the Opportunity Zone incentive.
Recent changes in regulation and technology have significantly impacted the historically staid real estate industry. What other regulatory changes and innovations do you hope to see in the next five years?
First and foremost, the Opportunity Zone incentive is the most significant legislative incentive in a generation. Given the benefits of the incentive decrease the end of 2019, the news coverage will continue to grow as will interest and use of the incentive. Second, data. Every building, from its operations to finance, produces a significant amount of data. We are just beginning to process that data and generate insights. As we get better at that, we’ll get better at applying it to our decision making.
I also see a convergence of asset types. Multifamily properties are already incorporating design elements like what you normally find in hotels. Hotels are offering coworking type services and operating small offices or shops in their lobby. The line between one type of asset ends and another begins will continue to blur.
And finally, even with all the data and tech, I think meeting face-to-face will still prevail. If you want to make a deal, getting in front of a person matters. While technology will continue to impact real estate, it is still a relationship business.