Q&A with Chief Investment Officer Chris Fraley

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Q&A with Chief Investment Officer Chris Fraley

Chris Fraley, our new Chief Investment Officer, joins RealtyMogul with over 20 years of experience in real estate. He is a former Partner at Rockwood Capital, a privately held real estate investment and advisory firm with more than $8 billion in assets under management.

We asked Chris a few questions about his previous experience:

Q: What are some of the most valuable lessons you learned during your time at Rockwood Capital?

Managing an $8B value-add portfolio during one of the most devastating downturns in the past century was quite an education. I got to see firsthand what happens when things go awry and how to manage through the down cycles. It is often important to shift business plans quickly in order to respond to changes in the market.

Q: How has the commercial real estate industry changed over the past 20 years?

The risk premium for value-add real estate investing has grown substantially. In other words, while the interest rate of U.S. government bonds has plummeted, the expected return for value-add real estate has essentially remained in the mid-to-high teens over the past 20 years. This is one of the reasons why I believe value-added real estate is such a great potential risk-adjusted investment. Keep in mind there are always risks to investing.

More recently, the advent of direct investing is incredibly exciting. Real estate investing is fun and with the growth of direct investing, individuals can access institutional quality transactions with institutional quality fiduciary oversight and create their own real estate portfolios.

Q: How do you intend to translate your experience from Rockwood Capital to your role at RealtyMogul?

In 2018, I see RealtyMogul expanding the size of its investment transactions, something I have direct experience in managing and find very exciting. I believe RealtyMogul is entering its third phase of growth as a business, evidenced by its recent acquisition of Serendipity Apartments this past September. Due to the ability to invest larger amounts of equity, we were able to maintain a majority, controlling interest in a $24M apartment community. While providing opportunities in preferred equity, mezzanine debt and smaller, passive limited partner interests will still be a critical aspect of our business, I am hopeful that our real estate team’s substantial institutional background will help us acquire and successfully manage properties with larger transaction values.

Q: What can real estate companies expect when working with you and your team?

Our goal is to provide a top-quality experience to our operating partners. I also hope they feel comfortable turning to us for advice and mentorship. RealtyMogul has some operating partners who started as emerging managers and have grown substantial portfolios, starting to build very impressive track records.

In addition to my institutional experience, having been an operator and general partner in numerous real estate joint ventures, I understand the importance of having a reliable equity partner.

Q: How will investors potentially benefit from you joining the RealtyMogul team?

I enjoy seeing the execution of a business plan as much as the creation of a business plan. I hope my institutional experience managing businesses can help to maximize value for investors.

Our asset management capabilities are one of the things that differentiates RealtyMogul from its competitors. We add a layer of institutional quality oversight, which can be critical in situations where the business plan goes awry.

Lastly, RealtyMogul sells all securities via a licensed broker-dealer and has regulated entities. Investors can gain comfort in the fact that we have serious internal controls intact.

Q: Why did you join RealtyMogul?

When I left Rockwood Capital and started my own business, I never imagined that I would join a company again. I got to really know the business after serving as interim CIO for six months and was blown away by the advanced systems, technology, process and potential for growth. RealtyMogul is a market leader of an industry that is still in its infancy, and can revolutionize real estate investing. I want to be part of the team that takes this company to the next level.

In addition, Jilliene is an inspirational and electrifying leader. She keeps me on my toes. I saw her speak at the IMN Conference in Laguna Beach four years ago and was incredibly impressed. I really enjoy working with the executive team and the staff. Also, having come from a very staid, traditional background, I am fascinated by the technology team. There is a team of around 20 technologists and analysts internally who are constantly modifying and updating the process to create a seamless execution.

As one of the first openly gay partners of an institutional real estate private equity firm globally, I know what it is like to be an outsider in the predominantly straight Caucasian male commercial real estate industry. It is so refreshing to be part of an executive team that is both a market leader and dominated by women and other underrepresented groups.

Q: Do you think RealtyMogul will impact the traditional institutional investing model?

Absolutely. The institutional world is already starting to sign on to the concept of direct investing because the typical closed end fund model is broken, inefficient and fraught with possibility of misalignment of interests.

Surprisingly, most institutional investors do not want to invest in value-add real estate investments in the bottom of a cycle until there is clear evidence of a market recovery. This was evident in the last downturn by the paucity of institutional allocations to value-add strategies in the 2008-2012 timeframe. When the market starts to recover, institutional investors should start to make allocations. This may take a year or two. They lock up allocations with three- to four-year investment periods, oftentimes at the peak of cycle. Now is a perfect example of this disconnect. We now have a few hundred billion of cash sitting on the sidelines looking for opportunities at the discretion of managers who often have an enormous disincentive to return the capital.

Direct investment platforms allow investors to move in and out of market more efficiently and avoid an extra layer of fees to the investor. I believe this is the future of our industry and RealtyMogul is poised to lead.

To learn more about investing in real estate, sign up today.

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