In a recent episode of The Distribution by Juniper Square, Managing Director Brandon Sedloff interviewed Michael Episcope, co-founder, co-CEO, and co-chair of the investment committee at Origin Investments. Watch an on-demand recording of the entire conversation here.
In its 16-year history, Origin Investments has grown from a two-person operation into a major multifamily investment firm with almost $2 billion in assets under management (AUM), 4,000 individual investors (termed “investment partners”), and 70 wealth managers who regularly invest with the firm.
Although headquartered in Chicago, Origin’s investment philosophy involves investing across the Sunbelt and pursuing three strategies: building, managing, and financing multifamily projects. “From the day we built this firm, it's always been about seeing as many deals as we can and having our tentacles out there.” The firm also has two guiding principles: client service, which comprises reporting, communication, and education, and the production of strong returns.
A focus on individuals over institutions
“The high–net-worth market is who we are and what we understand,” Episcope said. To appeal to the individual investor, Origin started offering an evergreen structure instead of closed-end funds. Introduced in 2019, the IncomePlus Fund has become Origin’s flagship fund, pursuing the three different strategies of development, cash flow from operations in a “core plus” category, and debt for stability.
Another major strategy is credit/debt, offered through the firm’s Multi-Family Credit Fund and the Designed Strategic Credit Fund. Episcope notes that each of these offerings is “designed for tax efficiency and the individual investor who is trying to get passive income, grow wealth, and build upside over time.”
In addition to a great product, Origin is committed to a great customer experience, building out an investor support staff of more than 20. “Each of our investors gets at least a 30-minute-long call with our team to talk through the fund details and operations. The last thing we want is someone investing in an asset that they’ll hold for five years without understanding our responsibilities and deliverables.”
And Origin isn’t just looking to connect with experienced real estate investors. In addition to the 4,000 active investors, the firm also has a marketing list of 80,000 potential investors who have opted in to the firm’s email communications. “Our mission is to enhance the lives of everyone in the Origin community, even people who come to our website and don't invest with us. If we can help them make smarter investment decisions and stay away from losses, that's a win to me…You have no idea who is in your ecosystem. Some of these could be students, and some of these could be billionaires just waiting for the right opportunity before they make an investment.”
Using machine learning to “see” the future
When thinking about the future, Episcope notes, “You have to be contrarian and place your bets before the market goes up. You have to look out a year from now.” In order to better inform decision-making, Origin developed a machine learning model, which the firm built in-house with data scientists from the University of Chicago. “It's been a big advantage for us to know where the next markets are going to be because if you're late to the game, it's too late.” For instance, Origin was able to identify opportunities in markets like Colorado Springs, Colorado, and Jacksonville, Florida, well before anyone else. “We were there when dirt was $25 bucks a square foot. Three or four years later, it was $150.”
Episcope added that the model has picked up on signals that the team had a hard time trusting at first. “In May 2020, the models started going haywire,” showing annual rent growth of as much as 17% in some markets. The numbers felt so unreasonable that Origin’s data scientists thought the model was broken. But ultimately, “it was absolutely right.”
The model was also the first to predict negative rent growth in 2023, which helped Origin make more thoughtful investing decisions when “everybody else was calling for positive rent growth.”
However, Episcope warned that even with a fantastic data model, success comes down to the specific deal. “If you overpay for a deal, even in a booming market,” he says, “you can still end up losing money.”