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Michael Episcope, Co-CEO and Co-Founder of Origin Investments, went from being one of the world’s top traders to building a $3 billion real estate investment platform. In this episode of CAIS Live Conversations: Building with Alts, he sits down with host Brad Walker, Co-President of CAIS, to share his insights on navigating real estate cycles, the evolution of institutional-quality real estate for high-net-worth investors, and how Origin is leveraging data to drive investment decisions.
Michael breaks down the firm’s expansion from equity into credit and its growing 1031 platform, highlighting how advisors and investors can strategically allocate capital in today’s market. If you’re looking to better understand how real estate fits into a diversified portfolio—this episode is a must-listen.
Chapters:
Chapters:
Creators and Guests
Host
Brad Walker
Co-President
Guest
Michael Episcope
Co-CEO and Co-Founder of Origin Investments
What is CAIS Live Conversations, Building With Alts ?
CAIS Live Conversations: Building With Alts, tackles the often untapped potential of alternative investments by sitting down with the various players in the alts ecosystem. Listen in as we dive into alternative investments from the perspective of industry experts, RIA executives, IBD executives, alts manager leaders, and alts experts. Hear what other advisors are doing, learn about new technology, and join us as we turn investment complexities into real-life concepts that could potentially help diversify and drive growth in the independent space.
Welcome to the CAIS Live Conversations podcast. I'm your host, Alex Cavallari, Chief Marketing Officer here at CAIS. We are the leading alternative investment platform for the independent wealth community.
In these conversations, I'll sit down with industry participants from asset management executives to RIA and IBD leaders to uncover their insights and stories that may be driving the growth in the world of alts. Each episode, we take a deep dive into the views of those who are breaking down the barriers and making alternative investments accessible to financial advisors. In this episode, we're joined by Michael Episcope, co-CEO and co-founder of Origin Investments, a firm managing over 3 billion in real estate assets.
Michael's path to real estate was anything but traditional. After being recognized twice as one of the world's top traders, he co-founded Origin in 2007, building it into one of the premier platforms serving more than 4,000 investors. Michael and CAIS co-president Brad Walker explored the current real estate cycle, how Origin leverages data-driven insights and the firm's expansion into credit in 1031 exchanges.
He also shares his philosophy on high net worth investing and why education is key to unlocking opportunities in alts. This conversation is full of actionable insights for advisors, investors and anyone looking to better understand real estate in today's market. Let's dive in.
The views and opinions expressed by the speakers herein are as of the date recorded and solely reflect the views and opinions of the speaker and not necessarily the views of CAIS or the broader financial industry. This podcast does not constitute an offer or solicitation to buy, sell or hold any securities, financial products or services on behalf of CAIS, its affiliates or any third party investment managers, their affiliates or strategies. This podcast is provided for informational purposes only and is intended for an audience of investment professionals.
Welcome to CAIS Live Conversations, Building With Alts. I'm Brad Walker, co-president of CAIS, and I'm thrilled to have Michael Episcope, founder and co-CEO of Origin Investments with us today. Michael, welcome.
Brad, thank you for having me. It's a pleasure to be here and I will correct you, it's co-founder. So I have to give my co-founder David a lot of credit too, because we did this together and grew up in the trenches starting in 07.
Awesome. Well, tell David I said hello too. I've known David for a handful of years, so I'll own that one.
Michael, first and foremost, I want to just give a quick background on Origin. You're a real estate asset manager, over 3 billion in assets. You and David founded the firm in 2007, and you've built an amazing business, over 4,000 investors, 70 team members.
Your career is pretty amazing, but it didn't start in real estate. You actually started as a trader. And in fact, I thought this was pretty fascinating.
You were named one of the world's top traders, not once, but twice. By Trader Monthly Magazine. So what was your inspiration to move into real estate and start Origin?
Yeah, yeah, you're taking me back down memory lane for a second. That was my first career. And I started that at 19, and I had a phenomenal career.
I started trading when I was about 27 years old, kind of worked my way up through the ranks. I'll never forget, I tell people, when I first got down to the exchange, I think I was making $320 per week. And that was the best money I ever made back then.
So good.
It was interesting because trading, and I think the success of traders, it's all about asymmetric information, making good decisions, risk management, a lot of the things that go into any investment career, continually making, if you make good decisions over and over, the output is going to be generally a good output. And so, I had 10 years of trading and I was young when I stepped out of that business. I wasn't, I'm not going to say retired, but what was happening in that business is that my edge was asymmetric information flow that I was able to take advantage of because I was in the pit and we had the advantage.
And then the computers started coming in and I knew that I couldn't see behind, around corners, I couldn't see behind walls. That wasn't what made me good. People used to always ask me like, hey, where do you think rates are going?
I'd be like, well, where do you think we're going today? If we go up, I'm going to buy. If we go down, I'm going to sell.
And if we go up too much, I'm going to sell. And so you would just take cues from the market. And so I left that business at the age of 35.
I had stacked up a lot of chips and I was like, what's next? And it's just so difficult to step out of any game at 35. And I really did want to get out of that business completely because when you are a commodities trader, you're leveraging your capital at about 300 to 1.
And the swings and you don't know what's going to be out there and what the X variables are. And as computers came in, I found it more and more difficult to manage my risk around my position. So I said, OK, I'm done.
I went back to school. I said, it's time to retool. I actually was introduced to real estate by my grandfather at a very young age.
I was like working summer jobs and he made a great living doing it. But I used to go and work on his buildings with him, do rehabs, things of that nature, just as a kid. And he paid me like three bucks an hour.
It was awesome. I really enjoyed those times. So it was always in the back of my mind.
And there is a simplicity around real estate. And so my partner and I knew that we wanted to continue to build our wealth, grow our wealth, create passive tax-efficient income streams. And we didn't have a lot of luck investing with others.
So we just decided to take control of our own destiny. And that was the beginning. And it wasn't this grand vision of creating this, but it goes back to making really good investment decisions and just decisions.
And so we formed this more like a family office and started doing deals and better deals and bigger deals, and then inviting friends and family in, and then creating a structure. And I think one thing that was unique about us is that we were investors first. And so like we knew the pain points of the investor.
We knew how to communicate. We understood like really that side of the business. And I think that was so, so important.
And then we both became educated in the business. I got a master's in real estate, and we used a lot of our own money to learn. And then we brought in a very talented team, and that's where we are today.
Seventy people. It's been a fantastic run over the years. There's a lot in between.
I'm sort of skipping between 07 and 24, but I think that's kind of the introduction for how it all began.
Yeah, and we'll bring you back in between those years, but you mentioned your investor base, and you and David, running this is kind of like a family office, your own capital for a bit. When you started to take in investors, was it institutions? Did you think about high net worth?
Maybe help us understand the investor base that you went after right out of the gate.
Yeah, and I'll take you back because it's very different. And I tell people this about the responsibility of managing money for other people. And when I was a trader, it was just my money.
And if I had a bad day, I would only look to myself in the mirror. And then when you start bringing on other money, it's a whole new level of, it's your reputation, you know that people have worked hard for this money, that you have a fiduciary responsibility, that you're waking up, how can you serve them better? Going and just being accountable to that group.
And so that happened, you know, I would say like the first investors we brought in were in about 2010 and these were friends and family and started building it. And then we also were building the platform at the same time and bringing in people from institutional backgrounds, from Blackstone, from Reef, from, I mean, you can name it household names that you would recognize out there. And as you bring in team members who are highly talented, they want to see growth and they want to see a path to growth.
So it was really around 2011, we launched our first fund, the majority of it was our capital, 2013 was fund two. And then as our team started growing, they wanted an answer, how are we going to grow? And David and I were going into the institutional route.
And we weren't having a whole lot of luck because the institutions like pedigrees more than anything. They want to know that you have something or competitive edge. And I think we had all the table stakes and everything at the time.
And we looked really good and we believed in what we did. The reality, though, we were kind of spinning our wheels in there. And so we made a decision at that time because we were winning on the high net worst side.
And we really struck a nerve because ultimately what we were trying to do is serve investors like us, be the institutional manager for the individual investor. Because prior to us coming into the market, you would either find these non-traded public reads that were charging exorbitant fees or you would find managers who were maybe regional models that took too much risk and they didn't have good balance sheets or the ones that did would charge too many fees. And we're like, look, there's a gap here in the market.
And so we decided and we told our team, and this was not very well received, we said, look, we need to pick a lane. And this idea that we're going to go after institutional and individuals isn't working. We're losing our voice.
So we actually rebranded. We used to be called Origin Capital. We then rebranded to Origin Investments.
We created a marketing arm. We created investor relations arm. We built our own technology and we went all in.
And where we went all in was really education and content. And we were so passionate about that, exposing the rest of the world and the market and showing kind of under the hood and communicating that we went from, I'll never forget, we went from, I think it was about 90 investors that we had grown to from, you know, basically 2010 to about 2015, 16. And as soon as we applied marketing and digital marketing, this was not popular.
Our team did not want us to do this at the time. And over the next two years, we hit 500 investors. And so we're like, this is working.
And we're like, and the reason why a lot of people don't want to do this, it's very difficult to scale into this business. And we found a way to do it and do it profitably. And our team quickly got on board, which was cool, because they're like, oh, everybody's asking about what we're doing.
Now, what was novel back then is sort of like table stakes today, which is interesting.
Yeah, well, I'll just say, I mean, I think the what you're saying resonates really well with us, me specifically, but also just CAIS in general. You know, you're choosing a lane, you're choosing high net worth, you started Origin investing your own capital, you understand what high net worth clients are looking for and how they should consider real estate, whether it be equity, credit, which we're going to talk about here in a second, your 1031 platform, which will also hit in a second, but you're also going to a market that you understand. And so when you bring education at Origin to the high net worth channel and other financial advisors, you understand how their clients are looking to allocate capital and deliver outcomes to achieve their financial goals, etc.
So I think it's pretty powerful what you've built within Origin. And like I said, you know, CAIS, just kind of bring it back for us for a second. When we started 15 years ago, we were in this world of the independent wealth channel.
At the same time, alternative asset managers didn't really care that much about that channel because they could get checks from a big institution or they could hit a big warehouse. And so really seeing the convergence between alts and independent wealth was a main event, and it's exploding now in a positive way. And education is so key.
So Michael, I think what you and David and the team at Origin are doing with education around real estate, equity, credit, and otherwise, I think is fantastic. Let's shift gears real quick. Real estate feels like a hot topic.
The last handful of three years or so have been quite interesting in the real estate space. We've seen ups and downs. It's not abnormal, but I'd love to hear your view, like your philosophy at Origin as you approach real estate, number one, and just kind of maybe help us understand where we are in the cycle right now, from your view.
Yeah, Brad, if I step back, I mean, I think it comes down to risk, not I think, I mean, risk management is what it comes down to and at all parts of the cycle. And you have to remind yourself, you weren't a genius in 2021 and you're not a fool today. And these are just part of being in the market and riding through, and we did some very good things.
Because ultimately, a firm, it comes down to strategy, execution, and a lot of it is structure within your funds. And if we go back to 2020 COVID back then, you know, in our open-ended fund, the Income Plus Fund, when the market started to recover in 2019, deals already were trading above replacement costs, and that only exacerbated, you know, going through 2020, 2021, 2022. And there is a common sense to this market.
And when deals are trading at 30, 40% above replacement costs, you don't buy them, you build. And when deals are trading 30% below replacement costs, you don't build, you buy them. And it's the opposite.
And so like we really changed our tactic and our strategy. And I think that's one thing, you know, about our organization is we've always had been nimble. We think about being able to, you know, withstand these markets and protect downside at all times.
And so we didn't buy a deal for four years. And I don't think any managers can actually say that. And one thing that I'm very proud of that we've built internally is our data science platform.
And we have something called Multilitics. So if you go into 2022, this goes back to decision making. Well, rent growth is one of the most powerful tools when it comes to modeling and getting it right.
And we actually built this because what we were renting out there was pretty much useless, these forecasting models. And so we had been working on this for about two years at that time. We were the first and only group to be forecasting negative rents in 2023, 2024 during that time.
And while other groups were still saying 2023 was going to be positive, five, six, eight percent, they were just kind of riding the trend. We weren't buying anything. And that turned out to be very, very prescient at that time and saved our investors a lot of money.
And that is, getting through to the other side is really important. And your question was, where are we today in the cycle? And we had a massive interest rate shock.
If we go back 10 years, going from one all the way up to nearly five percent, I think it's sitting about four and a quarter today. I do believe that's old news now. I think the market has sort of reset.
I think that we shouldn't be as concerned about interest rates going forward. I think this story now, because people are talking about the impact of tariffs on inflation, that will absolutely be inflationary. But I think one of the biggest things, and you can look at what's happened with other countries, is our deficit.
And if they can get our deficit down to two to three percent of GDP, we will get credit for that in the bond market, regardless of what happens on the tariff side. And I think a lot of that is already priced in. It's not very difficult to look at the tariffs and see how that's going to run through.
So all that being said, I think that we're in a world right now where we've been through one of the worst real estate recessions the last 20 years and the last two years. And there's been a lot of casualties of this, especially on the individual investor side, but also the platform side that just didn't last through the other side. So I say that because one of the unintended consequences of Fed policy, and this is what this is of high rates, is that shovel stopped going in the ground.
And that's a good thing. And that is part of the healing process of real estate. Well, we're two and a half years into this cycle, where rates have gone up, shovel stopped going in the ground.
We're about to hit a supply cliff. And what I strongly believe is that we are about to enter the next leg up in real estate. We are fighting some supply issues.
But once this is done after 2025, everything that we're looking at at MultiLytics, the supply figures, looking at the public reits as leading indicators, everything is pointing to just a lot of growth on the rent side in 2026, 2027, 2028. Because the reality is even if rates go down and you start getting new development today, that won't be delivered until late 2027, 2028. So you have this massive gap where you're going to be under supplied in housing, rents, or I should say, renting is still way more affordable than owning a house.
So the headwinds are becoming the tailwinds. And I haven't been this optimistic in years about where we are in the cycle.
When you talk about rents, are you like, let's just kind of dive in a little bit here. Are you specifically thinking multifamily? Are you thinking office?
Are you thinking something different?
Yeah, I should. So we're only multifamily when I talk about this stuff. We build, buy and lend.
So we're in all parts of the capital structure, different business strategies amongst multifamily. But that's all I'm talking about. And historically, Brad, multifamily grows at two and a half, three percent.
And we've seen a lot of volatility. And Multilitics is predicting in certain markets, four, six, eight, nine percent. I mean, I'm looking at these numbers as deals are presented.
And I can't, you know, it's incredible, like what is about to hit it. Now, there's always X variables that can, you know, you know, take the air out of the balloon a little bit. You know, those are recessions, things of that nature.
Some of the things that are happening on the policy front might be going, but, you know, we're also taking that into account. The biggest thing is just supply and demand right now. And that's really flipping in our favor in the next year.
Yeah. So talk, I love Multilitics when I was, you and I have had this conversation in years past, and I always think this is a differentiator for Origin. Data is just king, and you have a ton of it.
How do you leverage Multilitics on, clearly we're talking a lot on the equity side right now, but, you know, five years ago or so, you kind of also moved into credit. Maybe talk about, like, was Multilitics helpful there in analyzing opportunities set that could help Origin move into the credit side of real estate, number one. And then number two, help our listeners understand as an investor in real estate for yourself, but also in building Origin, how should advisors think about allocating to real estate credit, which is, you know, we hear a lot about right now?
Yeah. So how does Multilitics, I think was your first question, help on the credit side? So we were born out of the equity side.
That's what we used to do. And we've never lost money on a multifamily project in the equity side. And we still take that same mindset.
We're going into credit. We evaluate these deals, not as a bank would, but as somebody who's looking at the viability of the project. And that's the first thing.
And where Multilitics helps us is really getting us comfortable around our underwriting, making sure that we're looking at this thing from the right perspective, that we're getting into the right, not only national markets, but sub markets. And then it also goes drills all the way down into the site location and helps corroborate the underwriting of the individual project. And that, it's all about having a cushion against loss and making sure that the tailwinds are behind you.
And I would say the other, the big way that we've taken our data science team and in credit a lot of times when we're competing against K Series Bonds, which is Freddie Mac, you can have 80 loans in there. And a lot of times for these groups, it could take three weeks to underwrite these things. Our team can do that in about three days.
And that's a huge thing. And it's because we can unleash multi-lytics and it will bring up. You're always going to underwrite and analyze and dig deeper into the larger deals.
But we can price things so much quicker than our competition. And in this world, that matters a lot. So you're getting better information, you're getting unbiased information, you're pricing things quicker as well.
And all of this goes into just creating a better product for the investor. And that was your first question, I think, about how we're using it on the credit side. When I think about how RAA should be thinking about credit for, especially in the real estate side, for individual investors, these are real assets that cash flow that produce, and there is a distinct advantage of going into real estate, especially ours, because we have a read structure, so you're automatically going to get a 20% deduction of whatever you're generating, right?
So when you look at that, if another firm is generating 11%, you're going to likely pay taxes on that. And I think about this, like credit is sort of an alternative to your bond portfolio, even though the underlined widgets are real estate, I would not put this in the real estate portfolio, because if you want real estate exposure, you want to be in the common equity. And you're going to have more volatility, but you're going to have upside, you're going to have better tax consequences.
But we think about this, the credit side is purely an alternative to bonds. And then when you get over into the real estate, like the common equity, that's probably more of peeling off of your stock portfolio and potentially some of your bond portfolio too, because the beauty about real estate, what I love about it is it has characteristics of both. It has bond-like characteristics and equity-like characteristics, and has much more stability, but also, especially multifamily, low standard deviation, but has kept up with the stock market over the last 20, 30 years.
Yeah. And let's pull that thread a little bit more, because you've also expanded your real estate platform now to include 1031s. And so I'm trying to pull this, I love this conversation where we're thinking about the investor outcome.
Right. And really speaking to the advisor with the young client who might want real estate equity exposure, they might want yield in their portfolio, and they can think about the credit side of real estate within Origin. They also are always thinking about taxes.
And so in a world where, who knows where tax rates are going to go up, down, or otherwise, you recently launched your 1031 program platform. Maybe talk a little bit about that.
Yeah. And I'm going to say, one of the reasons why we work with RAAs, we don't work in the Broker Dealer Channel is what I went to before. It's part of our mission.
We want to make sure that we're delivering real estate in an efficient manner to the end clients. So that is really an extension. When we were direct to consumer and going after individuals, the RAA is an extension and they're fiduciary to their individual clients.
So that's why we also have dedicated distribution, internal distribution into that market and relationships that we're making as well. And when we think about our platform, this is, I would say the vision started coalescing around 2017, 2018. How can we best serve the individual investor?
When you look at it, what do they need? And normally what you get are you get these hybrid firms that are serving institutions and some individual investors and in and. And so because we have such an advantage where our underlying base is really homogenous, we're all taxable investors.
I'm a taxable investor. Our investors are the investors of, you know, RAAs. Some of them invest through non-taxable accounts, which is great for credit, but not really suitable for real estate.
And when you think about the spectrum of our investments, you can be in credit. You can be low-risk, higher-yield, looking just for monthly income, and that's what you want. You can be in the middle in something like an income plus fund, where you have a hybrid of debt, equity, ground-up, a diversified portfolio in an open-ended structure that's very tax-efficient.
You can also get into ground-up development deals. And everything we think about is, yes, it's long-term risk-adjusted returns, but also tax efficiency. Because if you're not thinking about tax efficiency, especially in real estate, it's one of the most tax-efficient vehicles out there.
You're just not doing it right. And I pound the table in this area. I'm like, closed-ended funds are not a great place for investors to invest because you buy, fix, sell, pay a bunch of taxes, do it again.
And IRR is not the same way as annualized return, and you're just not getting ahead. And that's why we operate in open-ended funds. QZ and 1031 are just extensions of that.
How do we build products to help the investor create more wealth, help people get ahead in one of the best asset classes and one of the best sectors in the market? And 1031, we entered into this last year, Brad. This has been our general council reminded us recently, this has been on a roadmap for 10 years, but you have to prioritize what you're building and you don't want to build it too quickly and fail.
And we've struck a nerve because ultimately, the 1031 exchange market is still this market where the fees are incredibly egregious by these groups. And it's kind of disgusting and it's personal to me as well. My mom got into one of these areas, she had a broker, just sell her a deal, put her too much money.
This goes back 15 years ago. And we want to save people from making mistakes like that, taking their hard-earned money, going into these groups that are just fee machines and paying a 20 percent load. It starts with great products, though.
And people really see through that. And in a world where everything is transparent, we just open it up and we want to be proud of what we sell out there. And it really is true to our mission and helping hard-working Americans and people who have saved and built businesses and sold their business and made money get ahead.
And that's the thing about real estate is it's one of the greatest assets for building wealth. And yet, so many people have gotten, have had wealth destroyed as result of it because of the perverse incentives, the misalignment, the too much risk in deals. And it's kind of sad when you look back at how much wealth has actually been destroyed in this asset class by just, maybe not bad actors, but people who are just not doing it well are right.
Well, Michael, I'll tell you, your career has been amazing. We could do this for hours. You've done some special things in your career.
And I think you've clearly built something great within Origin, and you're delivering for your investors. And so keep doing what you're doing, man. It's awesome.
And everyone appreciates you and David and the team at Origin. I do have to ask you, because I saw you on CNBC, your commercial is fantastic. Congrats to you and David.
When you're not thinking about real estate, what's on your mind? What are you thinking about? What's your bucket list, checklist items?
Brad, good question. You probably could have given me that one in advance to think about. You know, look, I love, I'm a big outdoors guy.
I love spending time with my family. I have two kids in college, so my wife and I are still, my son still plays baseball, watching him on the weekends, which is fantastic. We have one, a senior in high school, that's still here.
We enjoy traveling. We go out to West, you know, out West, Montana. We spend some time out there.
And just, you know, trying to enjoy life and keeping things level. And, you know, I think when you get into your 50s, you start having different perspectives about life and looking at it and what's important and things like that. And I'm certainly different today than I was in my 30s.
And I think some of, you know, starting this second career in my mid 30s was a blessing, you know, in disguise. Because, you know, we used to think that, and this is probably a tangent, but, you know, not having that pedigree was an impediment, but it led us to where we are today. And I just look back and I think that's awesome.
So, you know, I just, I try to enjoy life every day and just, you know, not take things for granted.
Yeah, I love that. Who do you think wins the National League this year? Am I fighting Phil's or you're struggling Cubbies?
I'm always a fan of the Cubbies, but I'm also a realist. So I'll take my 2016 World Series and live with that. You know, my poor grandfather, he lived his entire life and never saw a Cubs World Series, and he was watching them in the 1980s.
And, you know, I'll never, you know, wish he would have been alive to see them. But he passed away, unfortunately, about four or five years before they won that one. Yeah, we'll see.
I mean, probably my money's on the Dodgers. You know, they make some great moves. And I love, you know, seeing what Showy Ohtani has done in the league.
And he's a fan. But my biggest fan, you know, baseball player is my son right now. So I'm going to be following him.
Love that, man. Love it. Michael, thank you so much.
We truly appreciate you being on our on our podcast. And this has been fantastic. Thank you, Brad.
Thank you. And we are we are excited about the partnership with CAIS and truly enjoy spending time with you as well.
Amazing.
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