Mark Roppolo and HFS Capital Partners operate with a discipline most institutional investors can’t afford: the ability to do just two deals in a year when nothing else makes sense. While traditional funds face pressure to deploy capital or return it to investors, HFS exists in a unique hybrid space—not quite a family office, not quite a fund—that lets them be ruthlessly selective. This patience paid off when they acquired an 800,000 square foot office complex at a 20% cap rate that’s now 94% leased, proving that waiting for the right opportunity beats forcing mediocre deals.
Their investment approach reveals critical insights for anyone evaluating sponsors or deals. HFS avoids marketed deals entirely, focusing instead on sponsor-sourced opportunities where they can truly assess the operating partner’s capabilities. Their underwriting always centers on sponsor strength rather than just the asset, and they’ve completed over 70 real estate deals deploying $280MM through a couple dozen operating partners without a single failed capitalization. What makes this track record remarkable is their structure—they capitalize each deal individually through their affiliated wealth management shop, giving investors full discretion with no blind pools or forced liquidations.
Mark’s philosophy cuts through the noise of real estate investing: success isn’t about being the smartest—it’s about tenacity and getting more looks at deals. His Naval Academy training instilled a powerful accountability framework: if you can’t explain a deal to a classmate, something’s wrong. The conversation explores how staying connected to “the pointy edge of the spear” through daily conversations with operators drives better investment decisions, and why supporting operating partners through speed bumps is essential for long-term success. For sponsors seeking capital or investors building portfolios, Mark’s insights reveal what truly disciplined capital allocators demand for top performance.
Transcript
[00:49] Kevin Choquette: Welcome to episode 33 of Offshoot. My guest today is Mark Roppolo, Director of Investments at HFS Capital Partners, a Dallas based alternative, an investment manager as an LP investor looking to put 4 to 15 million dollars into each deal.
[01:04] Mark’s team of three investment professionals has completed over 70 real estate deals and deployed over 280 million dollars of equity through a couple dozen operating partners.
[01:13] Mark’s a Naval Academy grad who flew helicopters off destroyers before diving into commercial real estate,
[01:19] where he’s worked his way through everything from multifamily development to pension fund advisory to trophy office asset repositionings.
[01:29] What’s intriguing about Mark and his partners at HFS is their ability to be truly contrarian. They’re not a fund, but they’re not quite a family office either. There’s something in between that that lets them be incredibly patient and selective.
[01:41] That’s a discipline, a mindset that you don’t see in institutional shops who eventually must deploy capital as returning it to investors is not an option.
[01:51] HFS capitalizes each deal individually, partly through their affiliated wealth management shop, partly giving their investors discretion on each investment.
[02:00] There are no blind pools and no forced fund liquidations,
[02:04] yet they’ve never had a failed capitalization.
[02:07] As you’ll hear, that track record comes from a ruthlessly selective DNA and relationship driven approach to their investor community.
[02:16] They also invest alongside their investors on every deal.
[02:20] Listen in as we cover topics that include how they stole an 800,000 square foot office complex at a 20 cap,
[02:28] an asset which now is 94% leased,
[02:30] how they diligence boutique operators and how their underwriting is always focused on the strength of the sponsor,
[02:37] why they avoid marketed deals entirely and instead focus upon sponsor sourced opportunities,
[02:44] how they support operating partners when deals hit speed bumps,
[02:48] the discipline to do just two deals in a year when nothing else penciled, and why their investors appreciate the patience to invest only when they like it.
[02:56] The advantages of their hybrid model that acts like a family office but isn’t dependent on any single investor.
[03:03] Why real estate success isn’t about being the smartest. It’s about tenacity and getting more looks at deals,
[03:10] the power of Mark’s Naval Academy peers and their accountability.
[03:15] If you can’t explain a deal to a classmate, something’s wrong.
[03:19] And finally, how staying connected to the pointy edge of the spear through daily conversation drives better investment decisions.
[03:26] Mark’s journey from military service to institutional investing through to this brand of capital allocator provides a great perspective on what disciplined investors are seeking for top performance.
[03:37] I hope you enjoy it.
[03:45] Good morning, Mark. Welcome to the podcast.
[03:47] Mark Roppolo: Thanks. Good morning.
[03:49] Kevin Choquette: I appreciate you taking the time. I know you’re a busy professional and time is short.
[03:55] Mark Roppolo: Well, happy to be with you.
[03:57] Kevin Choquette: So if you would, just to get us rolling,
[04:01] you are with HFS Capital Partners out of Dallas.
[04:06] Tell us about the firm. Tell us about what you do there.
[04:09] Mark Roppolo: Sure. HFS Capital Partners is an alternative investment manager that looks for interesting risk adjusted, kind of story driven opportunities in real estate,
[04:22] which is my primary focus.
[04:24] And then we also have a significant practice and investment portfolio and the oil and gas minerals space which one of my partners runs. And we have a whole team that goes out and sources those opportunities.
[04:40] So between real estate and royalties focused on the oil and gas space,
[04:46] we offer some interesting private equity opportunities to investors within the firm.
[04:56] Kevin Choquette: Yeah, and one of the things I’m really intrigued by with HFS is you have a sister company, right. Which is hfs sort of wealth management. I don’t know if that’s the exact moniker, but it’s a related entity, right?
[05:11] Mark Roppolo: That’s right. The capital partners is a component of the wealth management firm. The wealth management firm should be thought of as kind of the parent and they do all the traditional wealth management services for a variety of high net wealth individuals.
[05:28] And we within the capital partners invest partners of the firm’s money as the weed on any investment.
[05:37] We can go into it further, but we fully believe in aligning the interest as closely as possible. And these are attractive. If they’re not attractive for us to individually invest in, then we shouldn’t expect anybody else to invest in it alongside with us.
[05:53] Kevin Choquette: That’s partners of the firm, as in principles of HFS Wealth Management or HFS Capital Partners. Or maybe both.
[06:01] Mark Roppolo: Both.
[06:02] Kevin Choquette: Both. Okay. Money where your mouth is kind of an idea.
[06:04] Mark Roppolo: That’s right.
[06:05] Kevin Choquette: Yeah. And then on the remainder capital, so say I bring you a deal and hey, Mark, we’re looking for $5 million LP equity to build a multifamily asset in Southern California.
[06:18] The balance that doesn’t come from the partners Is it exclusively funded from the HFS wealth management side or is that just a part of the sort of capital raise that you would do to fill out a subscription?
[06:32] Mark Roppolo: Yeah, I don’t, you know, my partners really lead that kind of allocation efforts. But I do not think of,
[06:42] we just think of investors for a private offering of folks that have routinely invested with us. They’re all known relationships.
[06:53] We don’t go out and use social media to try to find investors like a lot of syndicators do and have been successful with.
[07:04] So we have a significant investment from non wealth management clients.
[07:14] But you have to have a relationship. We, we need to know who you are, we need to know that it’s appropriate for you and that we want to invest,
[07:22] you know, we want you to invest with us.
[07:24] Kevin Choquette: Yeah, that’s cool, we’ll get into that. But that’s really helpful. Where are you guys seeing opportunities, challenges like what are you seeing in the market right now?
[07:33] Mark Roppolo: You know, it’s gosh,
[07:37] you see a lot.
[07:40] It’s a confusing time in many respects.
[07:44] So let me back up and say that in for the most part I find the space markets, if we would define kind of the relationship between the landlord and the tenant and therefore the,
[07:58] just think of it, the rent rolls and the occupancy, I find those mostly to be pretty, pretty healthy.
[08:04] Of course there was a lot of new deliveries on the multi side and on the industrial side which the,
[08:12] you know, vacancies have caused some overhang which is getting worked through in these lower barrier to entry markets.
[08:19] So in general pretty healthy there.
[08:22] Of course the significant increase in the interest rates, you know, starting in the April of 22 has really disrupted kind of the capital market side.
[08:35] It seems like that that’s starting to get worked through.
[08:40] But there’s,
[08:42] there are a lot of loans that you and I both know that we’re initiated with floating rate debt with low cap rates that are not performing and we see a number of deals that can’t close just for the debt, you know,
[08:59] the debt value.
[09:00] So I think that’s still going to take a while to work through it. And course that’s presenting opportunities which we’re trying to stay in front of.
[09:07] Kevin Choquette: Are you guys seeing much?
[09:10] You know,
[09:12] so let’s just go to the, you know, executed alone on floating rate terms,
[09:18] the index went up 550 basis points.
[09:23] And so what might have been,
[09:27] let’s just say 4% money suddenly turned into 9% money.
[09:33] And so they’ve got negative carry on the debt and they’re facing Maturity,
[09:38] there’s not enough cash flow from the asset to be able to service the debt.
[09:42] And it’s either a cash in refinance or kind of extend and pretend or there’s actually an event of distress or default. Are you seeing much capitulation on the.
[09:56] Either on behalf of the lender who may be a little bit overextended on current asset values, or on behalf of the borrower, he’s like, hey, I’m not putting good money after bad,
[10:05] our equities impaired if not wiped out. And let’s just walk.
[10:11] I’m just curious.
[10:12] Mark Roppolo: Yeah,
[10:14] I don’t, I have not seen many cases in which the lender is taking a write down,
[10:20] you know, just kind of pay off.
[10:22] Although we did have a very significant one in the office space last fall which presented a,
[10:31] you know,
[10:32] one of the more compelling opportunities we’ve seen.
[10:35] On the multi side,
[10:37] the multi tenant side, you know, industrial side, we have not seen any kind of significant discounted payoff opportunities.
[10:46] Kevin Choquette: Yeah,
[10:48] we talked about that office deal just because I think it’s interesting.
[10:52] Refresh my memory because I remember you telling me this story and I was like, okay, that’s compelling. Like this is the. There’s a lot of talk about vintage in real estate and there are some vintages like,
[11:03] like wine are better than others. That the vintage that’s printing now may prove to be a very good vintage because there is a little bit of a basis reset.
[11:11] Refresh my memory on that office deal you guys did.
[11:15] Mark Roppolo: Yeah, And I need to preface just to make our compliance people happy, that nothing I say should be, you know, implied as any kind of investment advice.
[11:23] Kevin Choquette: Perfect.
[11:24] Mark Roppolo: Yeah.
[11:26] So it was a two building office park in a suburb of Dallas that each building was about 400,000ft and the weighted occupancy between the two buildings was in the 70,
[11:43] low 70% range.
[11:46] One of the buildings was completely occupied and had four years of, of term remaining and the other building, you know, say 40 or 50% occupied.
[11:56] The,
[11:57] it was kind of the fully occupied building. You’re not really sure,
[12:03] you know, a little bit functionally dated. You probably wouldn’t, you wouldn’t build it like that today had a really large footprint.
[12:10] So we thought that it certainly could be compelling on just a land basis alone,
[12:20] which helped us get very comfortable for that.
[12:24] That building, the mid rise office building, 16 stories, nicely refinished.
[12:30] The previous owner had totally redone all the common areas, elevators.
[12:37] That building.
[12:38] We thought,
[12:39] you know, this is a good a minus building in a,
[12:43] an area that has a lot of the value office workers.
[12:49] And since we we bought that building that that portfolio for truly a 20 cap on in place income.
[12:59] Kevin Choquette: Wow.
[12:59] Mark Roppolo: And there was four years of, of term remaining.
[13:03] So I was seeing many deals marketed with you know 12 cap but there’d be a year and a half or you know, two years of term remaining and that still wouldn’t get you very compelling position.
[13:19] So this was a very unique opportunity.
[13:21] Since we closed that we signed a very large lease with a Fortune you know 20 company and of we’re 94% leased on the mid rise overall. Oh wow.
[13:34] Kevin Choquette: Yeah.
[13:35] Mark Roppolo: So our 20 cap is will. Will when they start paying for a period, you know will be in the 28 cap on. On total adjusted cost.
[13:47] Kevin Choquette: So just there’s two buildings. I just want to understand it. The one that you’re saying dated footprint and good for land was what a low rise sort of large footprint building that was a hundred percent occupied.
[13:59] Mark Roppolo: That’s right.
[13:59] Kevin Choquette: Okay. And then the tower was only 40% occupied but had gotten a lot of the value add treatment.
[14:05] Mark Roppolo: That’s right.
[14:07] And you know that market has a lot of corporate users.
[14:12] I think what made it compelling or what created the opportunity is the lender had tried to market it unsuccessfully a couple times and they had an agenda to move it off the books before into 2024.
[14:28] Our partner we always invest with on the real estate side through operating partners partner is very skilled and is one that often gets calls for difficult things that others can’t do.
[14:45] And this created quite an opportunity for both of us.
[14:48] Kevin Choquette: And so when you say on the low rise portion of it that you were comfortable with it just as land value you could actually underwrite holding it for the four years, letting the remaining lessees burn off term and then just scraping it for either new office or alternative uses.
[15:05] Mark Roppolo: That’s right.
[15:07] We do feel there are a number of interested users should for half the building that are poking around and touring it now. So it very, very much could stay a office traditional office use.
[15:25] But we got comfortable with the underwriting that if we could exit it for land value then you know that was our downside.
[15:32] Kevin Choquette: But at a 20 cap, if you just bought it with cash four years in, you’re down to 20% of your balance.
[15:38] Mark Roppolo: Yeah. You could, you could exit the entire. You could tear both buildings down and still have a very good return just off all.
[15:44] Kevin Choquette: So how many toads did you have to kiss to find that prince?
[15:48] Mark Roppolo: Yeah, well that’s the deal.
[15:50] It’s you know, this is thankfully a,
[15:53] a strong relationship that we have with this sponsor and we certainly knew the brokers involved in, in selling it.
[16:02] But this is a world that you know, you try to stay disciplined and look at everything that crosses your plate.
[16:10] And you know, I get a couple hundred emails a day,
[16:14] you know, you just have to have to review them and see where the opportunities may lie. And you know, it’s not always a lot of fun but when the right one does come along it certainly makes all that,
[16:27] all those kissing the frogs worth it.
[16:29] Kevin Choquette: Yeah, I mean I get to invest on occasion. If you called me and said I’ve got to a 20 cap. Okay. Yeah, let’s go, let’s go.
[16:40] Mark Roppolo: The math was pretty, the math was pretty easy. Yeah.
[16:43] Kevin Choquette: And how long was that relationship in place prior to, you know, having it bear that kind of fruit? I’m just curious because it’s usually the.
[16:51] Mark Roppolo: Case there’s something there over 10 years.
[16:54] Kevin Choquette: Yeah,
[16:54] yeah, yeah.
[16:56] Going back to like seeing banks take down, take any sort of material write downs. Although on that one it sounds like they did.
[17:04] How about deals where you’ve seen sponsors execute, right? They have a value add plan. We’re going to, you know, do these improvements move revenue this much, boost noi this much and then we’re going to sell at this terminal cap rate.
[17:17] Now they see that terminal cap rate is no longer in market and are either going to execute perfectly on the business plan and break even or even execute on the business plan and, and lose a bit.
[17:29] Are you guys seeing any of that or are you a part of any of it on some of your legacy deals?
[17:35] Mark Roppolo: Well, I think from what we’re seeing is often they’re not executing on the,
[17:41] you know I spoke earlier that in general the space markets are pretty healthy but in most of these cases those were kind of repositioning plays and they’re somewhat in distress because of the amount of product that was delivered on the, on the valuation.
[17:56] So they may have been, you know, the deal worked at 95 occupied economic but it doesn’t work really at 88% with rents that didn’t grow to meet those, you know, that underwriting.
[18:08] So that’s where you’re seeing deals that you know that are not trading even for debt value.
[18:14] And I think the lenders are just extending.
[18:17] They certainly they have a decent asset. They don’t want to take a write down right now.
[18:22] So that’s pretty common.
[18:25] From what we see on the multi side which is such a large asset class in today’s world,
[18:35] how long do.
[18:35] Kevin Choquette: You think that persists? Do you think the Lenders will ride with these assets long enough that the markets stabilize and we get a little bit of rent appreciation and then they’re able to refinance out and what could have been a troubled loan or a credit impairment becomes like a whole loan.
[18:52] They sell it.
[18:53] They don’t, maybe they just get a refi, they don’t even sell it at par. They just refi out and you know, everybody gets to keep playing.
[18:59] Mark Roppolo: Yeah, I think that’s their,
[19:02] that’s what their expectations are. I, I,
[19:05] you know, I think one thing I’ve learned from the previous two downturns is that this stuff generally takes a little longer to work through the system than you,
[19:15] you’re,
[19:16] you want to think.
[19:18] And this one, certainly this, this capital markets adjustment is playing out and similarly where this is taking while longer to flush that product through.
[19:30] Kevin Choquette: I think that’s especially true when you’ve got so many non regulated lenders that you know, aren’t facing the brow beating of the FDIC and other regulatory bodies telling them you need to write this down and sort of move on.
[19:48] Mark Roppolo: Yeah, that’s right. A couple of these cases I’m thinking of were certainly debt fund.
[19:53] Kevin Choquette: So real estate is a big portion. Oil and gas I know is another portion of what you guys do. We’ll probably leave that alone because it’s kind of not germane to what you and I get to discuss on a regular basis and the space I’m in.
[20:09] But where are you guys currently investing? I mean you mentioned this office deal which sounds super compelling, but where else are you guys looking to deploy dollars?
[20:17] Mark Roppolo: Yeah, we,
[20:18] we had,
[20:20] we initiated two multif family developments that were kind of unique opportunities. One was in a market that we had been involved with and had previous success.
[20:32] You know, started in 2019, sold in 21.
[20:35] We had a site that was teed up to do a, another investment.
[20:40] We thought it was the best site remaining in the market. We, we created it or our partners created it. The land,
[20:50] the land partners were contributing it into the development partnership and it was rezoned and then due to some protests within the community and appeals, it went all the way to the state supreme court before that that rezoning was upheld.
[21:07] So that was a deal we had been involved with since 2021. We finally kicked that off and in first quarter of 22 of 25. Okay.
[21:19] So you know,
[21:21] we think that when we deliver in two years that you know, the market will have the existing product or the new product will absorb nobody else will be able to develop in the meantime.
[21:34] And we’ll deliver into a healthy market with a great product.
[21:39] In a similar story,
[21:42] we did another one in a little bit of a tertiary market to Dallas,
[21:48] but has very little new pipeline.
[21:50] We were able to underwrite based on a deal that delivered May of 24 and leased up and you know, record fashion at rents above what we needed to underwrite to get a very compelling return on cost that,
[22:09] you know, that’s being a little bit contrarian to be.
[22:12] Kevin Choquette: Doing development right now. Yeah.
[22:14] Mark Roppolo: And you know,
[22:17] where, you know, you got to look ahead and you got to feel like that these markets are going to continue to absorb and get real comfortable on what the remaining,
[22:27] you know, with a pipeline, existing pipeline and potential pipeline that you could compete with.
[22:33] In both cases, we did, you know, exhaustive due diligence and got comfortable with that.
[22:39] Kevin Choquette: The first One you mentioned, Q1, 20, 25, the second phase of projects you’d previously been invested in. How did you guys approach that in terms of either a cap on cost relative to what you think the terminal value cap rate is and that spread, or if you.
[22:59] About Treasuries versus the, the unchanted cap on cost of the asset, like what kind of a spread were you looking for to justify Q1, 20, 25? You know, let’s put a shovel in the ground.
[23:11] Mark Roppolo: Yeah. So, you know, you got to get comfortable on kind of all the, all the different metrics, you know, certainly what the unturned return on cost is,
[23:18] what the price per unit,
[23:21] you know, is projected to be,
[23:24] you know, relative to existing comps in the market.
[23:29] Certainly,
[23:30] you know, we, we’ve got to have,
[23:33] you know, a premium to Treasuries or, or,
[23:36] you know, you will get the rent growth but over time.
[23:39] But why would you take that risk to do it if you could just get it in Treasuries? And so we, we see that of course, we’ve got,
[23:49] that’s what we do.
[23:50] And,
[23:52] and so in both the cases, these were well above Treasuries and they were compelling.
[23:57] Not, I would say they were compelling in today’s market and I would say they were compelling in kind of a normalized market as well.
[24:02] Kevin Choquette: Okay.
[24:03] Mark Roppolo: Without, without projecting, you know, trend, trended rents.
[24:07] Kevin Choquette: So does that, like if, if I know that all of these things are multifaceted, I’m trying to pin you on one metric which is in some ways unfair, but just for the benefit of clarity.
[24:20] 125 basis point spread to the sale cap rate. 150 basis point spread to the sale cap. Like what kind of, kind of litmus tests might in a Basis matters, leverage matters, market matters, you know, all that.
[24:32] Mark Roppolo: Yeah, absolutely. Yeah, absolutely.
[24:35] We find cap rates can be a little bit kind of muddied given that you’ve got is add on taxes on your property taxes adjusted which are, which are very significant in most of the markets we play.
[24:47] Or is that not tax adjusted.
[24:50] And so we,
[24:52] we certainly will focus there.
[24:55] But if you would say Dallas today is trading new product is trading at say a 475 cap which we wouldn’t do and we find that,
[25:07] you know,
[25:08] not appealing to us.
[25:11] Well, this is a market outside of Dallas so it needs to have at least a 50 basis point premium. So you’re at five and a quarter.
[25:17] Well,
[25:18] if we can deliver for in this case since we’re in a tertiary market,
[25:22] at least 200 basis point spread to that,
[25:25] then we’re pretty protected.
[25:27] In this case we were well above that.
[25:29] Kevin Choquette: Wow. Seven and a quarter cap on cost above yours. Above seven and a quarter?
[25:35] Mark Roppolo: Yeah, we were actually above seven and a quarter. And that’s you know, based on rents that you could point right to.
[25:43] You know we had a GMAX contract of course that we ended up having savings in from the buyout.
[25:50] But you know we’re,
[25:52] we are in,
[25:54] you know, a tertiary market.
[25:57] So there needs to be a premium today.
[25:59] Kevin Choquette: Right. Because you would perceive less liquidity on the, on the tail end of the investment.
[26:06] Mark Roppolo: That’s right.
[26:06] Kevin Choquette: And perhaps potentially, yeah, and perhaps a little bit more fragility in the economy and the demand drivers and stuff like that.
[26:13] Mark Roppolo: But one of the things that’s,
[26:16] you know, helps us is that we invest and each deal we is capitalized individually and so we can,
[26:26] we can capitalize a deal and hold it to what presents the best opportunity for the investment.
[26:34] We’re not, we’re not driven by some kind of fund constraint either to deploy money or to harvest money.
[26:41] Kevin Choquette: Why do you guys do that? Why? I mean like I probably could make a guess but you know the fun business in a lot of ways seems quite attractive. You circle up 150 million or $500 million, you take a couple points on an annual basis for managing it.
[26:56] You liquidate the fund in five to seven years. Whatever you make over baseline return to the investors you keep 20% of and you know, you do it again. Like that’s a huge.
[27:06] Mark Roppolo: I think there.
[27:07] Yeah, no, certainly it’s, it is.
[27:11] And we do have a small, a fund that we use for small, smaller investments, say 2 to 4 million which we can speak to. But there are several Reasons one,
[27:24] we as individuals, you know, and partners in the firm. And then, and then as importantly, or more importantly for our investors,
[27:33] we want them to have the discretion whether they want to do a deal or not.
[27:36] Many people don’t want to be in a blind pool kind of situation.
[27:41] And I think that’s playing out more and more as people have hangovers from deals they were in or funds they were in that were initiated at peak market and they’re having to work through it and they’re getting unexpected capital calls and they’re getting stretched for deals that, you know,
[28:01] are underwater.
[28:02] So I think that’s first and foremost on the, on the small balance. We have a deal we, we started for small balance opportunities that we do some debt within that and then we, we have closed three small single tenant industrial buildings and then one small multifamily deal that those don’t make sense from a cost basis,
[28:28] from a cost to the opportunity for compliance, getting K1s, getting audits,
[28:37] the closing cost involved to do those on a standalone basis, just all.
[28:41] Kevin Choquette: The friction of a, of a standalone syndication, single purpose, ent, et cetera, et cetera.
[28:47] Mark Roppolo: Yeah. And then we have a hard time,
[28:49] you know, allocating that appropriately among our investors. You know, a $4 million deal,
[28:55] we would have, you know, we’d be way oversubscribed. And then how do we tell people no, manage that? Yeah.
[29:02] Kevin Choquette: So one of the reasons I wanted to get you on the podcast is,
[29:07] you know, they’re kind of very distinct players in the capital markets side, especially on the equity side. And a lot of people have this love affair with the idea of a family office or a ultra high net individual who is behind the family office.
[29:25] The space that you play in.
[29:27] You know, you just sort of mentioned going shovel in the ground. Q1 2025 is, is very much a contrarian play.
[29:36] You’re in this kind of hybrid registered investment advisor.
[29:41] Um,
[29:42] at least that’s part of the backing that, that allows HFS Capital Partners to access some equity. It sounds like you also have,
[29:50] you know, long term, whether they’re institutional or high net strategic relationships. So you can subscribe these things quickly because you’re giving people discretion.
[30:00] But how do you think about the nature of your firm vis a vis like Goldman Sachs or you know, Cross Harbor? Name, name your institutional capital all who has largely been absent from the multifamily development space.
[30:16] You guys aren’t a family office. You’re not an institutional fund capital allocator. You’re somewhere in the middle. How do you think about the Opportunities and challenges that presents you relative to the competition.
[30:31] Mark Roppolo: Yeah, so previously in my career I was in,
[30:34] within the institutional space, the pension fund advisor.
[30:38] And you know, as I got a little longer in the tooth, I no longer wanted to be kind of in that,
[30:45] that world, which is a great world, but I wanted to be a little bit,
[30:50] have a little more discretion and a little more nimble and, and you know, not want to be,
[30:56] you know, mandated by consultants and you know, kind of fun timing that kind of pushes you to do one thing or another.
[31:05] So I,
[31:06] we are,
[31:08] you know, very unlike any of the, of the ones you mentioned.
[31:14] We only invest when,
[31:16] when we, you know, find a very compelling opportunity that we have no mandates that says we need to invest X millions per year or X billion per year.
[31:27] And so, and you know,
[31:30] 23 and 24, there’s about a 24 month period where we probably did,
[31:35] you know,
[31:36] two small deals.
[31:39] And so that gave us the, you know, we had a pretty,
[31:43] some dry, dry powder and you know, our investors,
[31:48] you know,
[31:49] were appreciative that we were disciplined and staying on the sidelines. And so it gives you the,
[31:56] you know, the opportunities. Want to be a little bit contrarian now. We’re, you know, we’re,
[32:01] we’re not going to be the biggest by any means.
[32:06] I would say that we look to our, to our partners, to our, our operating partners. We look and act as far as they’re concerned,
[32:15] very similar to a,
[32:16] a family office.
[32:18] We come in as one partnership. It’s a, there’s an ease there.
[32:22] We’ve never had a failed capitalization and 70 something deals.
[32:27] So it’s pre efficient for them.
[32:32] And then,
[32:33] you know, we’re not relying on any single investor.
[32:37] Kevin Choquette: You’ve got, you’ve got a big enough pool that when you guys go out, it’s not a challenge to get it subscribed.
[32:42] Mark Roppolo: I wouldn’t say it might not, you know,
[32:45] it might be, it might require a little bit more work on our part. But we certainly aren’t going to go into something that we don’t feel like as well within our capacity to capitalize.
[32:55] Kevin Choquette: And right when we started you said something about ascertaining the suitability of your investor for the deal.
[33:03] So, you know,
[33:05] I’ll be the wrong investor, right.
[33:09] I’m worth,
[33:11] let’s just say $1.1 million and I want to put $300,000 in your deal and I want to be out in 20.
[33:20] Right.
[33:22] How do you guys go about just making sure that you’ve got people who understand your ethos, the sort of risks that are incumbent with the deal and aren’t going to become a plaintiff or a fly in the ointment as the inevitable unfolds, whether it’s, you know, downside variance or a surprise to the upside or a little bit more duration or,
[33:43] you know, I mean, there are things in real estate that happen. How do you make sure you’ve got the right people?
[33:47] Mark Roppolo: Yeah,
[33:48] so one, they have to be an accredited investor.
[33:52] And,
[33:54] you know, these are relationships.
[33:58] And there is a,
[34:01] you know, a trust that’s earned over time.
[34:05] That.
[34:06] And there’s conversations. And so I would say that it’s.
[34:10] I’m not as involved on that side of it,
[34:15] but I think it’s more common that we might peel or decrease an investor’s appetite than,
[34:22] you know, than try to push them to do more.
[34:25] You know,
[34:26] that’s not. Our role is to try to, you know, push somebody into an investment. Our role is to offer a compelling opportunity,
[34:34] explain to them why we think it’s compelling,
[34:36] and then let them make the decision.
[34:39] If they’re a client of the firm, the wealth management firm, then they certainly have a dedicated financial advisor that looks after their total portfolio and can look at everything holistically.
[34:53] Kevin Choquette: Larry Fink, I think at some point in 2025,
[34:57] came out and he tends to be kind of one of these bellwether things where when guys like that make these kind of pronouncements, it tends to move things. But I guess the traditional wealth management model would be 60, 40 stocks and bonds.
[35:13] And Larry came out saying it’s not 60, 40 anymore. It’s 50, 30, 20 stocks, bonds and alts, alternative investments, of which a portion of that would go to real estate.
[35:26] And I think Trump just came out with this executive order saying that 401 s ought to be able to get access to alternatives. Are you guys seeing that trend impacting your business at all?
[35:41] Is it a part of what you’re up to or is it business as usual?
[35:45] And that stuff is sort of on the periphery. I’m curious about how you, how you guys think about that.
[35:51] Mark Roppolo: I think it’s on the periphery for now.
[35:52] Kevin Choquette: Okay.
[35:54] Yeah. It seems to me there’s still a bunch of capital that wants to get into real estate with statements like that. And, you know, the oil and natural gas business that you guys are in and other private equity plays,
[36:06] I think there’s going to be a lot of allocation from that individual investor. I think there’s like $19 trillion in that bucket getting siphoned off and pushed into Alternatives, but I don’t know.
[36:21] Have you been tracking that at all?
[36:23] Mark Roppolo: I have. And when you look at some of these gigantic,
[36:26] you know, funds,
[36:28] you understand why they would like to open up that,
[36:32] that vehicle and you knowing from,
[36:37] you know, high net wealth investors,
[36:39] why they’d want to have those opportunities.
[36:42] So I think that there’s,
[36:44] you know, there’s an interest or a,
[36:47] some forces pushing from both the investor side and from the,
[36:52] the individual investor and certainly from the,
[36:54] the fund manager side,
[36:56] the sponsor side on, on this making these changes.
[37:02] You know, if anything, it’s certainly just gonna increase the multiples and drive down,
[37:10] you know, yields on, on places in which they’ll, they’ll invest.
[37:14] Kevin Choquette: Yeah, it could be good for anybody who’s already in. Right?
[37:19] Mark Roppolo: Yeah.
[37:21] Kevin Choquette: I just want to switch a little bit the,
[37:24] you know, my view of HFS as a capital allocator, the long standing relationships notwithstanding, is that you might invest in.
[37:35] Well, certainly within the fund that you just referenced, where you might put out 2 to $4 million, you know, you’re likely to be with a more boutique operation.
[37:43] But even in some of the other deals you’re doing,
[37:46] you know, they’re not 50 or $100 million equity checks.
[37:50] And so you’re probably by definition playing again with kind of a boutique operator.
[37:57] I’m curious how you guys run diligence and think about making sure you’ve got the right operating partner.
[38:05] Especially on a new relationship when that partner might have three to five employees or you know, total headcount.
[38:14] I think that’s got the opportunity to provide really exceptional returns because they are small and focused and nimble, but also could be hard to figure out.
[38:24] Are these guys bonafide?
[38:26] Mark Roppolo: That’s right. Yeah. So, you know, on our normal deal side, which is a, you know,
[38:32] those we look for investments are kind of forward up 15 million. There’s no hard, hard or fast about that. It can be, you know, we have done a little bit larger.
[38:41] We have brought sidecar investors alongside us if it, if a deal, we like a deal a lot and it exceeds our capacity,
[38:50] but that’s the normal bucket in which we play. And so yes, we do have some smaller boutique, you know, sponsors and you know,
[39:01] it relationships you form, you certainly due diligence with back due diligence them with background checks.
[39:10] You know, you want to know that they have a history of performing within that asset type,
[39:17] within the business plan that they’re proposing and with some experience and relationships in the market in which they want to play in.
[39:27] If you can diligence that by their history.
[39:31] And then,
[39:31] you know, we certainly would never invest with anybody who has any kind of blights within how they treat their investors or any kind of,
[39:42] you know,
[39:44] legal financial misrepresentations.
[39:48] Life’s too short to, to get into a deal with any, anybody with that kind of record.
[39:53] Kevin Choquette: The track record. I get relationships. What are you looking for in that side? Just that they have kind of the appropriate professional network around them.
[40:03] Mark Roppolo: That’s right. Yeah.
[40:05] And you know,
[40:09] certainly the case that you use, they’re going to use third party management.
[40:13] We, I, I had an operating background previously. You certainly can. Due diligence not only, not only the firm, which those are, you know, there’s certainly the mayor, major players,
[40:25] the property management and leasing side,
[40:27] but also the individual team, which we all know it comes down to the individual people that are going to be working on your, your project.
[40:36] Kevin Choquette: I’m curious, in the space that you guys are in,
[40:40] it sounds, I mean,
[40:41] it’s awesome. You get to sort of go, yeah, and we just bought a 20 cap. I’m sure that doesn’t happen every year.
[40:47] Mark Roppolo: I think that that’s the singular one in all of our deal history. We can be upfront about that.
[40:53] Kevin Choquette: The one and only.
[40:54] But what do you think it takes to be amongst the best? I mean you’re, I think you’re spelling some of it out already in terms of being,
[41:02] being opportunistic, being okay with perhaps doing two deals when it’s not the right time.
[41:08] But what, what else do you think makes it so you guys can provide, you know, what you talked about at the, at the beginning, appropriate risk adjusted or, or attractive risk adjusted returns?
[41:19] Yeah.
[41:20] Mark Roppolo: You know, I think we try to be a very good capital partner to our, our partners.
[41:26] You know, if, if there’s something that needs our help,
[41:30] we’re ready to roll up the sleeves and work through any issues.
[41:35] We have the ability to stay,
[41:36] you know, after a property and, and help from strategic, from a strategic standpoint, from a structuring standpoint and from a financial standpoint. So we’re going to do what’s right for the investment if,
[41:50] if it needs more help.
[41:53] We’re,
[41:54] you know, there are some deals where we may only get, you know, monthly financials and a quarterly report and we make talk on a quarterly basis and, and just to say hi and everything’s operating, you know, as expected and there’s not much to do and there’s other deals which we need to talk,
[42:13] you know, almost on a daily basis and we’re available to do and we’ll certainly do whatever is needed to maximize, you know, our investment and our opportunity for our partners.
[42:27] I think, you know, you’ve got to understand what the partners, what the operating partner wants and you know,
[42:35] from you know,
[42:38] their risk standpoint, from their profit standpoint, from their whole,
[42:42] you know, agenda and you know, have a, have a strong alignment from the start just on what the story is, what the expectations are and then certainly on how you structure towards that and then you just have to be flexible along the way.
[42:59] As you know. No, very few deals happen exactly as performant.
[43:06] Kevin Choquette: You had mentioned previously that you guys can be flexible on duration.
[43:11] If it’s the case that the value creation portion of a business plan could be just on the front end. Let’s go back to your 2 parcel office complex, the low rise and the mid rise where now you’re 90 plus percent leased.
[43:31] Once you burn through,
[43:33] probably free rent and TIS and you know, get the release role on the lower, lower level building and, and that thing stabilized. You could argue that the value creation’s done.
[43:46] But your operating partner might have an attitude that double digit tax advantaged yield is something to be held for duration as opposed to ringing the cash register,
[44:01] making a grip load of, of gain,
[44:04] paying taxes and then having to go find another deal.
[44:06] Are you guys ever able to accommodate a longer term hold with your sponsors?
[44:14] Mark Roppolo: Yeah, we have some that we’ve,
[44:17] it’s certainly if you go into one knowing that that’s the likelihood you can capitalize it towards that and we can communicate with our investors and we have all to have that expectation.
[44:31] So we have one like that right now at Retail Power Center. We bought for,
[44:36] you know, at the end of maybe 2016 or 17. It was a REIT that was, had an agenda to get out of middle markets and go towards gateway markets. So they were selling deals in the nines and buying deals in the sevens and we put long term debt on that.
[44:59] We recently refi’d out of that debt and now we’re selling off a parcel and distributing, you know,
[45:06] additional monies towards that.
[45:09] So that’s the best case on a kind of a hold period where it’s a longer hold period.
[45:16] But if we certainly,
[45:18] you know, we would rather take our profits early and, and maybe leave a little bit on the table.
[45:24] You know, pigs get fat, hogs get slaughtered.
[45:27] But we are,
[45:31] we communicate with our investors, with our partners and try to find what’s optimal for, for both parties.
[45:38] Of course you have in the end if there’s a disagreement and there’s a Buy, sell, provision and you just kind of work through that. I,
[45:45] I don’t think that we’ve ever pulled out docs and gone into any kind of,
[45:51] you know, formal discussion on anything that’s really in the partnership documents.
[45:57] Kevin Choquette: When you go on those rare occasions for a bit more duration.
[46:02] Do you have a mechanism to reform the structure of say accumulating preferred returns and the waterfall and things like that so that the gp, you know, operating partner is able to participate in cash flows and not forever be subordinate to an accruing pref or how have you, how have you managed where you know,
[46:27] past that first three years of value creation they can begin to be more,
[46:35] I don’t know of an equal owner as opposed to.
[46:38] Mark Roppolo: Yeah, yeah.
[46:39] So we certainly have, you know, we have not done many deals that are our long term holds, you know, from the outset.
[46:47] So you know, and, but every deal,
[46:50] you know,
[46:52] we’re flexible on the, on the structure and, and how those things work. We certainly get it from their standpoint that they, you know,
[47:00] so in this case,
[47:02] you know,
[47:03] you’re kind of presenting in which they’re wanting to stay in the investment longer term so you know,
[47:12] they have more upside. I don’t, you know,
[47:14] we’re not going to cut a deal after the fact,
[47:18] you know, to stay in it longer term.
[47:20] Kevin Choquette: Right. It should be upfront clear. This is, this is the strategy, this is the timeline and if we’re going to accommodate that, we’ll do it now, but not, not once the sort of paint is dried.
[47:30] Mark Roppolo: Yeah, we’ve already communicated to our investors what the structure and the plan. So that would be a little bit of field.
[47:37] Kevin Choquette: Yep.
[47:38] Mark Roppolo: Cool.
[47:39] Kevin Choquette: That’s all great color.
[47:41] One last question on sort of the nuts and bolts of your business.
[47:44] How much of the analysis that goes into the attractiveness of an investment is done pre tax or post tax? Is the tax in the post tax returns of the investors part of it or is there too much complexity in all of the different sort of taxes?
[48:04] You know, every taxed individual has a different fact pattern and their tax consequences are different. So do you just leave that out or do you try to incorporate it into the analysis?
[48:15] Mark Roppolo: Well, so the firm had its genesis in from a tax accounting business. So I would say they’re extremely tax savvy.
[48:22] Kevin Choquette: Okay.
[48:24] Mark Roppolo: But we do not want the tax implications to drive any kind of real estate related decisions or to, to justify the worthiness of an investment.
[48:36] The deal need to work, needs to work outside of kind of any tax treatment.
[48:42] But we do optimize any kind of the tax implications.
[48:48] Kevin Choquette: Cool, Got it. So let’s switch a little bit.
[48:52] That’s all great. And I, you know, I hope people can hear.
[48:56] I love your space. Right. In my world,
[48:59] looking for equity capital,
[49:02] if I’m talking to a fund out of New York or something like that,
[49:06] I can call one and get the answer. And if I call 50 others, it’s almost certainly the same answer. Like there’s a few,
[49:14] there’s a little bit of dispersion around the mean. But generally that herd all moves together.
[49:20] The family offices can be truly contrarian because they can invest for a different duration. And I think of you guys is kind of a hybrid, right, where you’re independently minded,
[49:31] you make investment decisions on a case by case basis based on the merits of the deal and also the macro.
[49:40] And I think that’s just hugely valuable because there’s more independence, right. There’s more autonomy, there’s more discretion. You just articulated moving in a contrarian way to the market. And you know, to me you guys are,
[49:56] I also think you’re the future. This sort of ria,
[50:01] you know, tapping into the demand for alts and, and sort of allocating into this space. But I love the space you guys occupy. I think it’s really intelligent.
[50:10] Mark Roppolo: Oh, thank you. I appreciate it and certainly enjoy it as well.
[50:15] Kevin Choquette: So let’s switch to the personal side. Like how, how did you.
[50:18] I know a little bit of your background. We’ve talked about,
[50:21] you know, some of your academic and post academic pursuits. But how. What brought you here? How did you get into,
[50:28] you know, from, from college, which I think is a story on its own.
[50:32] How’d you get here? Like, what’s that? What’s that journey?
[50:36] Mark Roppolo: Yeah.
[50:37] No, no two people are or journeys are the same.
[50:41] So I grew up in Dallas,
[50:44] went away to school thinking Dallas was the only place in the world.
[50:48] Was fortunate to go to the Naval Academy right in the post Top Gun era and form some great lifelong bonds and was a formative experience.
[51:02] I studied economics there and then flew helicopters off of cruisers and destroyers in the kind of the. In between the two Gulf Wars.
[51:15] Met a wonderful woman in San Diego, got married, now have four kids, which we just shipped our last off to college.
[51:24] So it’s a new phase for us.
[51:27] But I went to business school at University of Texas Hook em Horns as I was getting out and had a Navy colleague who was at McKenzie.
[51:40] And so I thought that’s the world I want to go to. That’s kind of what little I knew.
[51:46] And then the world had other Designs for me is kind of that post.com 911 blow up.
[51:54] I kind of reevaluated what was important to me and what I thought I could be good at. And I had no real specific skills besides flying helicopters and,
[52:06] and managing, leading, you know,
[52:09] teams.
[52:11] But I was pretty cross functional. You know, I knew a little bit of engineering, I knew a little bit of equipment, I knew a little bit of finance from business school.
[52:20] I certainly had some economics background and I thought real estate would be a space in which I could find my way around.
[52:28] And certainly in Dallas there’s just a incredibly rich history and tradition and talent pool coming out of the Trammel Crow,
[52:39] you know,
[52:40] the empire.
[52:42] And so I just kind of found my way into it.
[52:44] Kevin Choquette: Did somebody, I mean, you mentioned like the McKinsey relationship and that having some influence, which, you know, you didn’t go in that direction. But was there somebody that sparks your curiosity on the commercial real estate side or was it sort of independent?
[53:00] Mark Roppolo: You know, there was a couple,
[53:02] a couple classmates that had preceded me that were in real estate and they kind of teed it up and said, hey, you ought to think about it.
[53:11] And then, you know, certainly I had always admired Roger Staubach. It was part of an inspiration to go into Naval Academy. And so he certainly had a great run in real estate.
[53:22] And um,
[53:24] so I would say that,
[53:26] you know, I guess a little bit of the Navy connection. Although there’s not that many Naval Academy grads in real estate, but some of them were influences.
[53:35] Kevin Choquette: And so you come out, you were, what was it, nine years in the Navy?
[53:41] Mark Roppolo: That’s right. Active duty for nine years.
[53:43] Kevin Choquette: Okay.
[53:45] Where, what was, what’s the trajectory, you know, for like you don’t have to go through all the deals, but I know you’ve had a lot of different roles in a bunch of different commercial real estate firms to end up here.
[53:55] I think you.
[53:56] How long have you been with HFS now?
[53:59] Mark Roppolo: Almost nine years.
[54:00] Kevin Choquette: Okay. Yeah. So what’s the, the, the abridged version of all right to Annapolis? I was a helicopter pilot and then ding, ding, ding.
[54:08] Mark Roppolo: Sure.
[54:09] I did this.
[54:10] I started in a stent in the multi family world and we had a development arm and then an acquisitions arm and student housing arm and then we had a construction.
[54:20] So that was pretty informative.
[54:22] It was a tough time. I remember we had assets in Atlanta where we were giving three free months on a 13 month lease. Oh, wow,
[54:31] you can do the math. And I didn’t need to do much math or figured out this is this thing’s Losing money.
[54:37] And so I did that for my intro and then I went with a pension fund advisor where I learned kind of the institutional world in the office and retail space,
[54:49] the acquisitions, asset management kind of went through the GFC there,
[54:55] got to work with some great people and on some interesting assets and some good, good investors.
[55:05] From there I followed what had been the head, head investor of that firm to an office value add fund manager.
[55:17] And I learned that 1980s value add office in suburbs was a really hard way to make money when you had negative, you know, leases,
[55:34] you know, as you’re buying tenants.
[55:36] So that was a pretty educational formation. But I got to work on some great assets and that,
[55:42] that gave me the experience to go run a trophy asset in downtown Dallas that was getting repositioned and that was for a very large institutional investor and,
[55:56] and some other large portfolios for an operating partner who was very talented guy and, and I learned a ton from him.
[56:06] We sold out the large chunk of the portfolio, the, the trophy office, the an area called the design district of Dallas, which was 800, 000ft of,
[56:17] of a repositioned real estate on a. That terminal crow started back in the 50s and 60s.
[56:26] We sold that and we sold a couple other assets and, and I wanted to transition. I thought somebody had said, hey, you’ve got a background that could be interesting to,
[56:38] you know, a group that acts and looks like a family office because you have the operating experience,
[56:45] you have the underwriting and acquisition experience,
[56:48] and you’ve kind of touched every asset class.
[56:51] And somebody made me the introduction to hfs and that’s how we got together.
[56:57] Kevin Choquette: Cool.
[56:58] Mark Roppolo: The pension, they had, they had had good success without me.
[57:03] Kevin Choquette: And.
[57:06] Mark Roppolo: And so I was able to, you know, kind of just join them and add to what, what they were doing.
[57:12] Kevin Choquette: The pension fund advisory space. Who are you between the pension fund is the client and you’re talking to the fund sponsors.
[57:22] Mark Roppolo: So we were, we had the direct relationship with the pension funds. We had CalSTRS, Ohio Public, Oregon, Stanford, University of California Regents.
[57:32] Kevin Choquette: You’re advising them on then portfolio compensation and allocation into different operators or different funds or what did that.
[57:39] Mark Roppolo: No, we were buying assets directly for them.
[57:41] Kevin Choquette: Oh, wow. Okay. Just going direct onto their balance sheet.
[57:44] Mark Roppolo: Yeah, we had, we had separate accounts.
[57:46] Kevin Choquette: Okay, that’s an interesting role.
[57:49] Mark Roppolo: Yeah, we had, we did have some fund, but the majority of that was done through separate accounts.
[57:55] Kevin Choquette: Wow. And so those were, they’re often there.
[57:59] Mark Roppolo: There could have been a Townsend or a Cambridge or another consultancy that was,
[58:05] you know, involved. But we reported directly in Most cases to the,
[58:10] you know, to the pension fund.
[58:12] Kevin Choquette: That was like core assets or core plus assets that are just sort of bolting down the, the almost annuity portion of their portfolios.
[58:22] Mark Roppolo: Yeah, there was a mix between, you know, kind of the, the risk spectrum, but there certainly was a core component.
[58:29] And we did have some, some value add. We did have some development allocations,
[58:36] depending on the client.
[58:37] Kevin Choquette: What was your role there? Were you acquisitions or were you.
[58:40] Mark Roppolo: What.
[58:41] Kevin Choquette: What did you do there?
[58:43] Mark Roppolo: I did both acquisitions and asset management.
[58:45] Kevin Choquette: Okay.
[58:46] Mark Roppolo: Certainly when the GFC came along, every acquisition person became an asset manager. That’s right.
[58:54] Kevin Choquette: Well, you bought this stuff. Go figure out how to fix it.
[58:57] Mark Roppolo: Yeah, yeah.
[58:58] Kevin Choquette: And then the value add office fund, you said something about negative leases, which I hear that as by the time you get done paying TIs and leasing commissions, you’d given away so much of the pro forma revenue that you’re not really,
[59:15] you’re not really making any money.
[59:17] Mark Roppolo: Yeah, that’s right.
[59:18] Kevin Choquette: Yeah.
[59:19] Mark Roppolo: You know,
[59:20] this is to get it from say 70% to 80% or the hope was that you made your money going from,
[59:29] you know, 85 to,
[59:30] to 95%. But that’s very seldom the case, especially in the markets in which we played, which were Dallas, Houston,
[59:39] Atlanta and some of the other southern markets.
[59:45] Kevin Choquette: I should have brought it up that we don’t have to follow any particular order, but in my mind there’s dissonance here. It doesn’t matter.
[59:51] The team at hfs,
[59:53] what does that look like? How many people are on your side?
[59:57] Which is to say we underwrite,
[01:00:01] we structure,
[01:00:03] we offer on LP equity investments, and then, you know, we deploy capital,
[01:00:09] manage the partnership, manage the asset,
[01:00:12] hold it through for a redemption and recycle the funds. How many people are on that side of the business?
[01:00:18] Mark Roppolo: I mean, we’re extremely lean in that most of the work is done by our operating partners.
[01:00:25] So there’s myself, who’s,
[01:00:28] you know, often finding the opportunities and presenting them, underwriting them.
[01:00:34] Stephen Howard,
[01:00:36] who oversees all of our private equity and investment opportunities.
[01:00:41] And then we have an analyst. So,
[01:00:44] and then Stephen’s brother John oversees the entire firm. So he certainly weighs in on any, on kind of any allocation approval,
[01:00:56] any capital events.
[01:00:59] So it’s really three that have kind of a voice in real estate opportunity. We’re not real formal in that. We have an investment committee that meets every Monday morning and you have to put your package together by Thursday night.
[01:01:18] And then,
[01:01:19] you know, present it’s. We get together on an as needed basis, which is sometimes multiple times a day, and sometimes it’s, you know, every three or four days.
[01:01:28] Kevin Choquette: And, and you guys have done like 70 deals with that.
[01:01:32] Mark Roppolo: I, I have, I, I don’t have the, the. Yeah, it’s over 70.
[01:01:37] Kevin Choquette: I love it. That’s awesome.
[01:01:40] Mark Roppolo: Yeah, I, I should know that a lot.
[01:01:45] Kevin Choquette: The, the leverage of deploying capital into real estate, I mean, that’s,
[01:01:49] that’s exactly how I, I think that’s how it should be. If you were to compare that, I bet, to the pension fund advisory and the headcount that was required to move those dollars,
[01:01:57] I think you probably have a better model.
[01:02:00] Mark Roppolo: Yeah. But, you know, I would say we,
[01:02:02] you know, we don’t have the friction which is necessary when you’re moving that much money in the large institutions. And,
[01:02:11] but we,
[01:02:12] we do have,
[01:02:13] you know, the same level of,
[01:02:16] of due diligence and, and,
[01:02:18] you know,
[01:02:19] certainly all of our major assumptions are scrutinized. You know,
[01:02:24] I personally, when I’m underwriting a deal,
[01:02:27] will call all the competition and shop them.
[01:02:31] You know,
[01:02:33] that discipline that came from being in the institutional world, we, we follow it just in a little less,
[01:02:40] you know,
[01:02:41] formal manner that you would expect from those larger institutions.
[01:02:47] Kevin Choquette: When you look back through the pension fund side or that value add office fund or working on the portfolio with the operating partner.
[01:03:00] And I guess there was that trophy asset as well.
[01:03:03] Anybody standout or even perhaps in your Navy days or even your schooling,
[01:03:09] influential mentors who have kind of helped shape your thinking around,
[01:03:15] not necessarily just business, but kind of how you’re approaching what you do.
[01:03:20] Mark Roppolo: Yeah, I’d say, you know, there’s a number of them certainly,
[01:03:23] you know, I’m proud of my Navy classmates. And,
[01:03:29] and while that’s not necessarily a direct relationship in, in real estate, there’s often a support and an accountability that you have from those relationships.
[01:03:41] And if I can’t explain it to one of them, then,
[01:03:46] then something’s wrong.
[01:03:48] Kevin Choquette: That’s cool.
[01:03:50] Mark Roppolo: So I have a good deal of that.
[01:03:53] You know, I, I have,
[01:03:55] I think I have relationships across all the different functions of the real estate world.
[01:04:00] Attorneys to construction to architects to engineers,
[01:04:04] leasing.
[01:04:06] And so, you know, you kind of tap into those,
[01:04:09] you know, as, as you need,
[01:04:13] you know, for coming from the operating side. You know, everything really starts with the land and then it starts with the, and then leasing.
[01:04:22] And you know,
[01:04:24] that is a world into. Both of those are world into themselves. And you’ve got to be well connected there to be able to understand the opportunity.
[01:04:36] Dallas has such a rich real estate community.
[01:04:39] We have a big organization Here called the Real Estate Council, which I’m a member of and have been involved in.
[01:04:45] And,
[01:04:46] you know, it’s extremely collegial.
[01:04:49] You can reach out and,
[01:04:51] you know, introduce yourself for any kind of needs you have.
[01:04:57] Kevin Choquette: SMU is a huge part of that too, isn’t it?
[01:04:59] Mark Roppolo: SMU is an impressive school. It keeps on growing and they do have a great real estate school. I know the, the director of it and the, and the guys that kind of backed it and they just got a new president from the University of Texas, which is, I think, going to carry them on to another,
[01:05:16] another,
[01:05:18] to another level.
[01:05:20] Kevin Choquette: Yeah,
[01:05:21] I, I’ve only heard good things about it, but I want to go back to what you’re saying about your Annapolis peers.
[01:05:27] It sounds to me like I’ll try to keep us off the explicit tag on the podcast,
[01:05:33] but it’s the no BS kind of check. Right. If you can’t call up one of your peers and say, here’s the opportunity, this is what I’m doing.
[01:05:40] What do you think? And have them go like, yeah, that makes perfect sense. You should do that.
[01:05:46] It’s just like, you’ve got a quick reality check with those guys because there’s enough camaraderie there that they’ll call a spade a spade.
[01:05:54] Mark Roppolo: That’s right. There’s a candor.
[01:05:55] Kevin Choquette: Yeah.
[01:05:56] Mark Roppolo: And you know, and that expectation of transparency and accountability.
[01:06:03] Kevin Choquette: So you fly a flag that says, I’ve got capital, which has for sure, people like me who are in the business of seeking people like you out calling and emailing. You mentioned earlier that you might get a hundred emails a day and that this most recent, deal,
[01:06:21] you know, is the one and only 20 cap.
[01:06:23] How do you manage,
[01:06:27] you know, like in a capitalist society, people who have a sign that says I have capital tend to be in high demand. How do you manage the noise that might come along with that and try to find the,
[01:06:44] you know, the needles in the haystack, not be dismissive of people, but also just be respectful of the finite resource that is your time. How do you deal with all that?
[01:06:52] Mark Roppolo: No, I don’t, I don’t know that I’ve,
[01:06:54] I, I, I still have a ways to go there. I, I, if part of,
[01:07:00] I am a,
[01:07:01] you know, in way too many marketing selections by the different, you know, capital markets brokerage teams to where I’ll get stuff that is not germane.
[01:07:14] And I signed up for them wanting to be able to see all the volume.
[01:07:19] We’re, we’re certainly very sponsor driven,
[01:07:22] so that helps us become efficient.
[01:07:26] But There are a number of things that,
[01:07:28] you know, I try to stay directly in touch with and look at and then maybe steer it towards a partner if I find an interesting opportunity. I’d say that’s pretty rare,
[01:07:39] but I don’t, I think it has happened.
[01:07:42] I did find a, a deal last year that,
[01:07:48] you know, was easily something to, I could have dismissed.
[01:07:53] It was just an email that had a,
[01:07:56] you know, had a pretty good subject line and kind of dug into it. And it was a lightly marketed deal that a sponsor had tied up off market, truly off market.
[01:08:07] And it was one of the better risk adjusted,
[01:08:10] you know, pricing.
[01:08:11] The seller had some personal issues,
[01:08:15] was very high net worth and it paid down his loan and we were able to buy it for well, well below what he had bought it for in a great submarket multifamily asset.
[01:08:29] So,
[01:08:30] you know, finding that needle in that haystack, and I wouldn’t say it was,
[01:08:33] it was just by looking at the emails and following up kind of makes you,
[01:08:40] reminds you that you need to, you need to stay diligent and, and you know, I hope I,
[01:08:46] I treat all those that call me well and I, you know, some of them want more candor than, than others.
[01:08:53] Some of them like the candor, some of them don’t.
[01:08:57] But I try to give feedback if they, if they really want it on.
[01:09:03] You know, how I look at a deal and why it’s not appropriate for us.
[01:09:08] You know, we’re seeing a lot of deals getting recycled three or four times, moved on to a different brokerage firm.
[01:09:15] You know,
[01:09:17] there on the market last year, it’s on again.
[01:09:19] So,
[01:09:21] you know, that kind of points in the direction of what’s, you know, where the sentiment is.
[01:09:26] You know, do you want to kind of pick up the falling knife? You know, there’s no perfect answer to that and it’s just trying to stay attuned to what’s going on.
[01:09:36] Kevin Choquette: Do you have the sensation that there’s too many checks? If you’re, if you’re the shorter, short order cook in the back of the kitchen, are there too many checks to be able to sort of handle all of that info or have you found a calm and ability to kind of address?
[01:09:55] Like I said, I, My perspective is if you’re flying a flag that I’ve got capital to allocate, you might, you might be a bit overwhelmed with what we might call inbound leads.
[01:10:05] Mark Roppolo: Yeah, I mean we, we really do not, I’m not trying to, you know, be tried or whatever, but we really do not try to do market deals.
[01:10:12] Kevin Choquette: Uhhuh.
[01:10:14] Mark Roppolo: So, you know, there needs to be,
[01:10:17] we want to make our money on the buy.
[01:10:20] That’s the easiest place to do it in real estate.
[01:10:23] And we know a lot of things can happen, but if you have the right basis, the right, right team up front and then you’ve avoided a lot of downside,
[01:10:33] which is, you know, kind of the job number one.
[01:10:36] And so it’s,
[01:10:38] you know, the,
[01:10:40] like the, the broadly marketed deals we, we do look at. But one of the reasons why I got out of the,
[01:10:46] that pension fund world is everything was done in an auction environment there.
[01:10:50] Kevin Choquette: Yeah.
[01:10:50] Mark Roppolo: And you know, I,
[01:10:52] it was just certainly when you’re in the, when you’re asked to do a fourth round of best and final. Right.
[01:11:03] That’s not compelling.
[01:11:05] And I no longer wanted to be in a world where,
[01:11:09] you know, it was either the lowest cost of capital or the one that, that pushed their assumptions,
[01:11:15] their underwriting to,
[01:11:17] you know,
[01:11:18] further and further from the edge.
[01:11:21] I didn’t want that to drive the investment decisions I was involved with because I had a long experience operating it. And then somebody’s got to go manage it, which often was me,
[01:11:33] and explain why it wasn’t hitting pro forma, you know, three years later.
[01:11:39] Kevin Choquette: Yeah, that fourth best and final is compelling only for the seller. Yeah.
[01:11:43] Mark Roppolo: Right.
[01:11:44] Kevin Choquette: Yeah.
[01:11:46] What about like your more you know, sort of personal side on a day to day basis, what do you do to sharpen the saw? Keep, keep, keep you at your best, you know, sort of.
[01:11:59] You talked about readiness in a military sense previously. But you know, how do you, how do you stay sharp? How do you stay ready for the, the day?
[01:12:09] Mark Roppolo: Yeah, so I,
[01:12:11] you know, get up, check the news,
[01:12:15] got a dog, I walk, I listen to a ton of different podcasts and books and audio that,
[01:12:25] you know, a lot of business oriented ones, but then some stuff out of left field and some tech, technology related ones and historian history.
[01:12:35] And then you know, you get into the office and you have already checked emails once at home or twice.
[01:12:41] And then you get in the office and you just kind of plow in,
[01:12:45] you know, it just depends on the day. No, no, two days are the same.
[01:12:49] But you know,
[01:12:51] try to,
[01:12:52] you know, if, if,
[01:12:54] if you’re not talking on the phone multiple times a day to somebody that’s involved in close to the pointy edge of the spear, then you’re not staying as sharp as you need to be.
[01:13:04] And so,
[01:13:07] you know, doing that,
[01:13:09] breakfasts, coffees, lunches,
[01:13:12] you know, those just keep you top of mind and keep you informed on the.
[01:13:17] The relationships within, the softer side of what’s. How the deals work and how the relationships work.
[01:13:24] And that allows you to often vet a potential partner or call on, you.
[01:13:31] Kevin Choquette: Know.
[01:13:34] Mark Roppolo: Those allow you to explore kind of the softer sides of the relationships which I think make real estate unique.
[01:13:41] Kevin Choquette: I had a gentleman on the podcast a while back,
[01:13:43] Jack Cohen,
[01:13:45] and he built a pretty significant mortgage brokerage,
[01:13:49] mortgage banking business,
[01:13:52] and had this comment that real estate isn’t.
[01:13:56] And in particular my business isn’t a business that you out think, you simply execute it.
[01:14:02] Mark Roppolo: Right.
[01:14:02] Kevin Choquette: Like you get up, you get up, you get in the field and you play the game. And I very much heard you say that.
[01:14:08] Mark Roppolo: Right.
[01:14:09] Kevin Choquette: Where if you’re not talking to the people with boots on the ground who are seeing the market,
[01:14:16] making the moves to create value,
[01:14:18] then you’re losing touch with what the actual business is.
[01:14:22] Mark Roppolo: Yeah, you know, I get calls,
[01:14:26] emails of how do I get into real estate from different,
[01:14:29] you know,
[01:14:31] young people coming out of college or coming out of the military or wherever. And I often try to say, you know, it’s not that complicated of a business,
[01:14:41] but it does require,
[01:14:44] I think the more looks you’ve had,
[01:14:47] the,
[01:14:48] you know, no two deals are the same, but they, there is some rhyme there.
[01:14:52] And I’m a whole lot smarter than I was 10, 15 years ago,
[01:14:58] or I would say I’m a whole lot wiser than I was 10 or 15 years ago. And I think I have more patience than I did then to be able to see through kind of the different facets of a deal and the different facets of.
[01:15:11] Of a relationship.
[01:15:14] So while it’s not that complicated,
[01:15:16] experience does matter and,
[01:15:19] you know, relationships matter.
[01:15:22] So just try to build on those.
[01:15:26] Kevin Choquette: It might be the same answer to like your daily routine and sort of being at the front of the spear, but how do you continue to grow? Like, how do you just said you maybe are materially better now than you were 10 or 15 years ago.
[01:15:44] What. Are there any other practices that you have that you pursue to cultivate that improvement or. Or is it the tenure in the business and, you know, sort of being in the game?
[01:15:57] The experience?
[01:15:58] Mark Roppolo: Yeah, you know, we’re pretty.
[01:16:02] We. We don’t want to get real inventive.
[01:16:08] We’re not trying to go out and create some kind of new asset class.
[01:16:13] But you do.
[01:16:17] I do try to expand the horizon and look at things that I don’t have as much experience in. They’re a little bit more bespoke and then get educated there. And that one, I can sharpen the saw.
[01:16:31] Two, it can form some new relationship.
[01:16:34] Three, help you look at something that maybe is, is closer to your field in a new light.
[01:16:41] So,
[01:16:42] you know, there’s always something new coming along that I’ll dive into or you know, a new submarket,
[01:16:49] our new market. I love learning about a city or a submarket within a city and what’s driving that. And so I’ll spend,
[01:17:01] you know,
[01:17:03] besides the stuff that we mentioned earlier, the market and the demographics and the are, are just fundamental. And so a lot of time on learning about a submarket on the idea.
[01:17:16] Kevin Choquette: Of topics that might be a little bit farther afield. Do you have any recently that you’ve pursued to kind of go down that like, hey, I’m going to go look at something that’s a little atypical to, but let’s just say value add.
[01:17:28] Multifamily investing lately. Like, is there anything you’ve been tinkering with lately?
[01:17:35] Mark Roppolo: Well,
[01:17:36] you know, we, we,
[01:17:39] we invested in one of the developments that I mentioned earlier. It was in Waco, Texas. And Waco is 100 miles south of Dallas on I35,
[01:17:47] midway in between Dallas and Austin.
[01:17:50] And Austin has pretty much grown to Temple and then another 30 or so miles from Temple to Austin. There’s certainly green space along there.
[01:18:00] Dallas has grown down to say Waxahachie and then there’s a little bit of green space,
[01:18:06] but it’s filling in in a significant way.
[01:18:10] And within the Texas triangle, which is I35 down to San Antonio and then over to Houston and up to Dallas is just an overwhelming amount of population and job growth and gdp, you know, gross product associated with it on the economic side.
[01:18:29] And so already well familiar with the economic drivers there, but having to dig deep into Waco to get comfortable that we wanted to have a new development. There was something that required quite a bit of, of study and, and conversations.
[01:18:48] And so, you know, did that and there were job,
[01:18:52] you know, announcements and new, new capital investments from the manufacturing side and the being done there that, you know, we’re not,
[01:19:01] well, while we’re maybe known in certain sectors of, of Waco, we’re not front page of Dallas, you know,
[01:19:09] Dallas Morning News or such.
[01:19:11] So that’s, that’s an example of one that did come to fruition.
[01:19:14] Kevin Choquette: Do you guys end up investing?
[01:19:16] Mark Roppolo: Yeah, we did. That’s one of our, our, our multifamily developments.
[01:19:20] Kevin Choquette: Oh, cool.
[01:19:23] Shifting a little bit.
[01:19:25] How do you think about,
[01:19:27] I mean, it sounds like you’re getting some calls from younger folks trying to find Their way, which I would say taking those calls in and of itself is a bit of a give back.
[01:19:36] But what do you think about,
[01:19:39] you know, this idea that we’re all walking on trails that somebody built before us? What’s your view of potentially giving back as, as the years unfold?
[01:19:49] Mark Roppolo: Yeah, absolutely.
[01:19:51] I certainly was, was helped along the way and it’s something I’m trying to do. I have my wife and I have four kids in college, so that sounds cheap.
[01:20:05] So I help a number of their classmates and peers around them, you know, years around them. We know and as well as those people that just reach out to me out of the blue and you know, I’m paying it back and I’m paying it forward and hopefully somebody, they’ll do that for,
[01:20:25] you know, our kids as well.
[01:20:29] But it, you know, it is, it’s rewarding and it also,
[01:20:33] it’s, it keeps me sharp and in tune with that generation.
[01:20:40] It helps me understand where my kids could be in, you know, a couple years.
[01:20:47] And they,
[01:20:48] they, while they maybe are unwise to our, our industry, they’re, they have a new insight and into tech, into,
[01:20:57] you know,
[01:20:58] things that are, are. As an old stodgy guy, I, I’m not quite as informed about.
[01:21:04] Kevin Choquette: Yeah. What’s their pulse on AI?
[01:21:09] Mark Roppolo: Wow.
[01:21:10] You know, I mean, I don’t know that I have,
[01:21:13] you know, certainly in the academic world,
[01:21:17] you know, that’s a fascinating how that’s changing the instruction and you know, what’s cheating and what’s not and what’s, what’s plagiarism and,
[01:21:30] but the power and do is amazing. You know, our analyst,
[01:21:36] you know, he was able to do some stuff through AI, you know, that I didn’t know you could do. I certainly love using it for queries and for finding information, but for modifying PDFs and, and you know, Excel models and et cetera,
[01:21:52] you know, it’s, it’s just an incredible force multiplier that I think is extremely early in its adaption.
[01:22:03] Kevin Choquette: I remember when you and I are roughly similar age when Google Earth showed up, right. And you’re, and you’re like, you’re like, wait, I don’t have to like pull up a Thomas guide and go figure out what sector this is and like drive to the corner to see the real estate.
[01:22:21] I can just type in the address.
[01:22:23] I mean there’s nothing like boots on the ground. You can’t replace it with Google Earth. But that was like,
[01:22:29] it’s, it sounds silly,
[01:22:31] especially in the face of something as powerful as AI to To recognize that Google Earth was kind of revolutionary to the industry.
[01:22:39] It feels like that, right. AI is just at that same sort of vintage where it’s like, oh, there’s Google Earth. This is interesting. We haven’t even figured out how to use it.
[01:22:49] Not really. I mean we’re finding new stuff weekly and it’s, it’s just incredibly powerful.
[01:22:57] Mark Roppolo: I, it is my probably number one website.
[01:23:02] Kevin Choquette: Yeah. GPT or cloud, what do you use?
[01:23:05] Mark Roppolo: No, Google Earth.
[01:23:06] Kevin Choquette: Google Earth. Oh yeah, of course, totally.
[01:23:10] Mark Roppolo: I’m on it all the time. Yeah. That’s funny.
[01:23:14] Kevin Choquette: Entrepreneurs,
[01:23:16] developers,
[01:23:18] even guys that are in a shop who have that sort of entrepreneurial grit.
[01:23:22] They may be employees but they, they have the plot they’re willing to take ownership of and some responsibility for the outcome.
[01:23:30] What message do you have for guys who maybe just have done a couple great deals? Maybe the guys are who are given the keys back or having worked on deals for four years and breaking even in terms of, you know, the journey and what you’ve learned, something you might want to share with them.
[01:23:48] Mark Roppolo: You broke up a little bit, but I think I got the gist of it.
[01:23:51] You know,
[01:23:53] it’s the hardest,
[01:23:55] it’s the hardest thing I think that there is.
[01:23:59] And you know, to be full candor. I, you know, I’ve not,
[01:24:03] I’ve always been,
[01:24:06] you know, I’m not created,
[01:24:08] you know, a platform on my own. My, my partners and their.
[01:24:11] They did it and so I have to give them credit.
[01:24:14] But if it, if it seemed easy or if it was, if it was supposed to be easy, then nobody would do it or everybody would do it.
[01:24:22] And so it’s not supposed to be easy.
[01:24:24] But if it was easy then there wouldn’t, you know, there wouldn’t be the rewards that you can have monetarily or just the satisfaction of, of rolling up your sleeves and getting dirty and figuring it out.
[01:24:40] Kevin Choquette: Yeah. And any advice to those guys like hey this is,
[01:24:44] you know, I mean you’ve undoubtedly, you have had people come to you who I’ll be judicious and say you would just be like, yeah, well thank you.
[01:24:55] Mark Roppolo: You’re.
[01:24:56] Kevin Choquette: This isn’t a fit for us. You might say different things over a couple beers.
[01:25:00] Yeah.
[01:25:01] You know and of. You’ve probably also seen sort of best of class. But any like think of this as the,
[01:25:09] the peer of your college age children when they are asking like what are the, the nudges that can get people a little bit more on signal to just sort of stay the course or not lose faith or I don’t Know.
[01:25:25] Any thoughts on that?
[01:25:27] Mark Roppolo: Yeah, I mean, you just have to be tenacious and stay at it. But, you know, a lot of success in life is luck and timing.
[01:25:39] And so, you know, you can, you can only control what you, what you can.
[01:25:43] And if you can fight through what seems like a tough time to do something,
[01:25:49] then you’re going to be rewarded for it. So there’s going to be fewer,
[01:25:52] less competition as you, you know, develop.
[01:25:56] Kevin Choquette: So the war of attrition.
[01:25:58] Mark Roppolo: Yeah, yeah. No, it’s,
[01:26:02] I admire guys like you and, and that have started up a platform and, and have created opportunities for yourself and, and for people that you’ve employed and that’s what makes us all tick.
[01:26:15] Kevin Choquette: I was at a conference of entrepreneurs years and years ago and the question came up,
[01:26:23] if you had known now,
[01:26:26] or sorry, known then, what, you know now, about the requirements that would be put on you to start the journey, the entrepreneurial journey,
[01:26:40] would you have done it?
[01:26:42] And almost, almost universally,
[01:26:45] you know, everybody says, hell no. Like, you don’t, you actually don’t.
[01:26:49] It’s very hard to understand what you’re getting yourself into when you jump out of the airplane. It’s not unlike having children. You’re like, yeah, let’s have kids.
[01:26:58] You’re like, oh my God, look at this.
[01:27:02] That said, I think, you know, if you ask, the second question is okay, but would you,
[01:27:07] you know, would you take it back? Did you make a mistake? Do you regret it? They all say, no, of course not. Like it’s, it’s been a wonderful journey. So it’s a funny thing about that.
[01:27:18] It’s exactly like having kids, I think.
[01:27:21] Mark Roppolo: Yeah, that’s a great, great antidote. Yeah.
[01:27:27] Kevin Choquette: Well, look, Mark, I appreciate you taking the time.
[01:27:30] I’m gonna give you the mic for closing comments, thoughts, anything you want to share.
[01:27:35] The listeners who’ve come this far, I’m always told to remind you,
[01:27:39] follow or like or subscribe or drop a review. For us at end, the makes a difference to the algorithms that seem to control modern day life.
[01:27:48] Mark, the mic is yours and thank you very much. I really appreciate the time and all of your insights.
[01:27:54] Mark Roppolo: Well, as always, Kevin, I’ve enjoyed,
[01:27:57] I enjoy talking to you. I find you with great insight and curiosity which I think is so important to discovery and to growth.
[01:28:11] And so I’ve enjoyed our conversation as always.
[01:28:14] Kevin Choquette: Great, thanks, Mark. I appreciate it.
[01:28:17] Mark Roppolo: You bet.
