EP.23 // Knowing Your Target Asset Class, Seller, and Investing Niche w/ David Berneman
On today’s show we have the CEO of Golden Bee Properties out of Southern California. Meet Real Estate Investor David Berneman.
On today’s episode we have real estate investor and CEO David Berneman out of sunny Southern California. David is the CEO of Golden Bee Properties, a boutique real estate organization that focuses on infill development projects and long-term cash flowing investments. On today’s episode David & David talk about mitigating risk by adjusting your underwriting for a changing market, the resilience of the affordable housing investment class, and how finding your niche investment can allow you to operate below the radar of institutional investment while leveraging your expertise.
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Key Points from This Episode:
David followed his father who was an avid apartment investor and a real estate attorney. He learned the ropes from his dad, going to auctions and learning on the ground. He went to Berkelee and UCLA and went immediately into consulting. After a decade he began his own investing and syndications in Los Angeles, and in a full circle moment he ended up partnering with his father in the new venture.
David’s company is vertically integrated; property management, construction company, allows to go through the full gamut of a property. They hold the hand of the property all the way through the investment process, especially on the construction side, purchase orders and crews, this is a crucial part of the investment strategy.
David attributes his success in finding trustworthy people that are worth trusting. His sister is the company’s COO, his brother is the head of construction, and his cousin does the company’s development work. Working with family allows the entire company to “join the family” and get involved in the family business. Even his mom, who isn’t directly involved in the business, loves to interject and advise!
David says the new market and state of the economy is a “whole new world” and his underwriting has adjusted. The balancing act of not pushing to get into a deal too early. Making sure that the company stays true to the roots and sticks to what it knows. Be diligent in underwriting, everything they're looking at they pump the cap rate and sensitivity analysis to where things will land in a couple of years instead of right now.
Rental rates are going up and are likely to continue to; even with the cap rates and interest rates that are currently heightened, there’s an immense tailwind on rental growth. Being cautious and careful but still stick to the original business model. Finding the “prototypical seller” that the business often deals with.
David talks about a “deal with some hair on it,” for instance a property that had a fire. They have the ability to handle that deal; many groups are either too large or too small to touch that deal. This allows an agility and flexibility that can put his firm under the radar of institutional capital but place their expertise above that of typical smaller operations.
David finds that mitigating risk is best done by underwriting properly; not overextending assumptions over the next several years. In the past few months the projections have changed drastically. The biggest risk mitigation is making sure they’re underwriting as conservatively as possible.
Another risk is the cost of labor, construction, and supplies. In markets that often had different labor costs, he’s seeing huge balloons in cost to evening them out. He makes sure that they’re including this in projected costs.
Many people say that when the market is scared, that’s prime time to acquire opportunities. David believes this is coming soon. He’s seeing in his Las Vegas market that opportunities are already starting to crop up and that’s going to increase over the next twelve months.
Affordable housing and low income communities are the assets that David targets. In Los Angeles, he targets +40-200 units. In Vegas, the 80-250+ unit range.
David went from syndication to starting the CalNeva Workforce Housing Fund. Since he had a variety of investors in his 3 syndications a year, they often were asking how to get into multiple syndications. The fund is a great opportunity to offer a diversified portfolio with pieces of a variety of assets in the multifamily class. This allows investors to properly hedge their assets.
David’s morning routine consists of taking care of his 8 and 6 year old children, getting them up and to school! He walks with his wife and kids to school, gets into the gym, and gets into the office to start the morning grind.
David’s piece of advice, however cliche, is “go with your gut.” In scenarios when you question things too much you may not act; your gut is more reliable than you think. This is what drove David to leave his well paid consulting job. This instinct led him to the success he has today.
Relevant Links from Today’s Episode:
ABOUT DAVID BERNEMAN
David is an experienced entrepreneur with an extensive career in real estate development, investing and asset management. He founded Golden Bee Properties, a boutique real estate organization that focuses on infill development projects and long-term cash flowing investments. The company later expanded to include a property management arm called Golden Bee Management, which now enjoys a portfolio of over 1,500 units throughout the Los Angeles and Las Vegas areas. He also formed Golden Bee Realty and Golden Z Construction, a commercial real estate agency and multifamily construction company.
Over the years, he’s built the Golden Bee family of companies into a vertically-integrated operation with over $250 million in assets under management (AUM). David also has an extensive background as a real estate consultant. In this capacity, his client list has included such organizations as the global commercial real estate giant Westfield, Thomas Properties Group and NBC Universal. In this role David assisted his clients with pro forma analyses, entitlement processing, retail mix evaluations, fiscal impact studies and various other economic projection studies. David holds a Masters in Urban Planning from the University of California, Los Angeles (UCLA) and dual Bachelors degrees in Psychology and Environmental Science from the University of California, Berkeley. He is a registered LEED Accredited Professional, a licensed California real estate broker, and a board member of the Los Angeles Sustainability Collaborative. He also teaches real estate market analysis at UCLA as a part-time lecturer.
