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Posted Sep 21, 2022

Fundraiser feature: Ernest Johnson at ApexOne Investment Partners

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Ernest Johnson, Partner and Executive Managing Director at ApexOne Investment Partners

Q: How did you get your start in real estate?

A: I started out with a portfolio of student housing assets scattered across the country. I did that for a few years, then I moved into the industry flex space – suburban office development and leasing to broaden my skill set. Then I was hired by JMB Realty, who at the time was the largest commercial real estate investment firm in the world. I worked with them for 10 years, in Chicago and around the southeastern United States, as well as on the West Coast as a senior executive. I took advantage of an opportunity to move to Houston to be a partner in a management and servicing firm that later moved into the development and investment business. I left that firm in late 2011 to join ApexOne.

Q: What’s the history of ApexOne?

A: Jim Hearn started ApexOne with Bill Saul, David Steele, and Tim Burns in late 2010 with the goal of creating a very small investment company that was laser focused on one sector: multifamily. They anticipated the growing shelter crisis in the United States, which came to fruition during the pandemic. I joined as a partner in late 2011 and we’ve now acquired almost $3 billion dollars of assets, raised four successful funds, and we're about to launch our fifth.

Q: How do you divide up company responsibilities?

A: My primary focus is on investor relations – setting the strategies for the fund and raising the equity capital. Tim Burns, my partner, is our chief investment officer. He oversees the acquisition, asset management, and dispositions. Jim Hearn, who is also my partner, works with me in investor relations and oversees property acquisitions, dispositions, and reporting. But because we are an intentionally small company – we only have 13 employees – we all wear a lot of hats.

Q: To what do you attribute ApexOne’s impressive fundraising success in 2021?

A: I think the reason we were so successful in 2021 is that we did a hard stop in 2020 at the outbreak of COVID-19 to ask, “Okay, what the heck is going on here?” No one really knew. So, we looked at what we did know – and that was that whenever there's been a recession in the United States, multifamily apartments were always the last to suffer occupancy and value declines, but were the first to rebound during the ensuing economic recovery. There is a strong corollary between job growth and occupancy. When job growth slows down, occupancy tends to decline. But when jobs are being created, occupancy increases. We came to the conclusion that there were going to be opportunities to acquire high quality properties from distressed owners.

Q: What happened next?

A: We met with our team of economic advisors and key brokers to get their take on whether this theory was correct. They agreed, and the ApexOne Multifamily Special Situation Fund IV was formed. The fund focused on distressed sellers, not distressed properties. While other firms focused on office, retail, hospitality, and sectors which really took a beating because of the COVID lockdown, we found opportunities in the multifamily space. Of the 18 properties we acquired, 17 were true off-market or negotiated transactions where sellers with limited time to close were willing to sell at a discount to relieve the project of their personal financial stress. Word got out to the investment community and, instead of our $200 million goal, we raised $355 million. That’s about three times more than we raised for our previous funds, and we did it in a third of the time. We also had properties in other funds that had matured in the holding cycle and were ready to sell. All told, the firm completed 25 transactions in 2021.

Q: How has ApexOne benefited from partnering with Juniper Square?

A: When the multifamily housing market took off post-pandemic, things like staying in regular touch with investors and marketing the company were taking valuable time and effort away from raising capital and closing transactions. We searched for an administrative and investor relations management solution, but we found that most software vendors over-promised and under-delivered on what they could provide. Then we found Juniper Square. The platform was just what we needed to facilitate our processes so that we were able to get information out, bring investors in, and keep them informed, which was critical to our success.

Q: What’s next for ApexOne?

A: For our next fund, we're again discussing where the opportunities lie. We think there may be an opportunity to explore discussing the development side of the business. One of the byproducts of our Special Situation Fund was that we met a lot of developers that had distressed situations and we were able to bail them out – in a gentlemanly and gentlewomanly way. We didn't try to take advantage of their situation. We knew the return expectation that we wanted to hit for our investors. We knew the situation the developers were in. We reached agreements that worked for both parties. Several of the sellers have come back to us now and asked, “Would you all like to be my new equity partner in development projects?” and we said, ‘YES!’ We’ve set a tentative goal between $350 million and $500 million. We will be working with some of the best developers in the country, and we currently have several projects we’re underwriting and a few under contract or letter-of-intent.

ApexOne was listed as one of the top fundraisers in 2021 using Juniper Square's Digital Subscriptions feature. Check out more winners here.