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Show Summary
In this episode of the Real Estate Pros podcast, Kristen interviews Kholt Mulderrig, managing director of DCA Family Office. They discuss Kholt’s background, the unique approach of DCA in focusing on founder and family-led businesses, and the various asset classes they invest in. Kholt shares insights on current opportunities in the real estate market, particularly in multifamily properties, and emphasizes the importance of location and long-term strategies. The conversation also covers the significance of finding the right partners in property management, the dynamics of working with high net worth individuals, and the importance of risk management in investment strategies.
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Kholt Mulderrig (00:00)
I think the big thing is probably just binary risk. When we underwrite an investment, we go through maybe 10 to 20 different scenarios. What happens if interest rates do this? What happens if interest rates do that? What happens if we can’t lease this particular unit at the current market rate and really kind of playing with all the different scenarios on different outcomes?based on either markets or based on kind of supply and demand dynamics. And so really, know.
take that approach when we’re underwriting deals to make sure that we’re not going to make a mistake or we’re going to, if something goes wrong, then it’s not a horrible outcome. I think we do see a lot of other managers taking a different approach, which is, we’re going to swing for the fences every single time. And we’re going to take this really high returning approach. we’ve seen it.
a number of GPs that go out and underwrite to a 30 % IRR and end up at a 5 % IRR. And you’re really, as far as from the view from the investors and the LPs, that’s not a good outcome. I think we’d rather underwrite to a 15 % IRR and get a 15 % IRR.
Kristen (02:58)
Welcome back to the Real Estate Pros podcast. I’m Kristen and I’m here with Kholt Mulderrig, who is the managing director of DCA Family Office. ⁓ Excited to get into today. Thanks so much for being here, Kholt.Kholt Mulderrig (03:10)
Thank you, Kristen. Appreciate the time.Kristen (03:12)
So let’s talk abouthow you got into this industry. What’s your background and what led you to DCA?
Kholt Mulderrig (03:19)
Yes, did economics as an undergrad, then went actually into the venture space, did two venture-backed and it really intrigued me to understand who was on the other side of the curtain.who are these venture capitalists and these private equity players that are actually making the decisions that drive business decisions. that led me back to my business degree and then ultimately into investment banking at DCA and I stay here today.
Kristen (03:54)
Amazingand kind of give us a little breakdown of DCA and what makes you guys different.
Kholt Mulderrig (04:00)
Yeah, I think the firm is extremely unique in that we’re focused on really founder and family led businesses. So the firm itself is founder led, formed about 20 years ago.really as a merchant bank with both an &A advisory practice, a direct private equity arm, and I sit on our family office practice which was formed about four years ago, really with the goal of providing ultra-high net worth, kind families, really a platform to invest within kind of private markets and alternative assets.
Kristen (04:37)
Yeah,and you guys are in a lot of different asset classes. Can you talk about just the variety that you you’re in?
Kholt Mulderrig (04:45)
Yeah, absolutely.So I think we very much take an endowment approach to alternatives. So we’re allocated across private equity. So that would include both growth and buyout stage companies, real estate obviously, and across all the really the major
kind of food groups there all the way from commercial office buildings to manufactured housing, multifamily car washes, kind of anything in between. And then our another sleeve is within infrastructure.
We can think of data centers or telecom and anything that’s kind of really the.
the picks and shovels, the nuts and bolts of really the industrial economy within the US. And then we also have a meaningful allocation to all yield. And that would be, agriculture, so permanent crops, almonds and pistachios, really taking an uncorrelated bet to the rest of the market and really focused on generating current cash flow for the family.
Kristen (06:37)
That’s awesome.And what opportunities are you seeing out there in the real estate space? What’s kind of getting you excited right now?
Kholt Mulderrig (06:46)
In real estate, think we’re excited about, I think call it 2025, 2026 vintage year deals. The real estate has been beat up the last couple of years. We’re starting to see Fed action move interest rates down. I think that will start to bridge the gap between buyers and sellers and we’ll start to see more transaction volume.We’re really liking things within the multifamily space right now. think the big thing there is we are heavily focused on kind of core and core plus assets. We haven’t seen the rent growth, rents have been flat. And so really buying, at the end of the day, real estate is all about location. And so it’s just buying core assets in the best locations possible, making sure that they’re kind of.
current yield positive day one and really taking a long-term approach and not trying to look at what’s gonna happen next month or next year, but is this gonna be a bad 10 years from now?
Kristen (07:52)
Right. And what areas are you looking at right now that you’re excited about?Kholt Mulderrig (08:00)
Yeah, you know, from a market perspective, I think we’re a bit contrarian. Actually, I think there’s been tremendous amount of capital flooding into the southeast. I think we also see that as markets that have been really had a tremendous amount of supply over the last couple of years, and we’re not seeing the rent growth as new product comes online and they’re, you know.providing heavy concessions to get those properties filled up. And so we’re actually kind of pulling back and really looking at some of the locations that have been kind of beat up on the coast during COVID. think San Francisco or the Greater Bay Area, Southern California. think it’s also probably just a West Coast bias. We are here in Northern California. And so I think one of the attacks that we always like to take is, is our property within a Southwest flight?
of us, right? At end of the day, know, real estate, you know, it is an operating business, right? It’s about the people and you need to be able to get to your properties quickly and to make sure that we can address any issues. So being able to get on a plane and be within, you know, to the property within an hour or so is important to us.
Kristen (09:14)
Yeah, and are you guys, as far as like property management, are you guys vertically integrated or have you kind of developed a team around you? ⁓Kholt Mulderrig (09:22)
Now, so we take in an asset management approach because we have a national footprint. I think what we really like to think about is who is the best person, who is the smartest person, who knows this market the best and who has boots on the ground. And so from my property management perspective.We’re going to select third party managers, which their ⁓ night and their day is property management and pick the group that has the best reputation and the most credibility within that particular market. Because we’re so widely diversified across asset classes and across geographies, you can’t be an expert in everything.
It’s a good lesson for any investor. Know what you know well.
and partner where you don’t feel like you have that subject matter expertise. And so think that’s the tact that we’ve taken to where we have partnerships in different regions kind of based on the asset class and based on the strategy. And then we have an internal asset management team, which are really the managing the property managers and really doing that financial analysis on a monthly basis to understand how the property is performing and being able to take a little bit of a, you know,
disconnected view, right? Because the property manager is in there tactically day to day. And so we like to make sure that they have the leeway to operate the property as they see fit. And we’re able to kind of come in and provide oversight and provide guidance on how we want the ship steered.
Kristen (11:38)
Absolutely, and what are your best tips for finding the right partners? I feel like that’s a huge part of it that takes a long time to kind of, you know, it seems like you guys are a well-oiled machine. How did you guys get to that point?Kholt Mulderrig (11:53)
So for us, know, it’s a lot of it is just experience and kind of having the networks that grow over time. We also go through a pretty extensive diligence process, right? You think about diligence on your property. We actually do two stages of diligence. So we’ll actually diligence the, operating partner or our property manager, and we’ll also diligence the underlying property. if it’s, you know, the property could be great, but if it’s not managed correctly.you’re not going to get to the ultimate outcome that you’re driving towards. So we’ll go through and really understand the team. What’s the key man risks there? there people that are integral to that team that if they were to leave, it starts to fall apart. We looked at the tenure of the individuals on the team. Do you have people that have only been there a couple of years and they’re leaving frequently or do you have a lot of folks on the team that have been there five, 10 years?
and that really just speaks to the culture of that company and whether they retain the talent. And then the next is track record. We look at every single property that they’re managing, how are those assets performing? If something went wrong, then we’re gonna have a conversation with them to understand, for these three or four assets that aren’t performing well.
what’s the rationale for that? Is that because of some external factor or is that because of mismanagement? And so we look at this very holistic level, kind of their capabilities within a market and their track record and being able to execute within that market. And then once that’s done and we can check the box, then we’ll actually look at a property in partnership with them.
Kristen (13:40)
I think that’s good advice because I think a lot of people kind of fall into the trap of whoever’s cheapest or, you know, without actually doing the thoughtful research like that. But there are data points that you can utilize to have a better chance of hiring the right person. ⁓ So in your line of work, you work with a lot of high net worth individuals and families. ⁓Talk about kind of that process and how that, I’m sure that influences how meticulous you guys are in your investing strategy.
Kholt Mulderrig (14:12)
It absolutely does. You know, when you think about family offices or high net worth individuals, you’re to one, you’re going to look at their overall kind of portfolio. ⁓ And they’re going to have some allocation towards public equities and bonds. And then they’re going to have an allocation towards alternatives and kind of private markets. And so one thing is, is really trying to understand what the goals of the family are. Do they haveyou know, a distribution level that is required to maintain their lifestyle. What’s their views on risk? What’s their views on ESG? What’s their views on the environment or other, you know, areas of interest? And so we can, at that point, tailor the portfolio around
where they want to be involved. If, for instance, hey, we’re really interested in hospitality.
then that may be a core focus for their portfolio.
with diversification kind of built around it. And so we do want to make sure that when we’re building out a portfolio on a family’s behalf, that it’s not just about maximizing returns, which obviously is kind of table stakes. need to make sure that we’re maximizing return for a given level of risk, but also that the family feels involved, right? Because unlike something in public equities where you own Apple stock or own Nvidia, right? Within the alternative space, we can actually get the family much more involved.
We’re going to go fly out and look at the property. We’re going to tour it on a regular basis. We’re going to be in the markets that they want to be. It’s very nice for a family to go and say, I’m going to go stay in my hotel and be there and be at the bar and have…
have that tangible pride of ownership. And so that’s paramount to, I think, the way that we really work with families to make sure that, hey, this isn’t just an investment portfolio for them, but this is really a lifestyle around ⁓ investments and being a real part of that.
Kristen (16:59)
Yeah,that’s amazing. Definitely, I think it makes a difference when people have, I mean, everyone has skin in the game when they’re investing, but it feels more real and tangible when you’re able to visit these properties and all of that. You mentioned that the Bay Area, San Francisco, is a market that you guys know very well and that seems to be kind of on an upswing. Can you talk a little bit more about that?
Kholt Mulderrig (17:23)
Yeah, absolutely. ⁓ I think if you look at a lot of the media coverage, I think it tends to always lean towards the negative. There’s no news like bad news. And so everyone always is going to report on that. I think because of that, it creates this…disconnect in the market where kind of public perception of an area kind of depresses values. And so I think we see that as a more of value play. Say, hey, this is is irreplaceable real estate here. It’s not going away. This is still the epicenter for tech and innovation, especially with the growth of AI. And for us, that’s that’s going to be a good bet long term.
Kristen (18:07)
Absolutely. Yeah, I grew up in the Bay Area, so I have a lot of friends over there and they’ve been seeing kind of the same thing. Well, that’s awesome. I think this has been really insightful just kind of how you guys function such a large business. ⁓ I mean, you guys have over $600 million in equity, so that’s, I mean, very impressive. ⁓ Can you talk about, I don’t know, maybe you see some mistakes that people make when they’re trying to structure their portfolio? Do you see stuff that comes up over and overthat you guys constantly educate people on.
Kholt Mulderrig (18:41)
I think the big thing is probably just binary risk. When we underwrite an investment, we go through maybe 10 to 20 different scenarios. What happens if interest rates do this? What happens if interest rates do that? What happens if we can’t lease this particular unit at the current market rate and really kind of playing with all the different scenarios on different outcomes?based on either markets or based on kind of supply and demand dynamics. And so really, know.
take that approach when we’re underwriting deals to make sure that we’re not going to make a mistake or we’re going to, if something goes wrong, then it’s not a horrible outcome. I think we do see a lot of other managers taking a different approach, which is, we’re going to swing for the fences every single time. And we’re going to take this really high returning approach. we’ve seen it.
a number of GPs that go out and underwrite to a 30 % IRR and end up at a 5 % IRR. And you’re really, as far as from the view from the investors and the LPs, that’s not a good outcome. I think we’d rather underwrite to a 15 % IRR and get a 15 %
think that’s at a particular asset level, I think that’s where a lot of people fail is that they’re really focused on just, this is the outcome I’m trying to achieve as opposed to what’s the probability of actually achieving that outcome relative to everything else. And so when we work with anybody. ⁓
you know, it’s about having some ballast in the portfolio that you can say, hey, I’m going to make these large bets that I know the outcome range is going to be pretty narrow. And then, hey, you want to have your gambling money on the side where you want to shoot for the fences over here, that’s OK, too. But you’re prepared to lose that money. And at the end of the day, the portfolio will still be OK.
I think we go through a lot of education with people on just not getting fixated on the deal and making sure that they’re viewing that deal as a component within the broader portfolio. We’ve had conversations with clients where we’re presenting an opportunity to them and they look and they say,
that’s not very sexy. Do we really want to do that? Look at this over here, this is sexy, I want to do this deal. And it’s like, yeah, there’s a role for that deal and there’s a role for this deal. And so making sure that you have that balance at end of the day, you don’t want to lose money.
Kristen (21:16)
Sorry.Yeah,
I mean the non-sexy deals are often the best ones, the best bets.
Kholt Mulderrig (21:36)
That’s Money is sexy.Kristen (21:38)
Yeah, exactly. That’s a good way to look at it. Awesome. Well, thank you so much. This has been really insightful, the way you guys do business. Let everyone know where to find you and where to find DCA.Kholt Mulderrig (21:50)
Yeah, so you know, DCAfamilyoffice.com. can see our website. I’m on LinkedIn, so feel free to connect with me. Happy to have conversations with anybody.Kristen (22:01)
Amazing. Well, thank you for being here and thank you everyone for listening. Hope you learned a lot, got some inspiration for yourself and we will see you back next time. Bye.
