Ex-Drawbridge execs hunt for $50M worth of underperformers

A pair of former Drawbridge Realty executives have launched their own commercial real estate firm with $50 million in funding to target properties with potential for value-add in the western U.S.

Bill Doyle and Chris Elmendorf started Equity Oak Ventures after spending almost a decade together as senior vice presidents at Drawbridge, a San Francisco-based real estate investment firm that manages more than 5 million square feet of Class A offices throughout the West Coast and Sunbelt.

The pair launched Equity Oak in mid-March, calling their timing right amid an “exorbitant” amount of demand in the U.S.’s life science market, uncertainty in the nation’s office sector and no shortage of buildings with upside potential. They’re well-versed in lab real estate: Elmendorf spent seven years at BioMed Realty, the second-largest U.S. owner of such properties. While at Drawbridge, he worked with Doyle and others on a joint venture with a partner to buy an empty office building in Fremont in the East Bay. Personalis, a cancer test developer, agreed to lease the entire 100,000-square-foot structure two weeks after the acquisition.

“There’s a lot of opportunity when things are unknown,” Elmendorf told The Real Deal.

Demand for life science and industrial property has surged during the pandemic as investors poured billions of dollars into the research and development of a vaccine and the number of online shoppers and people ordering food deliveries spiked. That led to record levels of investment in the lab real estate market and net absorption in the industrial sector. It’s also increased demand for so-called life science and industrial conversion plays, in which developers buy older office or research buildings and turn them into modern labs, warehouses or distribution centers.

“There’s a lot of assets out there that are functionally obsolete or are offices located in life science areas or located in industrial markets that can be transformed,” Doyle said. “The current owners aren’t getting the highest and best use of those assets. And so there’s a lot of opportunities to take existing properties, repurpose them, repackage them and go and do very well.”

Equity Oak has a $50 million commitment from an unidentified family office to buy value-add properties, Doyle said. That’s allowed the firm to be in final negotiations to buy a life science conversion play in the mid-$20 million range totaling about 80,000 square feet in a submarket where that sector is in high demand, he said.

It’s also in “detailed” talks with mid- and large-sized private equity firms on a $100 million round of funding, which would allow it to scale quickly and do more value-add deals, Doyle said.

The firm’s goal is to deploy $100 million in equity over the next 12 months. It’s seeking acquisitions ranging from $25 million to $45 million for the first few but will increase its price range as it sees fit.

“Efficient life science conversions of office buildings by top-notch operators are at a premium,” he said. “If you can do that in an efficient way and have ‘speed to market,’ it’s a key differentiator. That’s what the investors we’re talking to feel we can provide them versus competitors in the marketplace.”

While Equity Oak keeps offices in San Francisco and San Diego, the firm’s search for deals extends outside the Bay Area and the West Coast and to markets such as Phoenix and Raleigh, emerging life science hubs whose office sectors have begun to recover from the pandemic. Such secondary markets are the “path of growth forward,” Doyle said.

The firm is also eyeing more suburban cities with growing population and job numbers that have established technology or life science industries and are surrounded by large higher-ed institutions. Examples include Fremont, Hayward and Newark in the Bay Area and Carlsbad in San Diego County.

It’s open to building projects from scratch in the future, but for now, it plans to target only value-add properties and grow its business “one asset at a time,” Doyle said. He based its name on a “gigantic” oak tree in his backyard, under which he does most of his thinking.

“There’s no stronger tree than an oak tree,” Doyle said. “You’re not going to name it ‘Equity Eucalyptus,’ which gets blown over with a 20-mile-per-hour wind.”

Doyle is a Stanford University alum while Elmendorf graduated from the University of Southern California, two schools whose football rivalry dates to 1905. It’s a factoid that the pair plan to have a lot of fun with.

“It will be interesting to see what a Trojan and a Cardinal can do together,” Doyle said. “There’s nothing stopping us.”

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