Cornell’s Baker Program in Real Estate welcomed Mark Fogel of ACRES Capital to campus on August 31st for its first Distinguished Speaker Series event of the 2017-2018 academic year. ACRES Capital has a unique business model that meets the needs of developers who are unable to secure debt from traditional sources, particularly for construction and transitional loans.
Mark’s exposure to all facets of real estate helps him to be a professional that understands all sides of the business. Mark mentioned that his background in accounting and property management has been the foundation of real estate. Mark emphasized the importance of understanding how properties work, how they operate, what it takes to maintain them, and how to lease them up. “Once, you have a base in property management, getting into other functions becomes much easier such as development, banking, and lending because you really understand what makes a property work,” said Mark. At ACRES Capital, the team is able to make construction and adaptive reuse loans because of this experience.
ACRES Capital was launched five years ago to provide middle market debt, which was an area underserved by local lenders and community banks for higher risk assets. ACRES provided the perfect platform for institutional capital that was required for these investments and was able to quickly identify which risks could be managed and was thus able to deliver higher risk-adjusted returns on its deals. This in turn helped ACRES to build its own brand as a premier lender in the middle market space and helped attract more institutional capital. On his vision for ACRES, Mark is focused on creating a $2 to $3 billion company, replacing $500 to $600 million in loans every year, with 60 to 70 loans being originated each year.
For capital raising, ACRES will be accessing insurance companies, endowments, high net worth individuals, family offices, non-profits, and pension funds instead of private equity funds. ACRES is about to close on a $250 million commingled debt fund. The company will also be generating loans for Korean and Chinese investors separately. The purpose of the multiple sources is to have a capital base of up to $1 billion annually between the two platforms. ACRES follows procedures and processes designed for a mortgage REIT, which involves additional scrutiny from the SEC, EY (their auditors), and Standard & Poor’s.
Mark enjoys challenges and says that the difficult deals and negative situations he has faced were more important to him than the positives because they trigger learning experiences that are crucial during a turn in the markets. On his advice to Baker Program students, he suggested learning from the mistakes of those around us. For early career professionals, he also mentioned the importance of leveraging your expertise in the firm of your choice and to grow from that point on.
Excerpts from Mark’s interview with the Cornell Real Estate Review can be found in the video below.
