The Surprising Durability of OZ Multifamily in a Pandemic, with Pete LaMassa

Pete LaMassa

What are the biggest questions on the minds of Opportunity Zone investors? And what have been some of the most surprising real estate market outcomes from the coronavirus pandemic?

Pete LaMassa is Opportunity Zone deal captain and managing director at Bridge Investment Group, a vertically integrated real estate private equity firm with a $1 billion Opportunity Zone strategy.

Click the play button below to listen to my conversation with Pete.

Episode Highlights

  • The biggest questions that Opportunity Zone investors are asking amidst the global pandemic.
  • The markets and asset classes that Bridge believes will present compelling opportunities for real estate investors.
  • Some of the most surprising outcomes from the coronavirus pandemic.
  • What Bridge likes about secondary cities with high occupancy and good job growth.
  • The durability and reliability of multifamily, and how occupancy and lease collection rates have exceeded expectations.
  • Bridge’s deal pipeline and what they are ultimately looking for when they acquire a property for development.
  • The timeline for having a 100% development strategy, and how Bridge anticipates that their timeline may align well with the anticipated timeline of the pandemic.
  • The capital channels that have been the biggest sources of investment for Bridge.
  • The overlap between Bridge’s Opportunity Zone strategy and their affordable and workforce housing strategy.
  • The importance of vertical integration and being able to control the value proposition from top to bottom of the value chain.

Featured on This Episode

Industry Spotlight: Bridge Investment Group

Bridge Investment Group

Bridge Investment Group is a vertically integrated firm with approximately $22 billion in real estate under management, including nearly $1.5 billion in Opportunity Zones. Bridge manages approximately 40,000 apartment units across the country.

Learn more about Bridge:

About the Opportunity Zones Podcast

Hosted by founder Jimmy Atkinson, the Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in opportunity zones.

Show Transcript

Jimmy: Welcome to the Opportunity Zones Podcast. I’m your host, Jimmy Atkinson. Eight months after the coronavirus pandemic really took hold here in the United States, how are markets responding and what is going through the minds of investors? Here to discuss that topic and more with me today is Pete LaMassa. Pete is Managing Director in the Capital Markets Group at Bridge Investment Group and deal captain of their Qualified Opportunity Zone strategy. Pete joins me today from his home office in New York. Pete, welcome to the show. Thanks for joining me.


Pete: Thanks for having me, Jimmy. Thank you.

Jimmy: Yes, let’s dive right in here. You know, I mentioned we are in the midst of a global pandemic that has roiled the markets, what’s keeping your investors awake at night, Pete, and what questions are your investors asking?

Pete: Yeah, well, you know, we’ve been talking about Qualified Opportunity Zones now basically nonstop for about two years. It started out with a lot of very high-level educational calls and meetings, and then we’ve of course had to walk people through how the rules worked and what our strategy is. I mean, obviously, this requires a 10-year hold, so people really want to understand what they’re getting into. But I think right now because of the pandemic, one of the hottest topics is geography. You know, even though it’s very likely that the coronavirus problems will be well behind us when we deliver our properties to market in two to three years, people, of course, are a little bit more wary of the big cities, and that’s where we think our secondary market strategy is even more attractive today.

We tend to focus on fast-growing secondary markets so you’ll never find us really in midtown Manhattan or downtown Miami. We think that it’s a much more compelling opportunity that can be found in places like Austin and Sacramento, Atlanta, Salt Lake City, Scottsdale. So this is where the growth is and we’re looking for robust household formation and job growth, high occupancy, and good absorption. We did an analysis of the 20 odd markets that we’ve committed to across the last two years and we’ve seen that our population growth in our cities has been about 50% faster than the overall U.S. population.

And I think the other way that we address that is, you know, we point to the fact that we often like to be a little bit outside of downtown. So instead of building a high-rise in a very crowded downtown, our strategy is typically building a less expensive and maybe easier to build low-rise. We want to provide great amenities like rooftop cooking areas, dog parks, good common space, state-of-the-art fitness, and we want to be really competitive to those downtown rents so you can get perhaps a cheaper experience, a little more room, and you’re not packed in a high-rise which is I think what people are really wary about.

The other thing that comes up a lot now, the other thing that I would say is keeping the folks that we’re talking to up at night, is the way that the political landscape can change, what does a potential Biden administration mean for QOZs? You know, for this question, we really just point people directly to the vice-president’s platform, which is posted on his website. You know, he supports the program. He would like to see better reporting and better accountability, and quite frankly, we agree. We’re very confident that we’re meeting any standard that the government could implement.

Another question that comes up is, you know, what about higher taxes? What if taxes go up? When people ask that question, we point out that yes. Pushing that 2020 game to 2026 would result in a higher… That would be in a higher tax regime for capital gains and that would mean that you’d pay a little bit more. But we also remind them that any investment that they make instead of a QOZ would also be diminished by higher taxes. So in fact, higher taxes would actually increase the QOZ benefit relative to a taxable investment. It would increase the delta between doing a QOZ and not. Jimmy, it actually takes a couple minutes for clients to really think that through but once they get it, it gets them to a place where they’re a little bit more comfortable with the QOZ.

Jimmy: That makes perfect sense. I’ve been trying to drive that point home constantly on this podcast. It’s come up on numerous episodes over the last several months. If tax rates go up it’s actually even more in your interest to invest in Qualified Opportunity Zones as you rightly point out.


By the way, you did mention some uncertainty about the election, I’d just like to point out for our listeners this is airing the day after Election Day, but we’re actually recording it on Thursday, October 29th. So we don’t know what the result is of the election, and possibly we still don’t know what the result is of the election even when you’re listening to this. I’m not sure how long it might take to sort out those numbers. But just wanted to mention that when we’re recording this, we don’t know who has won or who will win the election in terms of the presidency and the senate.

So actually, I want to take a step back now, Pete. Bridge Investment Group, you guys have a $1 billion strategy for investing in Opportunity Zones. You’ve raised and deployed $1 billion in Opportunity Zones so far. Can you tell us a little bit more about who is Bridge, what its mission is, and how you came to work at Bridge, and what your role is in the company, Pete?

Pete: Yeah. So we’re a vertically integrated real estate manager. We’ve been around since 1991, so we’re coming up on 30 years. And we’ve got about $22 billion of real estate under management. We only invest in the U.S. because this is the most liquid market in the world, people from all over the world want to buy here. We have six verticals, our flagship, our strategy is multi-family. And then over the years, we have very deliberately and thoughtfully moved into new businesses: office, debt, seniors, workforce, and affordable housing, and of course, Opportunity Zones.

Across all these businesses, we focus on fast-growing secondary markets. Like I said before, you know, we’re not interested in Manhattan, we’re not interested in downtown Miami, we like the cities like Sacramento, Austin, Salt Lake, Atlanta, and we also like to invest in select first-ring suburbs. When the Qualified Opportunity Zone rules were passed in late ’17 and they started getting socialized and discussed in ’18, we concluded that this was a business that we think Bridge is very well suited for. You know, at $22 billion, we can build a team and we can put the appropriate resources on this, and since we’re vertically integrated, we’ve got thousands of Bridge employees working and living in our markets, managing our properties, interacting with our tenants and residents. We think having those people on the ground give this information edge over the competition.

So we went out, we built a 17-person team, and to our knowledge, no other firm has a team as deep or as seasoned as ours. And we rolled out our QOZ strategy in early 2019. We forged partnerships with a handful of national wirehouses and wealth managers, and after working through their exhaustive due diligence and research process, they made our strategy available to their clients. So fast forward to today, over this year and last year, we have approximately $1.5 billion allocated or committed to 28 QOZ properties in our fast-growing target markets.

Jimmy: That’s great. That’s great. That’s a pretty good track record or pretty good amount of capital that you’ve raised and deployed or have had committed so far in getting on those wirehouse platforms definitely key to being able to raise capital from investors. Getting back to the pandemic now, what to you has been surprising about this pandemic or the market’s response to it? What have you found that’s been surprising to you?

Pete: A couple things. You know, I joined Bridge about 18 months ago, and in the 5 years before I got here when I was in a different capital-raising role, I started to recognize how durable multi-family is as an asset class. You know, I would often say it doesn’t matter who the president is, it doesn’t matter where the S&P 500 is, people need to live somewhere. And yield-hungry investors are always going to pay up for the reliable yield that comes from multi-family. So little did I know that once I got here at Bridge, we would find ourselves going through a pandemic, economic stress, health stress, eviction moratoriums. I mean, Jimmy, this literally is the ultimate stress test that an asset manager could have.

We manage about 40,000 multi-family units around the country, this is regular multi-family. We obviously haven’t completed any of the QOZ properties yet. Across the 40,000 apartments that we manage in our regular multi-family strategy, which is a value add strategy, we see rental payments in the mid-90s, 94%, 95% of our tenants have been paying their rent. And we’ve seen occupancy ticking up faster than our original underwriting. You’ll see actually what’s surprising…I’m even not surprised by that, but I’m really excited about that. I’m excited to report that our multi-family strategy has remained really strong. And as we tee up our QOZ strategy, which will be 85% to 95% multi-family, it’s great to point to this outcome.

I think another thing that’s been kind of surprising is that the competitors that we saw last year we haven’t seen come back. So last year, as I said, we partnered with some national wirehouses and wealth managers and there were other strategies from other firms that were available on those platforms. And a lot of those institutional managers that had nationally available strategies have not come back in 2019. So we’re pretty excited about that because we have seen less competition for the assets that we’re looking at, and we think ultimately when we deliver these assets in a couple of years, and when we sell these assets in 10 years, it might mean there’s also a somewhat diminished amount of competition out there. So I think those are probably the two biggest surprises or things that caught my eye.

Jimmy: That’s interesting, the diminished competition. What do you think may have led to that diminished competition? Some of those competitors of yours not being around anymore?

Pete: This is a pretty labor-intensive business when you’re thinking about what we’re doing in the Capital Markets Group. Basically, I think that some of our competitors are maybe 10 times or 20 times the size of us in terms of assets under management. And I think it just made more sense for some of our competitors to focus on their flagship strategies where they could raise, you know, $20 billion funds and $10 billion funds, and get commitments from foundations and endowments and sovereign wealth funds, etc.

This business really is working directly with private clients so it’s much more labor-intensive, and we think that as successful as we’ve been in terms of capital deployment, I think if you compared it to what other firms are doing in terms of the funds that they’re raising, it kind of is a drop in the bucket. So we think that our combination of being large enough to put institutional attention and institutional resources on the strategy but small enough that the capital raising efforts that we’ve been going through still can move the needle for us.

Jimmy: That makes sense. That definitely makes sense. So, Pete, you mentioned already a little bit about your investment strategy, largely multi-family, some secondary markets, some just outside downtown locations, but could you dive into that a little bit more for my listeners and me right now, if you could tell us a little bit more about your investment strategy in terms of asset classes, locations, and the markets that you focus on?

Pete: So as I mentioned, we like Secondary Cities. And I’ll just give you a couple of examples. We’re looking for places with high occupancy, strong absorption, good population growth, and robust household formation. And we’ve got a terrific research team and they’re based in Salt Lake City, and they’re doing all the work to determine where there’s attractive opportunities to invest. But then, as I said, we overlay that with the Bridge property management people who are on the ground in our markets, giving us those anecdotes. So when you think about it, anybody can buy data, we buy data, and we really don’t have an edge over anyone in that department, but we think it’s great when we can overlay that data with the information that we’re getting from our Bridge property management folks.

For instance, it used to take us nine days to rent out a unit in this city, and now it’s only taking two. That might be we have some pricing power here, or the multi-family property down the street is adding a pool in order to remain competitive, maybe we need to do the same thing. So just having that information and those boots on the ground we think is really important, and then that helps us decide where to invest. So let me give you an example of the city that we like is Austin. Multi-family occupancy is in the 90s. It’s one of the country’s most educated populations. They’ve got a really terrific range of employers. Apple’s second-largest campus after Cupertino is there. And that’s 5 to 15,000 jobs. It’s growing the number of jobs in the city. Samsung, GM, Facebook, IBM, Allergan Pharmaceutical, all have a meaningful presence. And you’ve probably heard a couple of months ago, Elon Musk said that he’s moving some Tesla operations to Austin as well.

So we love the city because we feel we’ve got the wind at our back. I’m sure on previous episodes of your podcast, I’m sure you’ve talked about how the cities and the Opportunity Zones were determined using the 2010 census, right? So we’re using our 2020 eyes and ears to evaluate these properties that were deemed to be a little bit below par 10 years ago. And a lot of these cities they’ve grown so much that the place that was below par 10 years ago is now well within the path of progress. So for instance, in Austin, we particularly like the area just north of downtown where we can build highly amenitized low-rise that we think will be very competitive in that market. And then on top of that, rental price appreciation in Austin has been very strong, between 2010 and 2020, it was about 3%. And when we’re doing our underwriting we can plug in rental growth that’s lower than that and still get to our target returns.

Jimmy: Very good. That makes sense. My next question here for anyone who may be listening and has access to some real estate deals that they think you may be interested in or your team at Bridge may be interested in, could you tell us a little bit more about your deal pipeline and what you would say to those folks who have access to real estate deals. Ultimately, what are you looking for in a property? And I guess a follow-up question to that would be, how many properties are you looking at and ultimately acquiring for development? Maybe you can go into the size of the deals that you look at too?

Pete: So far over the last almost two years now, so we’ve been actively in this basically since the beginning of 2019. We have deployed or committed almost $1.5 billion of assets and we’ve done that in 28 properties that represent probably about 21 or 22 markets. Our average equity check is about 45 or so million dollars. And when you consider that we are applying 50% debt to equity obviously that takes us to maybe a $90 million total capitalization of the properties. So $90 million deals, $45 million equity checks generally. And our pipeline is really robust.

So as I mentioned, we’ve got a 17-person team, so those 17 people and, you know, that goes from senior all the way down to junior people, and they’re spending every minute of their working day thinking about Opportunity Zones, speaking to brokers and developers and architects and debt providers, and getting on planes and visiting properties. So because we’ve got that 17-person team and because word has gotten out that we’ve got capital to deploy, you know, we have seen a lot of deal flow. So as you said, about 28 commitments so far and we’ve seen over 600 properties.

And right now we’ve got a deal pipeline that’s probably about 20 assets that we have under control, meaning we can move forward if we choose to, or in very stage of diligence where we’re either going to throw those properties out or move them into that under control category. So the team has been extremely busy, and this really is, it’s kind of challenging because just as we are working doing our job in the Capital Markets Group, they’re looking to deploy capital. So it is very much matching dollars to deals, and we’re getting toward the end of the year here when we’re going to be finishing everything up. So it’s definitely very busy on both sides of that coin.

Jimmy: I can only imagine. And certainly, doesn’t sound like there’s any shortage of deal flow coming across your desk, which is great news for you, you kind of have a good pick of your choice there which is great. Going forward though considering the coronavirus pandemic and our response to it and people’s skittishness about getting back to normal, how are you expecting to fill up these properties that you’re developing?

Pete: So what we’re intending to do is we’ve got a strategy of 100% development, so it’s going to take us 18 to 24 months to build these properties, another 18 to 24 months to get the properties occupied, stabilizing cash flow. So yes, we’re living through a very difficult period right now and, you know, very challenging, but as I said, occupancy has remained very strong, and rental payments have been good. But I think one of the good news pieces here is that we will be delivering these properties in a couple of years when we anticipate that the pandemic will be well behind us. And so we are forging forward and we think that by investing in places and developing in places where occupancy is high, job growth is strong, absorption is high. We think we’re putting ourselves and our clients in a very good position to succeed.

Ultimately, we also just point to the fact, like I mentioned before, that our multi-family rental payments have been really strong. So even in a period where we have a global crisis, economic problems, and health problems, people tend to pay their rent especially perhaps this might actually be helping us when you are sheltering in place. And you realize that, gosh, I’m sheltering in place, I’m spending all this time at home. I don’t want to have my landlord chasing me. So in a world where we have an eviction moratorium it really just speaks to the durability and reliability of multi-family.

Jimmy: Those are all very good points. And that’s amazing too, that number that you cited earlier, did you say 94% lease collection rate?

Pete: Yeah, that’s what we’ve been seeing. And during that time, you know, if you think about our value add multi-family business where we buy existing multi-family, we improve it over time, typically over a four or five-year time period, obviously we go into each of those assets with a business plan. And our business plan underwrites for a certain amount of occupancy growth across our 40,000 multi-family units. We’re seeing our occupancy move up a little bit more quickly than we anticipated it would, so we’re going up faster than underwriting. And the way that we attribute that is that we’re seeing our move-ins are basically on target, but our move-outs have slowed down. And we think that so having a good place to live, living in a amenitized apartment building, you know, in a place that you like to live we think is really valuable to people and that’s why we think having our Opportunity Zone strategy be largely multi-family is the right way to go.

Jimmy: Yeah, that’s good theory to have there and interesting how it’s unfolded over the past several months for you. That’s really, really neat how high your lease collection rate has remained even through this pandemic and the high employment numbers and what’s resulted with the economy, a very encouraging sign to say the least. I want to shift gears now and talk about capital raising with you. I’m curious, Bridge being one of the biggest players in the Opportunity Zone space having deployed nearly $1.5 billion, where is your money coming from? How do you raise your money? Which capital channels are you having the most success in?

Pete: So over the last decade or so we’ve forged some really strong relationships with some of the leading wirehouses, banks, and wealth managers, and they’ve offered some of our other strategies to their clients. So we went back to them and we started speaking to other national wirehouses and banks, and we just laid out what our strategy was for Opportunity Zones. And we started doing this in 2018 when things were still coming together, a lot of the rules were still widely misunderstood. And it really is a partnership. You know, so obviously, the institutions that we’re speaking to have clients who have the capital gains and they’re looking for an Opportunity Zone solution.

And as you probably know, these wealth managers have a very robust diligence process. It takes months, sometimes quarters to have your strategy get approved by them. They do a full underwriting of your strategy and your team, operational due diligence, look at the back office, look at the history of the firm, who controls the capital, etc. And we’ve worked really hard, and I think we’ve had some good fortune to get approved on about half a dozen different platforms. So we partnered with them and it really is especially in these times of not getting on planes and not visiting people and not getting to stand in front of an office of financial advisors.

It really has been a lot of phone work, a lot of Zooms, a lot of emails to get to a place where we’re having all these conversations and we’re getting in front of the right people and we’re just laying out our value proposition. And we just point to the fact that we’ve got a long history in multi-family, we’ve put the resources behind this. You know, we’ve committed to this with a 17-person team, and we’ve seen over 600 properties, and we talk a lot about geography and where we’re investing.

The way I like to think of it is, it’s kind of a four-question decision tree, right? It’s, do I want to invest in Opportunity Zones? And obviously, I have to be willing to give up control of my money for 10 years to do it, am I willing to make that trade-off? If so, what do I want to invest in? And obviously, we’re biased, we think that a largely multi-family portfolio is the way to go. Who should I invest with? And of course, we’re biased, we think it should be Bridge. And then the last question is, where do I want to invest? Because, you know, the old cliché is location, location, location. So we spend a lot of time making the case for our cities, talking about the dynamics, why we think we have the wind at our back. Why we think that these are the places where we’ll have success in, obviously, if we have success, our clients will.

Jimmy: And are you raising capital solely through these wirehouse platforms or do you ever have individual investors coming directly to you?

Pete: Most of our capital is coming from those relationships. We do have clients coming direct but most of it’s coming from those relationships.

Jimmy: Got it. That makes sense. Shifting gears again, I want to go back to a point you made earlier, you said you were getting into some workforce and affordable housing strategy. I’m curious how that plays into your Opportunity Zone strategies. Certainly, there’s some overlap there. I would guess.

Pete: Yes. The workforce and affordable housing strategy is something that has always been a part of our multi-family strategy. And then over a couple of years ago, probably about three, three and a half years ago, one of our largest institutional clients suggested that we break it out as its own strategy, and it basically is a social impact strategy in the real estate space. So it’s a very interesting strategy because we cater specifically to tenants who are making 80% of the local median income. And we make sure that at least 50% of the unit, the multi-family units that we have in each of these properties is affordable to people who are making 80% of the local median income.

We also take a portion of our management fee and we use it working with local nonprofits who are putting in programming like English as a second language, financial literacy, afterschool soccer, and things like that to really make these workforce and affordable housing projects be a lot more than four walls and a roof. And what we’ve seen in this space is that the occupancy remains high, and it’s a very sticky tenant because they look at what they have, obviously, they’re paying a certain amount of rent that’s something you can quantify. But then they realize that they’re getting this extra stuff from Bridge in this programming and they tend to stay. And that makes that really a terrific social responsible strategy. It really is doing well by doing good.

And since the pandemic hit we’ve actually upped our game in that space. So in addition to that 25 basis points, we’ve actually increased that with additional capital. And we’ve been helping our tenants, we’ve delivered over 50,000 food baskets, school supplies, Chromebooks. We’ve done over 5,000 wellness checks, 14,000 outreach calls to residents. So this really is a social impact strategy. And it’s completely separate from our Opportunity Zone strategy, but we think that the whole spirit around it, which is about building communities and building a nice place to live, we think helps us as we are building out our Opportunity Zone strategy, because let’s face it, that is the core of what the Opportunity Zone benefits were all about. Obviously, we spend a lot of time thinking about the tax benefit but the other side of it, which is equally important is creating nice places to live and creating nice spaces in these Opportunity Zones.

Jimmy: I couldn’t agree more with you there. And, you know, I think if there’s some more reporting legislation on the horizon that really wants to address how the Opportunity Zone industry is actually achieving congressional intent which is social impact and lifting residents out of poverty and creating jobs, you know, what you’re doing is definitely going to be a pretty good defensible strategy not only for you and your strategy at Bridge but also for the Opportunity Zone industry and incentive as a whole.

You mentioned your tenants a lot in that previous answer. You know, you’re working down at the property management level, in addition to being up at the capital raising level and the construction level. You mentioned vertical integration earlier. How does being a vertically integrated company really add value for your bottom line?

Pete: It’s important because we control the value proposition up and down the chain. So it’s Bridge employees who are making the investments. It’s Bridge employees who are choosing the investments and evaluating them. And then ultimately it’s Bridge employees who are interacting with the tenant. And it’s one message up and down the value chain. We’re not negotiating with a third party to when we have a challenge in one of our markets. It really starts from the top. So we think that’s important.

We think that it’s also important because, like I said before, there’s no way we can have an edge when we’re buying data, anyone can buy data. It’s the additional information and the anecdotes and the strategies that our on-the-ground people are executing to help make these better places to live, whether it’s workforce and affordable housing, office, seniors, our standard multi-family strategy, or obviously, Opportunity Zones when we ultimately fill these properties up and we have tenants. So we think that it’s always important but perhaps never more important than today. And like I said before, obviously, multi-family as an asset class has been doing well through this crisis better than people might’ve expected. And we like to think that on the margin, part of that success is because we’re vertically integrated and because of those relationships we have with the tenants.

Jimmy: Very good. Well, Pete, I want to thank you for joining us today. We’re getting toward the end of our interview. But before we go, can you tell our listeners where they can go to learn more about you and Bridge?

Pete: Yes. So go to our website,, so Bridge IG is Bridge Investment Group And we’ve got some great information about our teams and our strategies. Our research team publishes a terrific weekly piece that helps you sort through the week’s economic news. For instance, we’ll talk about GDP expectations, the expected COVID recovery, how small business is doing. So it’s not just a real estate piece, it’s an economic piece that our research team does a great job on.

We recently wrote a terrific white paper about the office market because obviously people have a lot of very strong opinions about office, but office is not just one thing, it really varies by city and where you are, geography is super important. And the suburban office market. And the Secondary City office market really does we think have an edge as we go forward and we move forward through COVID. We’ve also done a couple of very interesting blog entries about Qualified Opportunity Zones. One of them we cover a lot of the same ground we covered today, how we’re executing our strategy through the pandemic. And we also publish one that compared 1031 investing to QOZs, obviously two terrific tax breaks, we broke them down and did a good compare and contrast.

Jimmy: Perfect. Thank you. Well, for our listeners out there today, I will have show notes for today’s episode on the Opportunity Zones Database website. You can find those show notes at And there you’ll find links to all of the resources that Pete and I discussed on today’s show. And I will be sure to link to as well as the insights section of their website where they have featured a lot of their weekly briefings. And I’ll also link to the blog entries that Pete just mentioned and that white paper on office as well. Pete, again, thanks for your time today. I really appreciate you taking some time out of your day to join me and my listeners. Thank you.

Pete: Jimmy, thank you so much. Thanks for the time and attention.

Jimmy: Absolutely. Thanks, Pete.

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