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Show Summary
The conversation explores the significant financial needs of universities over the next decade, highlighting a projected requirement of $750 to $950 billion for capital to address real estate infrastructure, including deferred maintenance and new building expansions. This presents a unique opportunity for investors, ranging from small family offices to large sovereign wealth funds, to engage in a previously closed investment ecosystem, driven by the enormous demand for funding.
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Josh Parker (00:00)
And of those universities, over the next decade, Moody’s has identified that they’ll need somewhere between $750 and $950 billion in capital.in order to fund and finance all of their real estate infrastructure needs, including deferred maintenance and ⁓ new building expansion. So when you look at the scale of that, I think investors can really get excited about the ability to place significant amounts of capital within a strategy that up to this point has been a fairly closed ecosystem.
Michelle Kesil (02:04)
Hey, everybody. Welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil. And today I’m joined by someone I’m looking forward to connecting with, Josh Parker, who is working at Ancora, which is a partner between universities and investors helping the universities with their real estate needs. So excited to have you on the show today, Josh.Josh Parker (02:31)
Thanks, Michelle. It’s great to be here with you.Michelle Kesil (02:33)
Of course I think our listeners are really going to take something away from how you’re supporting both the education system and investors and being that bridge. So let’s dive in.Josh Parker (02:49)
Thanks.Michelle Kesil (02:50)
Yeah, first off, for those not yet familiar with you and your world, can you share what your main focus is?Josh Parker (02:58)
Yeah, and Cora is really a specialized business within broader commercial real estate and institutional investment ecosystem. We specialize in partnering with anchor institutions, which we think of as universities, academic medical centers and national laboratories. Our main client base is universities and they have a very unique set of needs and a unique set of demands and the type of partners that they work with.And so we fill this very niche role of addressing the mission and strategic priorities of those universities through the real estate and infrastructure needs and bringing private capital, institutional capital to the table to unlock those priorities.
Michelle Kesil (03:39)
Awesome. How did you come up with this concept?Josh Parker (03:44)
You know, I got into the business 25 years ago rather by accident in Durham, North Carolina where I’d grown up. had the great fortune of working with and partnering with Duke University as they were thinking about how to redevelop downtown Durham and bring more economic activity, more jobs, more housing into the downtown area to make Durham an even better city ⁓ for all the folks that wereworking at the university, coming to school at the university. And what I learned working with them is really the stickiness of those types of partnerships. Duke is not like working with a large corporate tenant that at the end of the lease can pick up and leave town. They’re not going anywhere. And so they tend to think quite long term. And so the revitalization of downtown Durham that I was able to…
participate in really showed me the power of partnering with these anchor institutions. And so we took that show on the road and we’re able to start doing that in other places around the country, helping drive innovation ecosystems, helping bring folks living back into urban areas or areas around the campus. And all of it centered around these anchor institutions being this long duration, very durable relationship.
We tend to think of ourselves now less as investors in any asset class and more investors in relationships because the needs over time may shift, the type of asset that needs to be delivered may shift, but the relationship can continue delivering those new business opportunities over time.
Michelle Kesil (06:12)
Yeah, absolutely. That’s very important. How are you facilitating the relationships between these investors and the universities?Josh Parker (06:14)
youYeah, so we really traditionally have been a sponsor, you know, general partner in the transaction, delivering the full scale integrated of the development or of the asset acquisition. What we’ve done over the last year is really pivoted our business to more of an investment management model where we are sitting between and helping form the capital ⁓
through open-ended and closed-in vehicles and then making that available to the universities in a variety of structures. We tend to not come in and say, this is what we do, we could build one of these things here, or this is the type of money we have, would you like some? We tend to come in and listen first and say, what are you trying to accomplish? And then look to create a financial structure, create a real estate solution that can enable that, that can unlock the priority that the university has.
And then it’s really our job to blend that to the right type of institutional capital. So you can think about the different priorities that maybe sovereign wealth or pension or endowment investors may have versus more high octane, closed end real estate vehicles. And so we don’t come in and say it has to be any one thing. We really try to back solve for what is the right structure, what’s the right type of capital to use in any given situation.
Michelle Kesil (07:46)
Yeah, absolutely. When it comes to your investor partners, is there a specific criteria that they need to have in order to be involved?Josh Parker (07:59)
You know, because universities are such reliable, sticky clients, the investor community tends to think of them as more of a credit play. And so they tend to be more interested in long duration, stable, solid cash flows. That means the return profile we can offer typically is a little bit lower ⁓ than, development or a heavy value ad strategy. But that’s what the investors are looking for. They’d rather geta single digit predictable return year over year for 10 plus years, then try to deliver a 2X multiple with a highly levered ⁓ double digit return ⁓ in a two or three year period. We can do both, we can structure for both, but I’d say the majority of what we see in terms of both the opportunity side and the investor demand is more for that longer duration ⁓ cash flowing yield driven investment activity.
Michelle Kesil (08:56)
Awesome. What are some examples of how you’ve supported universities so far?Josh Parker (09:04)
Yeah, we’ve got a number of interesting projects going on now. One in particular that we’re proud of is with Notre Dame University in South Bend, Indiana. You know, a lot of institutional investors don’t think about Indiana. And we found that across the state, there’s really robust economic activity happening, but it’s not evenly distributed. And particularly in the northwest part of the state.There’s been under investment over the last 15 or 20 years. There’s a couple of really interesting ⁓ industry sectors that have remained strong there. Like it’s sort of the RV capital of the world. Folks may not know that, but the majority of RVs are built in that part of the country. And so what that means is there’s some really interesting industries that can be built up around that, like composite materials, advanced diagnostics, data and analytics. And so working with Notre Dame University, are
redeveloping a portion of downtown South Bend to provide a home for some of these entrepreneurial companies who are trying to address these new industry verticals. What Notre Dame’s doing is putting downtown some of their academic and research uses that can marry with the interest of industry partners and entrepreneurs who may want to engage with the university. it really creates a front door.
for working with the university. you think about, you know, it’s one thing to attend the university or work at the university, but if you want to partner with the university, it might seem quite complicated. And what this is trying to do is really lower the barrier to entry and make South Bend a more attractive place for entrepreneurs and for growth of companies and industry.
Michelle Kesil (11:18)
Yeah, absolutely. So you are supporting these universities with their overall growth, not necessarily just their real estate facilities.Josh Parker (11:28)
Yeah, no, it’s a great point. I mean, we tend to think of the real estate as enabling some larger mission or strategic priority. So in this case, Notre Dame sees an opportunity to grow its research footprint, sees an opportunity to provide more ⁓ outlets for student entrepreneurs and faculty entrepreneurs, and sees an opportunity for ⁓ greater economic activity in South Bend and ⁓ the northern part of Indiana.And so through the investment in the real estate, by populating that real estate with the right type of uses and by making the programmatic connections to the university, you can really create this value proposition that gets people that want to lease space there and want to be there. And our general view is, companies that can have a meaningful relationship with the university, whether they’re at startup scale or full corporate industry partner,
they will be better long-term tenants in the real estate because of that partnership. So it’s not a real estate decision so much as it’s a relationship and partnership decision and the real estate sort of helps enable that. And I think that’s true beyond just commercial office space. We see that in residential, we see that in retail. ⁓ The entire mixed use environment is strengthened by those programmatic connections with the university. So when we have a university that has
an impact goal, if you will, that goes beyond just meeting a space need, we’re really able to accelerate and amplify that impact.
Michelle Kesil (13:05)
Yeah, that makes a lot of sense. Amazing. What are you most focused on solving or scaling to next?Josh Parker (13:15)
Yeah, it’s a great question. mean, you know, within the company, we’re constantly thinking about how to grow and, you know, maintain an entrepreneurial mindset and continue to take advantage of any opportunity that comes in front of us. I think on the client side, the thing we’re most focused on now is helping our university clients navigate a fairly complex transition.that’s occurring across their business model. You know, for those folks who are following in the news, there’s been a substantial amount of change in the way the federal government is partnering with universities to support the research funding to provide for international students, enrollment, and any number of other ways in which the federal government works with universities. All that’s sort of been in flux over the course of this year. So that’s causing university partners to have to think very differently about ⁓
how they execute on their core mission of educating students and creating research and discovery and breakthroughs and continuing to ⁓ fill all the other ⁓ opportunity and potential that they have in their marketplaces, a generator of economic development, et cetera. That’s to say nothing of what’s going on in athletics around universities and NIL and all of the disruption to how the athletics world is working. So every part of
the university’s business model has been in flux this year. And so we’ve spent a lot of time planning, thinking, strategizing with our university clients about how utilization of private capital can help them make that transition and start to solve for some of those problems, primarily through the real estate. But I think we’re seeing in our business an expansion beyond just private capital need for real estate to some of the broader
transitions of business operations that we’re seeing at these universities across the country.
Michelle Kesil (15:46)
Yeah, amazing. What an exciting place to be in and to support them.Josh Parker (15:50)
going on.Michelle Kesil (15:51)
How does it look for the investors that work with you? What’s their role?Josh Parker (15:57)
Yeah, on the client side, the opportunity is of the top 430 credit rated universities. So there’s about 4,000 colleges and universities in the US. And we tend to focus on the top 430 or so credit rated universities.And of those universities, over the next decade, Moody’s has identified that they’ll need somewhere between $750 and $950 billion in capital.
in order to fund and finance all of their real estate infrastructure needs, including deferred maintenance and ⁓ new building expansion. So when you look at the scale of that, I think investors can really get excited about the ability to place significant amounts of capital within a strategy that up to this point has been a fairly closed ecosystem.
And so what we’re seeing is enormous investor interest, everything from
small family office to large sovereign wealth funds who are thinking about the ways in which they may want to allocate capital to meet the enormous demand that’s coming forward. Some of that is like we talked about in a very straightforward credit-like strategy. Some of that is much more opportunistic and risk-taking. And so our ability to offer that entire spread and be sort of the really
One of the only, if not the only players who’s focused in this unique niche means that we’re able to really take advantage of both an enormous supply and demand opportunity coming together at the right time.
Michelle Kesil (17:33)
Amazing. So do the investors need to be really hands on on this journey or they kind of just leave it up to you guys to hold them through that process?Josh Parker (17:48)
Yeah, it’s a great question. Most of the investors that we work with are passive limited partners. They’re making allocations to us as an investment manager and then trusting us to steward that capital on their behalf. Some of those investors like us to do that with discretion and report to them and keep them informed. Some investors like to be more hands-on and we’re willing to work with any structure that’s desired by the investor side.The thing that we’re constantly doing is trying to make sure that all parties in the deal understand the dynamics of the deal, right? So if we don’t want to create mismatch by having the wrong type of capital or investor expectation with the wrong asset type. The other thing that you’re seeing is universities are large business operations, so they’ve got pretty sophisticated real estate execution capability. And so oftentimes they’re able to do the on the ground work. And so the…
the scalability of our business that might otherwise be restricted from working nationally because we’re not in every market where a deal might occur is mitigated because the university has local staff on site who can handle a lot of that on the ground work. And so it allows the passive institutional investors to allocate us capital and for us to structure that capital for the university partners.
and have a variety of different ways in which we can interact based on how much support the university might need on the ground.
Michelle Kesil (19:16)
Awesome. How are you guys working on business growth when it comes to getting clients on both the educational system and through the investors?Josh Parker (19:28)
Yeah, so we segment our team out. We’ve got a great ⁓ group of team members called our Client Strategy and Execution Group. they’re really, many of those folks are former university administrators or have been in the consulting landscape with universities. So they really understand how universities tick. And so their job is to really sit down with the university and unpack the challenges that they’re experiencing.the opportunity that they’re trying to take advantage of, any constraints that might be affecting their ability to execute and really identify the scope of the opportunity. Then they’ll pair internally with a portfolio manager who’s able to then structure a deal on behalf of investors and blend that capital together. Again, we really think about this as being relationship driven. We’re not…
there to be transactional with any particular university where they’re developed a long-term relationship and deliver a structure that unlocks the mission and strategic priority that they have in front of them. Same thing on the investor side, where we’ve got a team that’s constantly out talking to investors, understanding what they’re looking for, the type of duration and yield. as you know, there’s a wide variety of… ⁓
investor profiles and appetites. And so, you know, an insurance company balance sheet might be really interested in a very long leased asset with a very low yield that has virtually no risk and is credit supported. They would not be the right investor for a new ground up mixed use ⁓ entertainment district around an athletic facility, right? So we’ve got to find ⁓ the right ⁓
of capital and investor in order to blend together. And so our investor relations team is constantly out talking to investors about what they’re looking for ⁓ and what ⁓ sort of structure that they’re interested in or role that they’d like to play in the deal. Again, some investors want to be completely passive and make an allocation to a strategy. Some investors want to be very hands-on and underwrite every deal. And we’re able to work with any of those demands.
Michelle Kesil (21:29)
Awesome! What a cool business structure you guys have created!Josh Parker (21:34)
Thank you.Michelle Kesil (21:34)
Yes. So before we wrap up here, if someone wants to reach out, connect, learn more about everything that you’re doing, where can people find you and connect with you?Josh Parker (21:48)
Yeah, our website, ancora.re is a great place to see what we’re up to and connect with members of our team. Again, we’re relationship driven, so we tend to think very deeply about building connections and friendships in all the markets where we’re working, not just with our clients, but with customers, the folks who are in our buildings paying rent, as well as community partners. Um you know, we also tend to think aboutlocal partners who can invest alongside us, right? So if we’re doing a large project in South Bend, Indiana, I hope that three or four other real estate entrepreneurs want to be investing around us and doing things that can benefit from the large investment that we’re making downtown, whether they’re trying to provide housing or building a retail space or other office space. We’re big believers in density and creating that center of gravity for investment. So
always welcome sharing and comparing notes and markets where we’re working with other real estate entrepreneurs and investors to create a rising tide for all of the votes.
Michelle Kesil (22:49)
Perfect. Well, I really appreciate your time, your story, and your perspective. Thank you for being here.Josh Parker (22:56)
Thanks Michelle, it’s great to be with you.Michelle Kesil (22:58)
Of course. And for the listeners tuning into the show, if you got value, make sure you’ve subscribed. We’ve got more conversations coming with operators like Josh, who are building real businesses. We’ll see you on our next episode.
