December 1, 2023

JF3375: Julian Vogel - The Power of a Co-GP Strategy



Julian Vogel, fund manager at Colony Hills Capital, shares his insights on the world of commercial real estate, specifically focusing on garden-style multifamily properties and innovative capital-raising strategies.

Key Takeaways:

  • The Power of Co-GP Strategy: Julian discusses Colony Hills Capital's unique approach to raising capital through a co-GP (General Partner) strategy. By bringing together LP (Limited Partner) investors and deploying their funds alongside Colony Hills' principles and employees on a deal-by-deal basis, investors can enjoy outsized returns and diversification.
  • Investor Confidence and Trust: Julian emphasizes the importance of building trust and confidence with investors. He highlights the significance of one-on-one Zoom or in-person meetings with potential investors, allowing them to connect with the sponsorship team and understand the strategy and underwriting of the deals.
  • Top-Down Approach to Investing: Julian advises active real estate investors to take a top-down approach. Start by identifying markets or sub-markets with strong demographics, industries, and population growth. Then, dive into the deal specifics, analyzing cap rates, potential renovations, and expense reductions to maximize returns.

Julian Vogel | Real Estate Background

  • Fund Manager at Colony Hills Capital
  • Portfolio:
    • Multifamily - $1.2 billion in total capitalization, +12,000 units, and 36 transactions
  • Based in: Wilbraham, MA
  • Say hi to him at: 
  • Best Ever Book: Ethics of our Fathers by Pirkei Avos
  • Greatest Lesson: Invest using a top-down approach. So, look for markets or sub-markets where there's strong income, strong demographics, strong industry, etc. And that those industries are resilient to downturns in the market, like tech, distribution, medical, education.



Click here to learn more about our sponsors:

New call-to-action

New call-to-action

New call-to-action



Ash Patel (00:02.029)
Hello, best ever listeners. Welcome to the best real estate investing advice ever show. I'm Ash Patel and I'm with today's guest, Julian Vogel. Julian is joining us from Wilberham, Massachusetts. He is a fund manager of colony Hills capital. They buy value add off market garden style, multifamily real estate, east of the Mississippi. Julian's portfolio consists of over 12,000 units, 36 transactions of multifamily, totaling $1.2 billion in total capitalization. Julian, thank you so much for joining us and how are you today?

Julian Vogel (00:38.59)
I'm doing awesome, thanks for having me Ash.

Ash Patel (00:40.789)
It's our pleasure. Julian, before we get started, can you give the best ever listeners a little bit more about your background and what you're focused on now?

Julian Vogel (00:48.134)
Yeah, sure. So my background before joining Colony, coming up on it five years ago, was in commercial mortgage and equity brokering. I was based out of Manhattan. I worked for a top 15 firm, which was called Dearwood Capital, which was purchased by Walker and Dunlop. And then I left there and had my own company doing the exact same thing before I took my wife and two kids and moved back to Western Massachusetts, where I'm sitting now. And so I was able to bring that experience and that expertise to the table.

And when I joined Colony five years ago, they asked me to launch a fund for them. And I said, I've never done that before. And they said, well, then you won't know what you can't do. Uh, and then fast forward five years, we're up to fund three. Um, and I focus all day on raising capital, structuring, uh, debt and equity on new acquisitions, uh, solely for Colony Hills.

Ash Patel (01:44.321)
Now, garden style multifamily, are you very specific to that niche? Why?

Julian Vogel (01:49.45)
Yes, yeah, we've been doing that since 2008. Why, it's just time tested, it's resilient. You look at CRE in 2008, garden style, class B, multifamily, sort of middle market housing, had the best average occupancy amongst all the commercial real estate types.

And it's just, it's bipartisan approved. It's in constant demand. There's a constant dearth of supply of it because you can't really build, you know, middle market housing, workforce housing. You can either build affordable housing or you can build luxury housing. You can't really build that middle, you know, that middle class housing. So it's a great space to be in.

Ash Patel (02:40.281)
Can you define what garden style housing is?

Julian Vogel (02:43.806)
Yeah, it's, I'm sure a lot of listeners are probably driving by one right now or seen it or lived in one. It's two to three story sprawling communities, you know, the pool in the center and, you know, clubhouse with a fitness center and a dog parks, et cetera. So, you know, its own specific egress entrance exit, 250 to 500 units. That's kind of, that's where we play.

That's garden style.

Ash Patel (03:15.509)
Each apartment has its own exterior entrance.

Julian Vogel (03:20.83)
Um, yeah, it could be. Sometimes you have, you know, sometimes you have the entrances where people walk in and it's, it depends like in the Northeast, for example, you have oftentimes where you walk in and it's a stairwell, you know, and then to your point, yes, each apartment has its own entrance or exit. Yeah.

Ash Patel (03:38.529)
Okay, got it. And your focus right now is on capital raising.

Julian Vogel (03:44.714)
Yes, yeah, for our fund and also for deals. So our deals range in size between 25 million to we just closed $130 million deal end of July. So it's kinda, I wear two different hats constantly.

Ash Patel (04:01.465)
What's the other hat that you wear besides cap?

Julian Vogel (04:03.242)
Well, for the fund. Oh, you know, two different hats of capital raising, one for the fund or one for deals. So that's kinda the two focuses.

Ash Patel (04:12.7)
Explain that to me. Don't all the deals go into the fund?

Julian Vogel (04:16.998)
So this is where it gets a little complicated. We have a co-GP strategy fund. So this is our third co-GP fund. So basically to put it simply, we aggregate a bunch of LP investors, passive investors into our fund. And then we take the liquidity from that fund and we place it into the GP next to or alongside Colony Hills principles and employees on a deal by deal basis, but for each deal we're still bringing in an institutional joint venture partner or possibly doing a syndication of some LP equity. So unlike most funds that are representing 100% of the equity in each deal, this fund only represents plus or minus 5% of the equity in each deal. So it's kind of a nuanced strategy.

Ash Patel (05:09.573)
Okay, so, that's a fund to funds model, right?

Julian Vogel (05:15.02)

Ash Patel:
Okay. And what is your involvement in those deals if you're just a minority holder?

Julian Vogel (05:23.81)
When you say you, do you mean me personally or an investor?

Ash Patel (05:25.793)
No, no, no. Your fund is a small piece of somebody else's deal.

Julian Vogel (05:32.41)
No, not somebody else's deal. All of Colony's deals. So we're the owner operator right of all of our deals and our fund invests into each of our deals alongside Colonial's principles.

Ash Patel (05:43.281)
Understood. So fund of funds is all internal. You're not investing in other syndicators' deals.

Julian Vogel (05:46.482)
Internal, yes.

Ash Patel:
Understood. Okay, got it. So as a retail investor, I can choose to invest in one of your individual deals or into the fund. Is that right?

Julian Vogel:
Correct. That's correct. Yeah.

Ash Patel:
Got it. Okay, cool. Interesting approach. What do most investors choose?

Julian Vogel (06:01.501)
You got it.

Julian Vogel (06:09.438)
Good question. It depends on their sophistication within real estate. If they have a real estate background, they're usually choosing deal by deal investments, right? Cause they want to pick and choose if they're a doctor, lawyer, tech executive, someone who just sold their business wants to get into real estate, doesn't want the burden of owning their own real estate, or doesn't have the sophistication to do diligence on a deal by deal basis, they'll put it into the fund because with the fund they'll get diversification. They're also by being in the GP, an LP in the GP position, they get outsized returns. Like our fund is targeting 20 to 25 net IRR for investors. Um, so it's a split. It's really a split.

Ash Patel (06:57.501)
I've been doing this for a long time, and I've never seen this model. So, uh, good for you for giving investors that option. It's usually most syndicators, um, they either have individual syndications you can invest in, or they've completely moved to the fun model where everyone gets thrown into that. So I applaud you for giving your investors that option. And I love that.

Julian Vogel (07:21.726)
Yeah, well, it was an organic happening because the first year and a half when we launched our fund, it was going to be a $150 million vanilla LP fund. And I personally sat across from endowments and insurance companies and family offices, etc. And at that point, Colony already had a solid track record, but no track record in fund management. So all of those big investors basically said the same thing, hey, we love your strategy, but come back to us when you're on fund three, fund four. So after hearing that on a repeat basis, I kind of got hit in the head with a lightning bolt idea of these investors perceive us as risky. So with any risky investment, what do you have to provide? You have to provide reward, right? Profit, risk adjusted returns.

So how do we provide more profit if we're perceived as risky? Where's the most profitable part of the deal? In the GP, right, the promote. So, kind of evolved into a co-GP fund where we could offer these outsized returns, reduce our fundraise, and it was successful.

Ash Patel (08:41.857)
So these institutions now are part of the general partnership.

Julian Vogel (08:46.914)
Those institutions never, I never went back to them, but I was able to attract a lot of high net worth retail investors, family offices, RIAs. Probably when we're done with fund three, get to fund four, fund five will probably convert to, you know, a more typical LP fund and go back to those institutions and those endowments and say, hey, look what we've done and you're ready to write a check.

But for now, it's still the co-GP strategy, which people like.

Ash Patel (09:20.697)
Sure, so the family offices, for example, are part of the GP structure on these deals.

Julian Vogel (09:28.15)
Yeah for a with within the fund if they're investing into the fund, that's right.

Ash Patel (09:31.437)
Got it. Okay. And what are you giving up typically? How many points of the GP?

Julian Vogel (09:39.403)
So maybe I'll answer to understand your question. I'll answer, you tell me if I'm answering your question. So if the GP is required to put in 10 to 20% of the required equity, the fund is only 5% of that equity. And then as the deal goes through its ownership period and then sells, the fund gets its pro rata share, its percentage share of the cash flow, and then its pro rata share, percentage share of the upside, the promote, you know, that's born from the underlying joint venture waterfall structure. Then once all that cash flow and promote enters the fund itself, there's a static waterfall where the fund investors get in 8% priority return that's compounded on a per annum basis.

Once they get caught up on that, they get the return of capital, and then it's a 75-25 split. 75 to the fund investors, 25 to Colony Hills's capital as our carried interest.

Ash Patel (10:39.509)
Understood. So your Co-GP model benefits these investors in the back end higher. Got it. Okay. Did you say 25% IRR?

Julian Vogel (10:47.538)
Oh yeah, yeah.

Julian Vogel (10:52.746)
Yes, Nat.

Ash Patel (10:54.857)
Okay, and how are you achieving that?

Julian Vogel (10:58.59)
So our deals, good question, I love your questions. Our deals, we're underwriting to are an 18 to 20 gross IRR. We bring in joint venture partners that will bring in, will bring, like I said, 60 to 90% of the required equity. They're underwriting to a 14 to a 15 IRR. So if they're underwriting to a 14 to a 15 and the deal's throwing off a 20, typically the GP's earning north of a 25, maybe 25, 26, 27, depending on how the structure is forged between the GP, LP.

Ash Patel (11:37.193)
Understood. Investor capital is drying up. Julian, what are you doing to get more capital out there?

Julian Vogel (11:45.486)
To get more capital out there. We've ramped up our SEO and our marketing big time. And a lot of the institutions are sidelining themselves. They're not really participating. They're waiting for massive dislocation is what I'm hearing in the networks and the circles I run in. Retail investors though as far as my experience has been are still game. They're still investing, they're still looking for opportunity, they're still looking for experienced sponsors. You know, people still have a lot of liquidity.

Ash Patel (12:28.073)
Investors appetite for risk. Have you noticed a change in that at all?

Julian Vogel (12:33.438)
Yes. So the savvy investors who understand real estate, they want to see at least neutral leverage, ideally positive leverage. What does that mean? I'm sure you know what that means, but for your listeners, neutral leverage means that when I buy a deal, if I can buy it at a six cap rate, right?

A cap rate is taking the net operating income and dividing it by the purchase price. If I can buy a deal at a 6 cap and I can borrow from the agencies at a 6% interest rate, that means I have neutral leverage. It's a really good way to determine and judge the health of, you know, potential asset that you're going to buy and understand your cash flow.

Ideally, you're buying a deal, to use the same example, at a six and a half cap rate, and you're borrowing at a six interest rate, right? So now you have positive leverage going in. That means you're making more yield from the deal than what you're paying to the bank, or what you're paying in debt service to the lender. And then what's even better than that is if there's dormant cashflow, dormant value. So you can now take that same cashflow and bolster it to one and a half to two times over a three year period. That's, and that's our game. 

So investors want to see that we're buying deals at a cap rate that provides neutral leverage. And it took a while, it took probably the last seven to eight months for sellers to come around and to recognize, excuse me, and re-manage their expectations as far as where they can transact. April, 2022, I can remember it very clearly until probably six months ago. There was just like this gaping valley between what buyers and sellers were expecting. And you can see it in the numbers, right? Transaction volume nationally has plummeted. Last time I checked was probably two months ago, right? It was like 70% down from the year prior. Take my numbers with a grain of salt. So now I think sellers are becoming a little more desperate um, for one reason or another, their debts maturing or whatever it is. And there's really interesting deals popping up.

Our pipeline just went from being zero to hero. It went from being like no deals to now we have three deals we're chasing with really attractive cap rates. Um, so that's a long winded answer to your question, right? But that's the expectation of our investors. They want to see that we're getting discounted deals. We're getting deals that are appropriate. For the interest rates that we're borrowing at.

So we admittedly, you know, 2019 to 2021, we were, you know, using bridge debt, like most other people, floating rate debt, thankfully, thank God, we were buying, you know, solid rate caps, right to manufacture a ceiling for those floating rate loans. And then also, I'm going to keep mentioning this date since April 2022 we switched to using low leverage fixed rate agency debt. So 55 to 65% leverage on purchase and fixed 10 year financing.

Ash Patel (16:33.421)
Those rate caps expire. Are you guys sitting on deals that are coming due?

Julian Vogel (16:39.814)
No, thankfully we had some joint venture partners that were smarter than us and that forced us to get, you know, four year caps instead of two years or et cetera. So that, that has created a lot of flexibility for us. Um, and at the time we were kind of kicking ourselves like, why are we spending this extra money to rates? Aren't going to go up, you know, they were smarter than us though. And it's a, yeah, it's been a good. Yeah. I think that was luck.

Ash Patel (17:03.245)
Wow. Good for you.

Julian for our best ever listeners that are in the early stages of capital raising. Maybe they've raised a few million dollars. What's your advice to them?

Julian Vogel (17:20.498)
Yeah, that's a good question. My advice to them is to believe in themselves to understand that they're offering their investors an opportunity to invest passively in deals that they don't have to manage. If they're a savvy owner operator who's raising capital and they know what they're doing, celebrate all of your achievements and show those achievements to your investors.

Don't be bashful about it. Everyone's started somewhere, right? Um, market yourself heavily. I think everyone knows that you kind of have to be on these podcasts and be doing videos and constantly touching your investors through email marketing, et cetera. Um, believe in yourself is really because that's what comes through. Investors are looking for trust more than anything else. They're looking for confidence. They're looking for some track record.

So if you can convey that conviction about yourself and what you do, you'll impart that conviction and you'll attract capital.

Ash Patel (18:29.973)
And Julian, what is your best real estate investing advice ever?

Julian Vogel (18:35.359)
As a passive investor.

Ash Patel (18:37.798)
Uh, no, because I, well, let me think about this. No, as an active investor.

Julian Vogel (18:43.166)
As an active investor, top-down approach. So look for markets or sub-markets where there's strong income, strong demographics, strong industry, economy, right? And that those industries are resilient to downturns in the market, like tech, distribution, medical, education.

You know, things of that nature. See that, make sure that you're investing in a place where there's, you know, population is trending upward. It's also good to invest if you're buying existing, invest in places where it's difficult to build, because then you know there's gonna be a dearth of supply in that sub market. Also invest in places where that provides really solid public education, elementary schools, high schools, that usually comes with the income, right?

But, that's going to attract a lot of people who want to live in that market, but can't necessarily afford a house. So that's going to drive up and sustain your occupancy. Then second, that's kind of top down, are you starting with the market, then you're going to the deal. What are they charging for one, two, three bedroom? And what are your comps charging? What's the property next door charging? Where is there what's called lost to lease? Are they leaving money on the table?

Are they charging $1,500 for a two-bedroom when they could be charging $1,800? And in order to achieve that, you need to renovate and be reasonable and realistic with your renovation budget. Don't go crazy, but also don't undershoot your budget. And then find out where operationally, where are they dropping the ball? Where are expenses out of whack? Where can you improve and reduce expenses? So that way when you're increasing the income and reducing the expenses, it's a really good equation. And then either refinance or sell.

Ash Patel (20:40.185)
I love it. Julian, I feel like you had a chambered answer for best advice for passive investors. Let's throw that one out there too then.

Julian Vogel (20:49.214)
Yeah, for passive investors, a lot of people, you know, I'm talking about guys who are, or gals who don't have real estate background. It's kind of goes back to my, what I was talking about before about neutral to positive leverage. Look at what the deals going in cap rate is, and then ask what the exit cap rate is, right? That's like the most powerful lever in the whole model.

If they're selling you a 20 IRR, but then you ask them what their exit cap rate is and it's a four and a half, right? It's a pie in the sky. It could happen, right? It could happen, but it's not conservative. If their exit cap rate is five and a quarter, five and a half, something more reasonable where they're estimating that, hey, interest rates could come down. Typically when interest rates come down, cap rates fall out. But they're not assuming they're just going to plummet. That's a conservative underwriting. And if it's still throwing off a solid IRR and you like the sponsorship and you like the deal on the market, then go for it.

Ash Patel (21:59.097)
Julian, are you ready for the best ever lightning round?

Julian Vogel (22:02.206)
I hope so.

Ash Patel:
All right, what's the best ever book you recently read?

Julian Vogel (22:07.994)
Um, yeah. So for me, I, I'm Orthodox, I'm an Orthodox Jew. So I, in my free time, I spent a lot of time learning Torah and there's a part of Torah that I love learning. I learned it on repeat and I find that the advice in it is, is always cutting edge ethics of our fathers. Um, it's, you know, advice from sages from thousands of years ago. And it's like anecdote after anecdote. And it covers. Like all of life and it's I keep every time I review it and I keep going through it I find new nuggets so...

Ash Patel (22:46.713)
Do you read it in Hebrew or is it translated?

Julian Vogel (22:49.851)
I read in both. If I read in Hebrew and if I need the English, it's right there.

Ash Patel (22:51.371)

Ash Patel (22:56.489)
Awesome. I want to circle back and ask you a question. You've got your SEO set up for investor portals. How often does somebody on your team speak with investors prior to investing?

Julian Vogel (23:11.742)
Oh my gosh. I mean, I've, I don't think I've ever had maybe once or twice, we've had an investor invest without speaking to us, um, which is like wild, right? You make a 50 to a half a million dollar investment without talking to the group. It's, it's, it's wild. Um, so I have a, we have a director of investor relations, Melissa Barber, who's also my assistant and she's amazing.

She tees up these calls, she answers their questions, she gets dozens of questions before it even gets to a Zoom call. And the Zoom calls are amazing. I mean, we used to do phone calls and the conversion rate was very low. Once we started doing Zoom or even better in person, the conversion rate just skyrocketed because like I was saying before, people want trust. They wanna see who they're investing with, they wanna read the room, so to speak.

So there's a lot of oftentimes one or two calls before someone invests and I show up for all of those, whether it's a $10 million investor or a $50,000 investor.

Ash Patel (24:16.885)
Yeah, I think that's really important. Good advice, by the way, on the zoom instead of phone. But it's important to know that raising capital isn't autopilot, right? That they have to see and talk to a face and find someone they can trust. Thank you for sharing them. And back to our lightning round, Julian, what's the best ever way you like to give back?

Julian Vogel (24:42.898)
Uh... i like to give back to my family to my wife and kids and show up for them as best as i can uh... i also like to give back to a community literally where i live you know the people in my community and i try to figure out how k how i can add value to that and then i also by mention to you know it's like she's so i give it ten percent of my of my uh... minimum ten percent of my post-tax income to charity so

Ash Patel (25:12.089)
Julian, how can the best ever listeners reach out to you?

Julian Vogel (25:15.85)
Our website,, is the perfect way to reach me.

Ash Patel (25:24.313)
Julian, I got to thank you for your time. I wrote down a lot of good notes. You've given us some great nuggets of advice. So thank you very much for giving a part of your day to join us. Best ever listeners. Thank you for joining us. If you enjoyed this episode, please leave us a five-star review. Share this podcast with someone you think can benefit from it. Also follow subscribe and have a best ever day. Excuse me. That's a wrap, man. Thank you so much.

Julian Vogel (25:34.815)
My pleasure, thank you.

    Get More CRE Investing Tips Right to Your Inbox