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Every Friday, join us as we dive into the latest in real estate multifamily with David Moghavem, Head of East Coast Acquisitions at Trion Properties. David invites top experts who know the ins, outs, and trends shaping the real estate multifamily market across the nation!
Whether you’re a seasoned investor or just curious about where the next big opportunity might be, Deal Flow Friday brings you the weekly inside scoop on what’s hot, what’s not, and what to watch for in today’s ever-evolving real estate scene.
David Moghavem (00:01)
All right, welcome to another episode of Deal Floor Friday. I'm your host, David Mulgavum. Today we have Dwight Dunton, the founder and CEO of Bonaventure. Bonaventure has over 2.9 billion AUM, 9200 units across the mid-Atlantic, Midwest, and Southeast. They develop, own, and manage. They have 615 million of their own capital invested alongside their clients. And
They're one of the most active sponsors in DSTs and 721 Upreads. So Dwight, it's a pleasure to have you on.
Dwight Dunton- Bonaventure (00:37)
it's a pleasure to be here. Thanks for having me. I'm excited for the next thirty minutes or so to chat.
David Moghavem (00:43)
Yeah, it's gonna be exciting. I would love to get in the weeds on the strategies you guys up to are up to. I mean, with DSTs and 721 upreads, you've carved out a really nice niche at a time, quite frankly, where promotes carry has been wiped for the most part, ⁓ with maybe little to no sign of that really returning with where treasuries are at and rates and borrowing costs. Meanwhile, you're seeing a lot of.
nice new construction deals that you know long term will be great buys, buying below replacement costs. And so it feels like the niche you've carved out is also great timing with where the market's at today and buying below replacement costs and kind of looking long term. So I'd love to maybe start for you first maybe give a little bit of ⁓ intro on Bonaventure, but more importantly, what are you guys focused on right now?
Dwight Dunton- Bonaventure (01:40)
Yeah. Well, ⁓ we've been doing this for twenty-seven years. I started the company on a a very lucky circumstance that I found my calling. No one is like five years old in kindergarten says when I grow up I want to be a landlord. ⁓ but fortunately I discovered that at a young age and and love everything about what we do because I get to be a financier, I get to be an architect, get to be an engineer, I get to be a marketing person, I get to be
David Moghavem (01:55)
Ha ha.
Dwight Dunton- Bonaventure (02:09)
help people make some of the most important decisions about their life, like how do they build their financial future. And so all that was started because, you know, 27 years ago, my family owned a slice of an apartment building. We were passive investors in in every sense of the world, like literally just got checks. And our partners that had built that property and owned it had become a huge company. And they kind of, their goals and our goals had diverged. And so
I did the crazy thing when they told us it was a C property that needed five million dollars of capital improvements and we didn't have five million. Most people would have said, Well, how quickly can we sell? And instead I said, We'll be buyers. And so I somehow put together a deal to buy 378 units from a large publicly traded conglomerate, convinced Fannie Mae to lend me mu a bunch of money, let me start a property management company, a bunch of things that even as I say it again, telling this story for like the hundredth time, it sounds totally insane.
David Moghavem (03:08)
Right.
Dwight Dunton- Bonaventure (03:09)
But over the last, you know, twenty seven years, what we really focused on then and as we do now, which is be great real estate investors, never lose money, and use utilize all the tools and the tax code to make good investments great by not giving ⁓ extra to Uncle Sam.
David Moghavem (03:27)
Yeah, and I think the tax code is really the key and kind of what you guys do from looking from afar. Kind of what I was saying before. A there's a lot of groups out there and syndicators putting deals together, looking short term, three to five year hold. Even if you cost seg and depreciate and try to get that, you get a recapture. And it's not truly taking advantage of the beauty of real estate, which is the tax benefits.
I think you guys have mastered that in some of the different structures you've created. DST, 721 Upreads. I guess before we dive into that, one thing I also noticed is you guys are doing developments as well right now. And it's it's interesting because it's a time where people usually are not developing, where you could buy relower replacement costs. So maybe to start, like what's getting you guys
Dwight Dunton- Bonaventure (04:11)
Yeah. Yeah.
David Moghavem (04:23)
having conviction to develop right now.
Dwight Dunton- Bonaventure (04:26)
Yeah. Well, ⁓ just stepping back, Bonaventure is several different businesses that all ⁓ have symbiosis but operate independently. So we've got our investment management business that manages almost three billion dollars worth of capital, including our money. ⁓ we've got the development business, we have an internet service provider business, a property management company, and our newest business, which is an insurance business. And so all those businesses
David Moghavem (04:52)
Mm.
Dwight Dunton- Bonaventure (04:55)
get some benefit from working with each other, but they really operate autonomously. And your question about development, development is the most cyclical of all those businesses. And there's moments in the cycle where you should develop everything you can. And there's moments in the cycle where you should not develop anything. And then there's moments in between where it's really deal specific. And
We hadn't started construction on anything for two and a half years and we're fortunate at the beginning of this year to sneak, I literally say sneak three shovels in the ground because we caught the perfect window between, you know, tariff tantrums and interest rates rising, where we were able to get deals in the ground with the right costs, right returns, and and right interest rates that they went. And if I was having this conversation today and
We wouldn't be going on them. And so yeah, costs are high and borrowing costs are high. So means you need more equity, which makes the deals harder to pencil. And construction costs continue to be exacerbated by, you know, oil, ⁓ tariff changes. ⁓ and then frankly, all of the AI infrastructure boom that's going on. I mean, that is fairly priced inelastic, you know, a 1% interest rate.
David Moghavem (05:53)
Right, with where borrowing costs are at? Mm-hmm.
Dwight Dunton- Bonaventure (06:21)
If you're NVIDIA, Google, they don't care. They they have they can make so much money on those deals, they're like fine, it's cost of doing business. But
David Moghavem (06:29)
They're just underwriting feasibility. They're not underwriting a return on cost.
Dwight Dunton- Bonaventure (06:33)
Rig exactly. And so that business is super cyclical. And so to answer your question very directly, we can buy deals maybe slightly below what we think our all-in cost is on those three deals, which is not a standard rule of thumb. In other markets, we can buy them significantly below cost. These happen to be in markets that are have been supply restrained, which means the bottom hasn't fallen out of existing assets.
So if this was Austin, Texas, I would have been like, I can buy deals for half what they cost to build. If it was Nashville, half what they cost to build. But when you talk about Norfolk, Virginia, that market has continued to have rent increases and NOI increases and there's no discount to replacement cost available.
David Moghavem (07:04)
Forget about it.
Right. High barriers to entry markets, supply constrained, maybe land constrained. I'm I'm assuming stronger demos potentially. ⁓
Dwight Dunton- Bonaventure (07:31)
Yeah, I mean, if you I think there's a couple of rules of thumb we've picked up about being like making money in real estate. One is have deals where there's no other supply coming. And so like forget everything else, forget the macroeconomic picture, the the part of the pitch book that's like the last 40 pages where they print out beautiful, pretty pictures of all the job announcements and maps of all the employers. That is just smoke.
It's just to distract you, all that matters is how much supply is possibly coming, what is the impediments to competitors? And what we found is you have dynamic markets like Austin, like every company, every factory, Tesla, SpaceX, tons of jobs growing.
It has been the worst apartment market for the last three years. And it has nothing to do with the economic dynamism, has nothing to do with the last 30 pages of all the job announcements, in that it's all about supply. And you have other markets where they don't show up on anyone's radar as attracting the most jobs, but they show up on everyone's radar as consistent revenue growers. And that's a lot of the Midwest markets currently. It's some of the secondary Sunbelt markets.
Those markets have been tremendous because they've been passed over to by developers. So that is the first rule. The second rule is don't give away unnecessary profits to Uncle Sam. Use all the tools and the tax code. Those two things together will make you a significantly better real estate investor than the average.
David Moghavem (09:11)
Yeah, I'll let's go to the to the first point because I think it's really important. You hear the sexy job announcements, you hear the inbound migration, you track the U Haul data, and that's just one side of the equation. If there's no barriers to entry, you're gonna get smoked by all that growth. And so it's really important to look at supply dynamic supply demand dynamic rather than just demand or just supply.
And we like some of those steady markets as well. Some of the coastal markets are naturally can be a little more supply constrained. So we've been there, whether it's West Coast in California or ⁓ East Coast in in Florida. And then we're also seeing in general that if if there's you know good quality demos and good schools and irreplaceable.
And you're not building commoditized product, ⁓ you can you can do well by going long on those type of deals, whether some of the commoditized products, you got to get the timing right. And so, and and I was gonna I was gonna kind of continue on that. Dwight, it sounds like when you guys develop, you have a hold strategy. You're you're building to to core, building to own rather than some merchant developer who's just in development.
Dwight Dunton- Bonaventure (10:19)
Yeah. I agree.
David Moghavem (10:38)
building by the time they get CFO, they're not even seeing the cash flow. They're just flipping out of it. So maybe go into that strategy once you're kind of done developing. Are you putting it into these DSTs and 721 upreads directly or how how's your strategy after you're kind of going vertical?
Dwight Dunton- Bonaventure (10:51)
Yeah. Yeah. I would say broadly across all the ways that we invest, whether it's buying existing assets, doing value add development, whether it's in our perpetual life fund, a single asset investment, a DST, our hold period is generally from five years to forever. And we want it's really simple. ⁓ we want to make fewer investment decisions because if you're constantly flipping and trading, you're making more decisions, which means you're more likely to make a mistake.
Just you're making more decisions, you can't be right every time. And so if you limit the amount of decisions you have to make, then you're just going to make fewer mistakes. And they can be higher quality decisions. And you can say, I if I could, if I had to own this deal for the next 15 or 20 years, would I buy it? That changes a lot of things because a lot of people would be like, heck no, but I'll own it for three years while I put lipstick all over this pig. And
David Moghavem (11:24)
Mm-hmm.
Interesting, yeah.
Dwight Dunton- Bonaventure (11:50)
That's fine, but that is really not a sustainable business because the economy cycles and interest rates cycle. And if I said to you last year that the Fed would be raising rates this fall, people would have been like, no way. But if your business plan was predicated on getting out this fall, like you had to, you'd be in a lot of trouble. Versus if your business plan was like,
Rates will go up and down. We have a fixed rate loan for the next seven, 10 years. We don't really care. That is a ⁓ much more resilient business plan. Maybe you don't make the massive grand slams because you just timed it perfectly, but you also don't strike out. And we just want to avoid strikeouts at all cost.
David Moghavem (12:40)
Yeah, I mean, I I completely agree with that. ⁓ I think when you're looking at some of these longer-term bets ⁓ and and being in a maker market in that regard, right? Rather than some of these trader markets where you're just trying to quick flip, it's not only bad with timing, but it's also bad with tax, as you were mentioning on your second point. ⁓ and so maybe talk a little bit about.
The tax strategies here, I want to talk first about DSTs. ⁓ and even before DSTs, you know, I understand DST as like the tick 2.0, and you've been around, you've been doing this for 27 years now. Were you in ticks? Were you doing normal ticks before DST? And how did you get into DST ⁓ business?
Dwight Dunton- Bonaventure (13:30)
Yeah. So I think to help your audience, ⁓ you know, DST and and a tenant in common are just some wrappers you can put around a property to allow someone to acquire a portion of that property and still meet the requirements for a 1031 exchange. Because for whatever reason, the IRS says if you sell a property and buy a piece of a partnership that owns a that that building.
You have not completed a 1031 exchange because you sold real estate and you bought partnership units. However, if that same apartment building has a tenant in common wrapper or a DST, which stands for Delaware Statutory Trust, your fractional ownership of that property qualifies as real property. So that's fundamentally, you know, why this enters the conversation. I think getting at your question, ⁓ the wrappers, you know, in
2004, five, when the economy was booming before the housing market busted, there was a massive frenzy and people buying fractional interests and properties through a tenant in common, a tick structure. And those were horrible real estate deals. And the entire industry imploded, and everyone basically said tick was a four-letter word and blamed the structure rather than the participants, the decision makers, the brokers, and the actual investors.
And so people said, well, ticks are terrible. We're gonna swear those off. Now this thing DST is is better. And they're not better or worse. I mean, it is a tool. And you know, if I have a stake knife and I use it to cut my steak, it's very helpful. If I use it to stab you, then it's very dangerous. And I think people use the tenant in common and the DST in a dangerous way. It's not the tool that it's a great tool to solve a very specific problem. ⁓ and so to your answer to your question, we didn't.
We did one ⁓ tenant and common deal in the original, you know, cycle. And I just felt like the entire infrastructure around that was not something that we wanted to participate in because we saw so many bad actors. I I'm feel very terrible for a lot of those investors that it turns out our intuition was correct, that it was just not a good industry, and there's a lot of bad people selling products that were not good investments. I think today, you know, again, there's
The DST marketplace has got some great companies, some really intelligent ⁓ advisors that are helping their clients. And then like any industry when it's frothy, you get some marginal players in. And I think there's some of those in there, but I it feels a lot less like that. And I also feel like Bonaventure, we are ⁓ a much bigger organization and we can say, you know what, that's
We're not even getting anywhere close to those terms because that's not something that we'd put our name around and people will listen. Versus back then, there was very much, if I had said the same thing, people would say, We're not going to do business with you. And so now at our scale and size, we can say, this is what we will and won't do, and people will respect that. Whereas before they would just like push us off to the side. So it's a better marketplace with better actors and Bonaventure's reputation is such that.
David Moghavem (16:48)
Mm-hmm.
Dwight Dunton- Bonaventure (16:53)
People will say, I actually appreciate that you have standards that you're willing to live by. And we actually like that and we will do business with you. And these people who are willing to do anything that anyone asks for any reason, those are not people we want to do business with. So it's different world and Bonaventure is a different company.
David Moghavem (17:12)
Yeah, and I I wanna maybe ⁓ follow up with that. So what's what's really changed, like what's like the the most important changes and fixes that are with DSTs rather than back in the day with ticks, that you're avoiding some of those bad actors or you're able to kind of negate some of those issues with with ticks.
Dwight Dunton- Bonaventure (17:31)
Yeah. I think one of the challenges with the tenant and common structure was ⁓ it required unanimous consent to make certain changes, like to refinance the property or to change property management companies or whatever. And if you had 30 people who all invested and bought a slice of a property and those 30 people didn't know each other, and you need every one of them to come on board, maybe there's somebody who just doesn't even open their mail.
Or maybe there's somebody who's recalcitrant who just likes to be a thorn in people's side. And so it caused these projects to seize up and get stuck at the worst time because they needed to be nimble to make whatever decisions to grapple with what was going on. Today the DSTs are structured where the sponsor has significantly more ability to drive outcomes and to zig and zag when the business plan gets met by a different reality than was expected.
⁓ and so I think that's an important innovation. I also think the DST to upreet, where you combine the 1031 exchange to the 721 Upread is an important innovation because one of the things there's a segment of the pop segment of the industry that is churning clients' accounts. And for some clients, selling one property and buying another is a great decision, but that
David Moghavem (18:38)
Mm-hmm.
Dwight Dunton- Bonaventure (18:56)
There are some people that, and it's a very small minority where that is their goal because it generates more transaction fees. And this is a counterweight to that because you get somebody from their current property into a fractional interest to then becoming a shareholder in a large diversified fund. And it really removes the incentive to turn that account because now they're in their destination, their permanent destination, which is part of the large fund. So I think that that has been an important innovation.
David Moghavem (19:25)
So to walk it through it, someone, you know, John Smith owns a property, sells it, comes into you one of your DST vehicles, carries interest in that DST vehicle till ⁓ it eventually gets converted into your or sold into the 721 Uprie. And then now they have operating shares in this upre that's diversified with a ton of other properties.
Similar in class and vintage, but now diversified.
Dwight Dunton- Bonaventure (19:58)
Yeah. You nailed it. ⁓ you've sounds like you've told that story before that but you nailed it. And I think for those clients, because some clients it's right for them to stay owning a single property. But for other clients, it's right for them to become part of a diversified pool because they want exposure to the industry and they want somebody to make those decisions about which properties to buy and sell. They want to be able to
David Moghavem (20:03)
Yeah.
Dwight Dunton- Bonaventure (20:24)
you know, have the ability to sell a few shares at a time because a lot of these upreet programs have limited liquidity where on a quarterly or annual basis you can sell shares. And so it becomes a much more flexible tool than just simply owning one property or a piece of one property. And so I think for those investors that are looking to kind of have a set it and forget it, ⁓ market exposure to have professional ⁓ institutionalized management, it's a great investment for them.
For other people who are like, you know what, I might like to actually use this capital to buy my that bed and breakfast that I want to own and run when I retire, they should probably stay in a single property. If they want to, you know, buy that development parcel because they're going to be ready to become a developer and they need this capital role in it, they might be better off in a single property. But for other people, being part of a fund is a great solution for them.
David Moghavem (21:21)
What I think what's also interesting is in acquisitions, I mean, we we're looking at deals and we see some of the sale comps and we see some of the buyers like yourselves or whoever else has 721 upreads that they're buying it using this mechanism to have the seller come into the 721 UPREIT. I think that's a game changer because you see these sellers who might be sitting on their properties for God knows how long and they have
A major tax liability. They want to retire. ⁓ they're at, especially right now with how multifamily is and the operational struggles, they want to wave the white flag and they don't want to get hit with this big tax bill. Here you come with a 721 up restructure that's major tax advantages, diversified in a whole pool. Say we'll buy your property and we'll instead give of giving you cash, we'll give you shares. And now they don't have to pay tax, they're diversified and ⁓
I think that's ⁓ a huge differentiator on the acquisition side to actually buy better properties.
Dwight Dunton- Bonaventure (22:26)
Yeah, ⁓ you nailed it. There are in addition to people who want to move from their current asset into the fund by way of a 1031 exchange. There's some people who own amazing properties that we would love to make part of our fund. And we can directly UPREIT those by that 721. And for those clients, there's a lot of motivations. I think you nailed a a bunch of them. It's maybe they are want get out of the active role. ⁓ they're tired of
The terrible tease of toilets, trash, and tenants getting that phone call on Saturday night. ⁓ maybe that they have a loan maturity coming and they need to inject capital and they don't have it. And they also don't think that they want to fire sale the property because right now bids might be thin. And this we become a solution to that because, you know, we have we can make a small pay down on one loan by maybe borrowing against an asset that's performing better and
David Moghavem (22:58)
Mm-hmm.
Dwight Dunton- Bonaventure (23:25)
We might be a better ⁓ platform to have that property recover. And so I think there's a lot of reasons, but yeah, our, I mean, our pipeline of deals that are potential upreets is larger than it has ever been before. And I think that happens when the market shifts. People's plans get kind of thrown to the wind and they are like, okay, I need to develop a plan B.
David Moghavem (23:45)
Mm-hmm.
Dwight Dunton- Bonaventure (23:51)
I think the other reason is is we've been in the market telling our story along with some other great firms about the benefits of an upreat. And so now I think it's more widely known. I think, you know, five years ago when we started this, it was I could talk to 15 really smart real estate people and they're like, maybe I heard that one time, but I don't know anything about it. Now our phone rings with people explaining to me all the benefits of why their clients should do an upreet with us.
David Moghavem (24:19)
So so why is that? What caused this shift ⁓ in in the desire to come into a DST or an UPREIT?
Dwight Dunton- Bonaventure (24:27)
Well, I would say in 2022 and 21, when properties were selling it, you pick your cap rate, a three or four. You could sell that property at such a premium to its intrinsic value, you could pay all the taxes in the world and still be better off than if you had just said, all right, what's the normalized value at a five and a half? And so I think that assets had gotten so bubblish that people would be like, you know what?
I don't want to mess with that. I'll just take my cash, I'll pay my taxes, and I'm still better off than I ever anticipated. I think now, you know, things have come back to normal. And for unfortunately for some people, they've had their asset values fall further because they've been in overslied markets or their cap rates have gone up, or they had floating rate loans and they now have been feeding it. And so now every last dollar really matters because they're not playing with the house's money.
in an overpriced environment, they're playing with their money and they need to keep every penny of it and not give it to Uncle Sam. And so I think that's motivating people to be scrappier and they see us and this and what we can offer and other people who do what we do as being the means to preserving as much value as possible so they can stay in the game and keep compounding.
David Moghavem (25:47)
It's good point. ⁓ on your DSTs, what kind of leverage do you have on them? And I and I asked that because I think you're also entering a time out of 2022 where people might have higher LTVs if they're trying to come into a DST. And if you're lower, but usually these DSTs are lower leverage, right? I I'm not sure what what your leverage is, but ⁓ it would trigger a boot, right? Of some sort. And so like how are you?
seeing that trend and what leverage are you offering to kind of minimize maybe some of that boot?
Dwight Dunton- Bonaventure (26:21)
Yeah, I think you that's a great question. And I think unfortunately there's a lot of people that find themselves in a high LTV situation they hadn't anticipated. So some of our deals are completely unlevered because there still are a lot of people that own buildings for cash. ⁓ the ones we have in the market right now. I'm sorry. Yeah. Yeah. ⁓ the ones we have in the market right now are plus or minus 50%. However,
David Moghavem (26:37)
Smart men, yeah, smart, smart people, smart people.
Dwight Dunton- Bonaventure (26:48)
I think we've just pioneered something that gets at your last issue, which is somebody's like, well, 50% is good, but the property I'm selling, I started at 50%, it's now gone down in value and is at 70. And if I buy that 50% replacement property, I have a taxable event. So we have just come up with a gap loan solution where we're able to lend to that investor.
And it's select investors on our deals where we are able to lend them additional money to bring their effective LTV up from the fifty percent that the first mortgage offers to get them to 70 so that they can complete their exchange without boot. And then in two years, they would then roll into the REIT with their net equity value.
David Moghavem (27:36)
wow. That's very interesting. So you're providing extra leverage to negate the boot and then they they just have to make sure they're coming into this seven twenty one UPREIT, right? If if they're not coming into the UPREIT then it
Dwight Dunton- Bonaventure (27:48)
Yeah. Yep.
Yeah, if that's not the right solution if the UPREIT is not the right long term solution for them, then this gap loan solution is not the right solution because they're connected. Because that ultimately is the means in which our gap loan gets repaid, is when the property gets upreaded, our gap loan gets paid off. And so they're tied together.
David Moghavem (28:00)
Yeah.
Mm-hmm.
Yeah. So it's a great it's a great vehicle for you guys to funnel these DST investments into your upreach.
Dwight Dunton- Bonaventure (28:17)
Yeah, I I think, you know, I would put it a different way. ⁓ what we see is the market is all clustered in the center and nobody is innovating trying to solve investors' real problems. And I, you know, there's some high LTV products in the marketplace and I looked at them and I said, I hope I never find that myself in that situation, but I would not do that deal.
David Moghavem (28:30)
Mm-hmm.
Dwight Dunton- Bonaventure (28:44)
Because it was just, I didn't find it to be a good economic deal. And I said, and and I I'm fortunate that I've we've got a great company and people running it. And I can spend all my time talking to clients and like understanding their pain. And so I was talking to clients, and I said, I think there's a better way. And it was about combining a traditional first mortgage plus using Bonaventure's balance sheet for gap loans. We came up with that idea last fall. We had a group.
approach us this spring that had a property that went from 50% LTV to 70 and said, Dwight, do you guys think you know can help out here? And I said, as a matter of fact, we can. We've been looking for an opportunity to test this program out. And so we've got closings on that asset right now. And I think we're gonna, you know, help I think 30 investors out. It's gonna be a $50 million project. So I I it makes me feel good.
David Moghavem (29:35)
Amazing. Yeah. I mean, you're you're yeah, you're hitting, you're striking a chord here because of like what we were just saying. Like people may have not wanted to get into this higher leverage situation, but with where property values are and hold periods being forced to force people's hands to sell, they want to preserve capital. Now they have to get trigger a boot if they're going into something lower leverage, which most DSTs conventionally are lower leverage for the most part. So
Dwight Dunton- Bonaventure (29:59)
Yeah.
David Moghavem (30:05)
By creating this bridge or gap solution on debt and then using that as a way to funnel into your 721 UPREIT. I mean, that's that's genius. ⁓ do if someone's in the 721 UPREIT, can they lever against it for like like collateralize against it if they want to have like a private loan for something else?
Dwight Dunton- Bonaventure (30:28)
Yeah. So we we do not offer that. But if, you know, you go to your bank and say, Hey, I need a loan, and they say, What collateral do you have? You say, I've got my car, got my stock portfolio, got my house, I've got a million dollars in this REIT. If they'll take that collateral, then, you know, as long as it doesn't adversely affect our investors, ⁓ I I don't see why that wouldn't work.
David Moghavem (30:30)
Mm-hmm.
Nice. Awesome.
Dwight Dunton- Bonaventure (30:54)
Yeah. It's ⁓ it's a it's an interesting time. The market is shifting and I think it's revealing a lot of problems that maybe people didn't see coming. And, you know, we want to be part of solving those problems for clients. We really feel like that is our mission in life is to help people afford their long term dreams. And right now a lot of people's dreams are on detour and we wanna help them get back on the road.
David Moghavem (30:55)
⁓
Yeah, and let's let's get into that a little more. You know, you guys work with families, not institutions. ⁓ you know, you work with private families and clients that, as you said, are making life decisions here. What drove you to that side of the business rather than traditionally people talking to different institutions or allocators in that regard?
Dwight Dunton- Bonaventure (31:26)
Yeah.
David Moghavem (31:47)
How what what was the conscious decision that kind of led you to that?
Dwight Dunton- Bonaventure (31:50)
Yeah, I think it is all about where the business started was my family, and we had this problem with this property where our partners weren't stewarding our family's nest egg. And I had to solve that problem. And then it was like, okay, well, how do we help our family accomplish its long-term goals? And then some more families we knew started investing with us, and it came very naturally because our story rhymes with everyone else's family. Like we've got
You know, not every family member is on the same page as to what to do with the money or how to allocate it. And, you know, some people say, I want to leave it all to charity. Other people are like, I want to spend it all before my kids get it. And some people are like, I want to be able to retire early. And everyone's dream is different. And even within the same family, they might not all be on the same page. And so we have had so much experience talking to those clients. And, you know, I've probably been on the phone today with three families.
And every one of their stories is totally unique, but it rhymes with 80% of everyone I talk to. And so I think it's just the origin story of our company and the way we've gone. And I can relate to somebody who's like, I've got these challenges with estate planning, or I've got a concentration issue, or I need more liquidity. Like, I get it. And so it's just that's how I what resonated with me, and that's how I built the firm.
To help those families.
David Moghavem (33:21)
Yeah, I mean, I would I would add to that there's so many you know, groups that are trying to raise capital and it's almost become a bit commoditized at this point of what they're chasing and what they're trying to solve. I think you guys have carved a nice niche where a you're not going, you know, you're not following the herd. You're able to have family capital that's looking longer term, and so you're not just
investing in what's hot, what's not. And you're solving a real need through through tax strategy, which is really the essence of what real estate's all about. So so credit to you guys for kind of carving out that niche and sticking with it. When I'm sure at times when ⁓ multifamily was hot, when real estate was hot, when interest rates were at zero, people were making crazy promotes, could have, you know, I'm not going to speak for you, but there was probably times where you might have had FOMO in regards like, wow,
that people are making crazy promotes right now. Are we are we doing something wrong? And you guys stuck to your guns. And now you're at a time where ⁓ your your side of the business is actually becoming really trendy, where DSTs are now, ⁓ as you said, not just you don't have to explain it anymore. People are explaining it the advantages to you. So credit to you guys for kind of sticking to your core competencies.
Dwight Dunton- Bonaventure (34:45)
Well, I I appreciate that. And ⁓ I'm fortunate that I have a team of folks who think all like long term ⁓ people and I I feel very lucky to have them on my team. ⁓ and I think that's the perspective we bring to our client conversations is we're not here to make a buck today. What we're here to do is invest our capital alongside your capital. And so we look at ourselves as co investors rather than somebody who's there to try to generate fees and commissions.
David Moghavem (35:14)
Hmm. So what's some advice that you would give to someone who's trying to follow a similar path, trying to maybe start their first DST, or maybe they're looking into some sort of seven cr structuring some 721 upright. Even the most seasoned operators may have trouble getting into this side of the business because it is different in many ways. So what's your advice to them?
Dwight Dunton- Bonaventure (35:39)
⁓ a couple of things. One, ⁓ you have to have great real estate investments. Like it does not matter what wrapper you you put around it, how many tax tools you incorporate, like if it's fundamentally not great investments, doesn't matter what you do beyond that. ⁓ two, focus on what you're great at. Like when we created our REIT, we were very focused on saying, like, we are long term investors and this tool has
Got to be a long-term vehicle that allows us to invest the way we've always invested. Versus, I see some people, they've had a great investment track record and they create a new vehicle that forces them to do something very different than what got them there. So I think focus on what you're great at and make sure that whatever you do next ⁓ leverages those strengths. ⁓
And then the last thing is as soon as you're in the business of accepting other people's money, you're now in two businesses. You're in the business of real estate investing as well as asset management. And it is a different business and it requires you to really expand your capacity as an organization in order to do both at a high level.
David Moghavem (36:54)
So I guess for your first point of making sure you have a great asset, is there a different criteria for what a great investment would look like for a DST versus maybe a great investment that wouldn't be a DST?
Dwight Dunton- Bonaventure (37:08)
Yeah. well, again, DST is just a wrapper. And so the question is, what do your clients want? Do they want lots of growth? Do they want stability? Do they want, you know, no downside in their cash flow? So therefore they're willing to have less upside. So I think focus on what your investors are really looking for. Find the property that fits that. That being said, there are some legal limitations.
David Moghavem (37:14)
Mm-hmm.
Dwight Dunton- Bonaventure (37:37)
On a DST where you can't refinance the property within the DST. You can't do massive renovations to it. So it does constrain what you can do. But within that, those constraints, there are a number of business plans you can execute. Most DSTs that are publicly marketed are relatively new properties that require very little capital improvements. But that being said, for instance, last year we did a custom DST for one client where they sold.
think it was like a hundred and fifty townhouses. And every time they sold one, we sliced off another slice of this property until they owned the whole thing. And then that property had a large renovation ⁓ program in it. And so we custom curated that solution for the client and we put the DST wrapper on it as a means to facilitate their capital structure.
David Moghavem (38:29)
When you say custom DST for a client, is that another operator or owner that you're creating a DST vehicle for and funneling in capital or ⁓ or someone that's coming into your Uprate or DST?
Dwight Dunton- Bonaventure (38:39)
Mm.
So great question. So the two deals I talked about earlier, those are generally for folks who have smaller checks and they're, you know, ⁓ it's like they go to Brooks Brothers and buy an off-the-rack suit. For somebody that has a huge check, they walk into the custom suit store and pick the fabric, the cut, the buttons, everything. And so for some clients who have
David Moghavem (38:53)
Mm-hmm.
Right.
Dwight Dunton- Bonaventure (39:08)
a very large amount of capital that gives them the flexibility and us the flexibility to design a solution that is just to meet their needs. And so we have a large custom solutions, you know, tax equity business that's designed around folks who have those bigger checks and they can spread the financial friction across a larger asset base in order to come up with a custom solution.
David Moghavem (39:34)
Awesome, awesome. So I guess to wrap it up, what's next for Bon Avenger in the next twelve to twenty four months?
Dwight Dunton- Bonaventure (39:42)
Well, I think we've got ⁓ Opportunity Zone Fund series that are launching. I think that that is an exciting ⁓ set of tools. The Opportunity Zone ⁓ reboot from the one big beautiful bill, I think is going to create a permanent asset class because originally it was a temporary one, but now it's been made permanent. And I think that that is a tremendous tool to do great investing that has a ton of tax benefits associated with it.
David Moghavem (39:55)
Mm-hmm.
Dwight Dunton- Bonaventure (40:11)
⁓ so I think that that's that's a big Q4 push so that we're open for business on January 1st when the new benefits take effect. ⁓ yeah, ground up or substantial renovation. ⁓ and then ⁓ I think we're gonna continue to do lots of upreets. ⁓ I think we're gonna have some more DSTs that are gonna hit the market. I I think ⁓ we do best when the market is turbulent.
David Moghavem (40:21)
That's for ground up, for your ground up vertical. Right, okay.
Dwight Dunton- Bonaventure (40:40)
I think because we're done so many things and we have so many capabilities, we're able to respond quickly. And so I think I think 2026 has a good shot at being our all-time transaction record as an organization. And I would expect
David Moghavem (40:55)
Wow. Which you don't hear often you don't hear often from a real estate operator, right?
Dwight Dunton- Bonaventure (41:01)
Yeah, it's it's been a heck of a year. I mean, our team has just been hustling. They've made some great investments. ⁓ so we ⁓ I'm I feel very fortunate that we've been so blessed with the opportunities, but more importantly, the team that can seize it. And I would expect more for 2027. I mean, I expect that it's very likely cap rates and interest rates will go up.
I think that that actually could facilitate even more business for us for all the reasons we talked about. When things get hard, people need alternative solutions and we're specialists in that.
David Moghavem (41:40)
Yeah. And I think as we see where rates are today, we've talked about this on previous pods. The idea that this higher rate environment is probably going to be here for some time, which is going to force some capitulation. It's going to force sellers to have to sell. It's going to force lenders to maybe have to sell. And maybe on your private client side, it's going to force these families that may have catered a thesis around selling in a better debt environment to now having to just.
sell and throw in the towel and as you said, preserve that capital. So it's really interesting to hear how despite all this turbulence, you're seeing the DST space thrive or maybe even thrive because of all the turbulence. And ⁓ it's it's it's really, really remarkable to hear kind of this side of the business that you don't hear as often, but you're definitely hearing the name and the the buzz and the the buzzwords, but you don't get to hear the details and the minutiae of it. So
Twine, I really appreciate you giving that insight.
Dwight Dunton- Bonaventure (42:41)
Well, I I enjoy what I do. I hope that comes ringing through. I I love my job. I love helping people. I love educating. So thank you for the opportunity to share.
David Moghavem (42:51)
Awesome. Awesome. Well, great having you on. Thanks again. And ⁓ stay in touch.
Dwight Dunton- Bonaventure (42:56)
Thank you.