Q2 2024 Company Spotlight
Company Spotlight: A Decade of Dedication – 10 Years in Review
Written by SPI Co-Founders & Principals, Michael Becker & Sean Mabarak, & Lily Turner, Marketing Manager
MICHAEL BECKER (left) & SEAN MABARAK (right) | Co-Founders & Principals, SPI Advisory, LLC
In the dynamic landscape of multifamily real estate, Strategic Property Investment Advisory ("SPI") is a testament to innovation, growth, and steadfast dedication to excellence. Over the past decade, the Dallas and Austin-based real estate private equity firm has emerged as a frontrunner in the multifamily sector, investing in over $2.5 billion of assets, with $1.3 billion currently under management. In 2023, SPI was one of the top 5 buyers in Texas, further cementing our success and influence in the market.
As we celebrate our 10th anniversary, we’d like to take a moment to reflect on the journey, achievements, and values that have propelled us to our current success. In this article, SPI Co-Founders and Principals, Michael Becker ("MB") & Sean Mabarak ("SM") share their recollections of the past decade and their vision for the future.
How did SPI come to be?
MB: “I was a banker at Wells Fargo, and Sean Mabarak worked for a broker out of Los Angeles helping high-net-worth individuals buy property in Texas. I made a loan to one of their clients and flew out to meet them, which is how Sean and I first met. We did a couple of loans for them, but they had pivoted their business model and wanted a local operator with boots on the ground to invest in the deals and oversee their asset management. In the second half of 2013, before we started SPI Advisory and while still with our former employers, Sean and I closed our first four deals together, totaling nearly 800 units: Bay Island, Gardens on Walnut, Cooks Creek, and Tierra del Sol.”
SM: “Through our exposure to the industry on all sides of the transaction, we decided to transition to the ownership side and invest our own capital. Steven Brown, a colleague who worked at my company, joined us in this venture.”
Bay Island Apartments, Mike & Sean’s first acquisition (2013)
MB: “It was just time to go out on our own. Up until then, we were essentially working for other people as vendors. The 2008 financial crisis was still fresh in everyone’s mind, and the years following were tough, but by 2013, it was clear that the financial mess was largely in the past. However, multifamily values hadn’t fully rebounded; it was pretty much a buyer’s market when we first started. It was easier to buy, but the debt got a lot easier to obtain compared to just a year or two earlier. Everything just converged and told us that we should go for it. So, on June 11th, 2014, we officially formed SPI Advisory, and the rest is history.”
How did you come up with the name "SPI Advisory"?
MB: “When we were coming up with a name for our company, because Sean and Steven were in LA, I threw out the names of California landmarks like 'Brentwood,' 'Westwood,' and 'Century City,' but Sean didn't like any of them. Instead, he proposed 'Strategic Property Investment,' or 'SPI.' Then we added 'Advisory' because we were also advising high-net-worth clients on deals for a fee at the time. We just went with it – 'SPI Advisory.' In hindsight, I might have chosen differently, as several other firms use 'Strategic' in their name, but that's what we came up with.”
What were the most significant milestones in SPI's growth over the past 10 years?
MB: “For me, a milestone that stands out was SPI's first deal, The Loop, which was not very efficient. Steven and I raised the necessary capital, which was just under $2 million, one person at a time. We made 20 to 25 hour-long phone calls, pitching the same thing over and over again to acquire the 15 or so people who invested in the deal. Closing on that deal was a big day for sure. From that experience, we began using webinars, which were much more efficient in raising money. Another milestone was buying Woodhill in Denton, TX, which had 350-something units. That was a big step up for us because it was double the size of our previous $2-$3 million raises. I was also excited when we bought Frankford Flats and The Slate from Westdale, our first two-property deal with over 500 units.”
SM: “Another key milestone was our shift from B and C class multifamily to targeting A- and A class deals, beginning December of 2016 with our first A- class acquisition, Mission Ranch.”
MB: “With the acquisition of Mission Ranch, followed by Boulders (A-) just two months later, in January 2017, we'd officially transitioned from older workforce housing to properties built in the 2000s and newer.”
SM: “2017 was half and half with Boulders (A-), and then Skyview West (A-), Park at LeBlanc (B), Wood Meadow (B), and Westpoint at Scenic Vista (A-ish). From there, the majority of our acquisitions were Class A. We were ahead of the curve.”
MB: “At the time, cap rates were narrowing, so older, riskier deals no longer offered higher returns. It didn’t make any sense to pay a similar cap rate for something old when you could buy something new. This realization in 2016 led us to intentionally pivot to newer, nicer properties, and since 2017, that has been our strategy for the vast majority of what we own.”
Ella Parkside, acquired in 2021
What significant strategy changes do you remember?
MB: “A significant strategy change was when we entered the Austin market in 2018. Up until then, we were only operating properties in DFW.”
SM: “Austin had always been more expensive than DFW. In 2018, prices merged, and we could finally make sense of Austin. So, we pursued acquisitions there aggressively.”
MB: “Expanding into a second market was significant. Initially based in Los Angeles, Steven returned to Texas in 2016 and Sean in early 2017 and opened up the Austin office, which made it easier to enter the market because we had a local presence. By 2021, Austin became so expensive, and we could no longer justify it, so we pivoted to San Antonio. The only project we did [in Austin] was Ella Parkside, early before the market went berserk.”
Have there been any major partnerships or collaborations that you consider crucial to the company's growth?
MB: “We and our clients had worked with several management companies over the years and decided it was time to dedicate the vast majority of our business to one management company that could take us to the next level. After interviewing many, we settled on Valiant Residential. Similarly, we began with a sole practitioner CPA before moving to a 15-person firm, and now we partner with BDO, one of the largest in the country. In the same way, we advanced from a small legal firm to a larger one. Experience has taught us that, as we expand our business and pursue more deals, the quality of our vendors becomes increasingly important.”
SM: “Our strategic partnership with Valiant was significant, especially as we positioned into Class A multifamily. They leveraged the cost efficiencies they developed in the B and C class segments, enhancing our competitiveness by reducing our expenses. Adopting Investor Management Services (IMS) in 2017 was also pivotal, as it greatly improved our ability to raise capital on a larger scale, manage investors, and streamline K-1s. These capabilities were further refined with the implementation in 2023 of our newest investor portal, which Jennifer Warder custom designed with a software development team from Dynamo to transform the way we raise capital and provide investment transparency to investors going forward.”
What do you consider SPI's most notable achievements over the past decade?
MB: “We've remained consistently active in executing deals, even when it’s been difficult to do so. Last year is a good example of that: we successfully bought five deals despite being difficult to execute each of them.”
SM: “When we began raising equity from individual investors for large deals–$25 million or more in equity–everyone who we talked to, that was unheard of. Competing directly with institutions while syndicating the equity ourselves was particularly impressive given our small team. This not only marked a significant accomplishment but also gave us a distinct competitive edge. Our ability to secure investor loyalty enabled us to raise funds, even for smaller deals like $30 million, which was a game changer. The SPI Texas 530 equity raise to purchase Oaks on Marketplace and Northpoint Villas was a standout success.”
MB: “Ascent North and SPI Texas 530 were major accomplishments, each raising around $25-27 million, the largest we’d executed at the time. I remember discussing it with Sean and saying, 'Well, I think we could do this,' and Sean replied, 'I don't know, but I think we can. Let's go give it a shot.' Those were pivotal achievements.”
SM: “Moreover, achieving this with responsible leverage was unconventional; most syndicators max out around $10 million and rely heavily on high leverage for larger deals, typically 80% or more. We went the other route and became comfortable raising large amounts of capital.”
MB: “Operating with efficiency and utilizing a streamlined approach is key for us. In 2023, despite challenging market conditions, SPI was among the top five largest buyers in Texas. Just the other night at the Mavs game, I spoke with the top broker in Texas who recognized SPI and one of our competitors, RPM, as the most active and largest buyers in the state currently. He commended our resilience in remaining active despite market conditions and affirmed his belief that now is an opportune time to invest.”
What are some of the greatest challenges that SPI has faced, and how did you navigate them?
SM: “Learning how to manage a large pool of investors with a small team has been a major challenge. We've continuously sought ways to streamline our processes to effectively maintain and grow our investor base, which took considerable time and effort to establish. In the first four years, we had to focus on small to mid-size equity raises due to a lack of capacity, despite seeing incredible opportunities with more scale left and right. Once everything was in place, thanks to Jennifer Warder, we hit the ground running.”
SPI Principal, Jennifer Warder (2021)
Have you had to make any critical, difficult decisions? What was the outcome?
MB: “Yes, last year, we were among the first to target refinances. Navigating these decisions, while not always fun, has been crucial. Being nimble, reacting promptly to the changing market, and de-risking deals as much and as early as possible, has been a major focus. The decision to sell eight deals in 2022 (after selling several in 2021) when interest rates began to rise was difficult but allowed us to de-risk our portfolio. In this business, we confront challenges head-on and do not shy away from them, face the reality of the situation, and make informed decisions based on the available information... Nothing ever goes exactly as you plan and there are always unexpected problems. It's a problem business… We eat problems all day, every day. That's what we do.”
"...IT'S A PROBLEM BUSINESS... WE EAT PROBLEMS ALL DAY, EVERY DAY. THAT'S WHAT WE DO."
SM: “Early on, particularly in the first four years, we lacked the cachet with the brokerage community that we enjoy now. Despite often being top bidders, we rarely secured market deals because of our lesser-known status. To overcome this, we focused on off-market transactions, networked with brokers, consistently delivered on our promises, and never committed to deals we wouldn’t close. Over time, this strategy paid off, and we built a reputation that positions us as the preferred bidder–often we’re even asked to slightly outbid competitors because of the trust certain brokers place in us. It was a grind to build this reputation in the first four or five years, but now we’re in a much stronger position.”
What are SPI's goals in the next year, the next five years, and then, the next decade?
SM: “Absolutely, our focus is on growth.”
MB: “From now into the next year, it's 'go time.' We’ve been highly active and intend to continue this trend, aiming to expand our portfolio to exceed 10,000 units in short order. Currently, we’re in the process of acquiring and selling properties, which will likely settle us around 7,500 units, give or take.
The market is currently on sale relative to its peak in 2021 to early 2022. Valuations are down, and it's challenging to close deals, making it even more important that we execute as many as reasonably possible. We're hyper-focused on putting as many deals on the board as is practical given the circumstances. We believe that once the supply of new properties coming onto the market largely dries up in the not-too-distant future, the market will rebound significantly. For well over a year, I've been predicting that once we get into the second half of 2025, by and large, deliveries of new multifamily properties that began construction at the peak of the market in 2021 and 2022 are going to be in the rearview mirror, creating a big hole in supply.
Ever since Silicon Valley Bank and First Republic failed in March of last year, it's been very difficult to capitalize on equity and get financing for debt to undertake new construction deals. As a result, [new construction] starts have fallen off dramatically since then. In Texas, it takes around two years to build a garden product, or your three-story walk-up, and around 30 months for a wrap product, or properties with a parking structure, corridors, and elevators. Given that it’s already been 15+ months since the significant changes in the market, it’s reasonable to expect deliveries to significantly diminish, by and large, within the next year. Essentially, today’s temporary oversupply is creating tomorrow’s undersupply, which supports a period of rental rate growth and an increase in valuations. I believe that if SPI can push through all the noise now and acquire as many high-quality properties as possible, we will be handsomely rewarded in the second half of 2025 and even more so in 2026 and 2027.
"...IF SPI CAN PUSH THROUGH ALL THE NOISE RIGHT NOW...WE WILL BE HANDSOMELY REWARDED IN THE SECOND HALF OF 2025..."
At the tail end of the next five years, likely around 2028 to 2029, our focus will be to sell a good portion of what we own. For what we decide to hold, we want to make sure that we put durable financing structures in place, ideally, 10-year fixed rates and lower leverage… The mantra around our office for a while now is 'Survive til '25,' then I think we're going to thrive in '26 and '27.
Our vision for SPI a decade from now is to have it in a position that’s sustainable in the long run and prepared for the next generation of leadership to take it over from Sean, Jennifer, and myself. We haven’t determined precisely how we will accomplish this at the moment, but that is what we are starting to attempt to figure out: 'How do we get this thing evergreen?'"
How has SPI's team evolved over the past decade & how has this impacted SPI's vision, strategy, & culture?
MB: “Sean and I have been the engine driving our operations, remaining deeply involved and hands-on from the start. As SPI has grown, the focus has shifted from being about 'Mike and Sean' to nurturing the team and brand.
"...AS SPI HAS GROWN, THE FOCUS HAS SHIFTED FROM BEING ABOUT 'MIKE AND SEAN' TO NURTURING THE TEAM AND BRAND."
Initially, it was Sean, Steven, and myself closing deals. We were effective but lacked scalable systems and processes. Jennifer Warder joined us in 2015 and began defining and improving our processes systematically, which was crucial for our growth. Adopting technology like IMS for investor management was a game changer, replacing our previous use of Google Sheets and Excel and streamlining our capital-raising efforts. Last year, we upgraded to Dynamo, a more efficient investor database.
Under Jennifer’s leadership, our team has expanded significantly over the years. The first significant addition was Nicole Taylor in 2017. In 2019, Josh Tucker would join the team, providing much-needed assistance with our asset management. Sean Callaway bolstered our acquisitions team in Austin when he joined in 2020, and our Dallas office grew in 2021 with Kara Perez handling accounting and Lily Turner managing marketing. Recent additions include Katrina Keys in HR, Tamia Ballet as support to Josh, Tracy Minor in Dallas as an administrative assistant, and Will Ziegler in Dallas to assist Sean Callaway in acquisitions.
We’ve addressed challenges methodically, leveraging technology and expanding our team while remaining lean and effective. The emphasis has shifted from Sean and me to a cohesive, capable team.
SPI’s culture emphasizes care and community impact. Everyone on the team shares a passion for making a difference, reflected in initiatives like #SPICares, which launched in 2021. Partnering with Vogel, a Dallas-based non-profit, we’ve volunteered and raised over $130,000 to support their mission, strengthening team cohesion and reinforcing our core values of compassion and responsibility.
Lily Turner, Marketing Manager (left) and Kara Perez, Accounting Manager (right) volunteering at Vogel with the SPI Dallas team (2022)
What are the most significant lessons learned from SPI's journey over the past decade? How have these lessons influenced SPI's current strategy?
MB: “Over the past decade, every projection I've ever made has been wrong; we always either do better or worse than projected and it never goes exactly as planned. This industry is a problem industry–there’s always a problem. The key is navigating the curveballs thrown at you along the way.
I’ve also learned the importance of being measured, whereas I was more excitable at the start. Overcoming adversity successfully and repeatedly has taught me to always expect the unexpected and pivot accordingly. These experiences have given me confidence in our ability to embrace challenges and emerge stronger.”
Is there anything else you'd like to share about the evolution of SPI Advisory?
Michael Becker (left), Steven Brown (middle), Sean Mabarak (right) – NMHC (2015)
MB: “Looking back on SPI's journey over the past ten years, it's amazing to see how far we've come. We started as just three guys doing deals – super bootstrapped, frugal on everything, and with modest offices. We’ve evolved quite a bit; The quality and size of the deals we can execute now is night and day. What began as four deals between Sean and me has turned into a robust team with strong processes, much more sophisticated and organized than when we started. We have acquired north of 63 properties, selling over 30 of them for substantial profit."...WE STARTED OUT AS JUST THREE GUYS DOING DEALS – SUPER BOOTSTRAPPED, FRUGAL ON EVERYTHING..."
The types of deals we are able to win today versus back then are staggering – we’re a top buyer in all of Texas now, in shark-infested waters competing with the best and still getting our unfair share. We're not only winning, we're thriving, and I couldn’t have imagined that we’d own as nice stuff as we do now. It’s surreal to walk into a room of Texas brokers who control so much of the market and know everyone very well. It’s pretty amazing, considering where we came from. It’s a cool full circle moment.
In the beginning, the focus was just on doing whatever deals we could afford, which usually meant older, small properties. Buying the Woodhill property in Denton, TX from Blackstone back in 2016 was a big step up for us and helped establish our credibility, which we leveraged to acquire two off-market deals from Westdale, Frankford Flats, and the Slate. From there, we were able to move up to higher-quality Class A properties and gain the confidence of major institutional sellers.