Real Talk: Real Estate Discussions with Andrew Kirsh

Episode: Providing Family Office Joint Venture Capital with Troy Marcus, Founder of Evergen Equity

Date: December 14, 2022
Host: Andrew Kirsh
Guest: Troy Marcus (Founder, Evergen Equity)

Episode Overview

In this episode, Andrew Kirsh interviews Troy Marcus, founder of Evergen Equity, a real estate investment group based in Austin, TX, focused on providing joint venture capital for generational real estate assets on behalf of multiple family offices. The conversation dives into Troy’s investment philosophy, Evergen’s unique business model, market dynamics, leadership, and personal insights relevant to both real estate professionals and newcomers to the industry.

Key Discussion Points & Insights

1. Evergen Equity’s Unique Approach

• Tagline & Philosophy:
  • Evergen focuses on "partnering Evergreen Capital with generational real estate," – assets held for generations rather than quick flips.
  • Quote:
    • “We always have the ability to control the asset for not years, but for generations.” – Troy Marcus [03:25]
• Client Structure:
  • Works with multiple ultra-high-net-worth family offices as a dedicated real estate investment partner.
  • Avoids commingling funds; each client invests via a separately managed account.
• Investment Strategy:
  • Long-term hold with emphasis on downside protection.
  • Conservative deal capitalization, focus on compound equity over time.
  • Looks for under-appreciated dirt (land) in growth corridors across all asset types in the continental US.
  • Not seeking "home runs"; more concerned with steady, stable performance.
  • Quote:
    • “We live and breathe downside protection. We’re in the business of no home runs, no strikeouts.” – Troy Marcus [05:00]

2. Comparison to Traditional Private Equity

• Hold Periods:
  • Contrasts Evergen's indefinite hold strategy with typical private equity cycles (3–7 years).
  • Families retain significant rights over buy/sell decisions, tailored to their estate and liquidity needs.
• Aligned Interests:
  • Troy criticizes the "operator-first" mentality of traditional private equity.
  • At Evergen, investment structures are “what’s in the best interest of the family, then the property, then the operator.”
  • Quote:
    • “All I can say about our business is I think we work a lot harder to make a lot less money, but I think we better protect the families that we're investing in.” – Troy Marcus [07:33]

3. Deal Structure Details

• Always Joint Ventures:
  • Evergen brings the majority of equity as a joint venture partner with operators [11:09].
• Why Not a Fund?:
  • Separate accounts provide tailored solutions (e.g., tax strategy, timing of depreciation).
  • Quote:
    • “If you go try to make bespoke decisions at the property level or the fund level for one family, you’re just going to upset the other seven or 79 of them.” – Troy Marcus [12:38]
• Family Consent Rights:
  • Families have sign-off on acquisitions and ongoing control over key decisions, with some lockout periods to protect operator integrity [13:16].

4. Personal and Professional Background

• Origin Story:
  • Troy is from El Paso, TX, with family roots in real estate.
  • Studied real estate finance, worked in private equity in Dallas before returning to Austin to lead Memco and eventually founding Evergen in October 2021 [14:53].
• On Austin’s Growth:
  • Remembers Austin as a "sleepy town" in 2005, now a major tech and business hub, marked by an “ecosystem” that attracts both companies and top talent, especially women entrepreneurs [18:05].
  • Predicts Austin and Salt Lake City as next wave markets; highlights features like education, workforce, and business-friendly environment.

5. Real Estate Market Trends & Themes

• Nearshoring & Industrial:
  • Expects major trends in nearshoring to boost US/Mexico industrial markets due to shifting supply chains [17:12].
• Market Cycles and Demographics:
  • Emphasizes the importance of identifying not just today’s “hot market” but where the next big growth will be (e.g., Tucson, Chattanooga, Salt Lake City) [22:07].
• Migration Patterns:
  • Notes influx of Californians and companies into Austin and Texas as a whole [26:09].
• Policy and Affordability Crisis:
  • Population inflows create affordability crises; blames restrictive housing policy and stresses need for political leadership on development and immigration [27:56].
• Current Economic Environment (as of November 2022):
  • Inflation, layoffs in tech, crypto crash, and most importantly, a liquidity crunch due to reluctant lenders [32:00].
  • Quote:
    • “The problem is not the interest rate so much as it is the liquidity… It’s not that Wells Fargo is at 4% or 14% or 44%. They’re just not lending.” – Troy Marcus [33:41]
• Investment Focus Amid Turbulence:
  • Focuses on basis (entry price) and operations since they can’t control markets.
  • Still bullish on industrial (especially infill), infill housing, and limited new office (must be highly amenitized medical/light office).
  • Warns that outdated large offices are a “four-letter word”—could face significant pain before becoming attractive [36:43].
  • Return-to-office will shift demand in office space design and locations.

6. Work, Passion, and Leadership

• Time Management & Values:
  • Credits supportive spouse; sees passion as driver for balancing leadership, philanthropy, family, and business [42:20].
  • Believes strongly in giving back; driven by a sense of responsibility to future generations.
• Quote:
  • “To whom much is given, much is expected... we owe it to the generations coming after us to absolutely provide them with first rate education, to provide them in neighborhoods where they can be safe and to provide them with opportunities where they can go thrive.” – Troy Marcus [43:10]

Notable Quotes & Memorable Moments

• On Evergen’s Purpose:

  • “We only do deals that are evergreen in nature or long dated in nature. We always have the ability to control the asset for not years, but for generations.” – Troy Marcus [03:25]

• On Downside Protection:

  • “We live and breathe downside protection... no home runs, no strikeouts.” – Troy Marcus [05:00]

• On Private Equity vs. Family Office Model:

  • “I think we work a lot harder to make a lot less money, but I think we better protect the families that we're investing in.” – Troy Marcus [07:33]

• On Market Liquidity Crisis:

  • “The problem is not the interest rate so much as it is the liquidity… [big banks] are just not lending.” – Troy Marcus [33:41]

• On Return to Office:

  • “The four letter word in real estate is office... But I will tell you this morning, so last week Elon Musk completed his acquisition of Twitter. This morning he announced we're back to going to the office, everybody's coming back a minimum of 40 hours a week.” – Troy Marcus [36:43]

• On Relationships and Passion:

  • “The power of compounding… relationships. Life is about relationships and friendships.” – Troy Marcus [44:25]
  • “You’ve got to be passionate about what you’re doing. If you’re not passionate, you’re going to cut corners.” – Troy Marcus [45:09]

Key Segment Timestamps

• [02:53] – Evergen’s tagline & business model explained
• [04:15] – Definition of “generational real estate” and risk-adjusted return focus
• [06:59] – Long-term holding structure versus traditional private equity models
• [11:09] – Joint venture structure details
• [13:16] – Family consent rights & decision-making
• [14:53] – Troy’s personal and professional background
• [18:05] – Austin’s transformation and major business trends
• [22:07] – Comparing Austin's growth to other emerging markets
• [26:09] – Migration from California to Texas and its implications
• [27:56] – Affordability crisis & need for political leadership
• [32:00] – Economic uncertainty: inflation, layoffs, liquidity
• [34:52] – Evergen’s strategy for the current climate
• [36:43] – Office’s future and return-to-office movement
• [42:20] – Troy on work/life balance and passion
• [44:25] – Lightning round: advice to younger self
• [46:02] – Lightning round: Fed interest rate predictions

Tone & Style

The conversation is candid, insightful, and occasionally humorous, reflecting the familiarity and mutual respect between Andrew and Troy. Troy shares practical, grounded views shaped by his family-business roots and his extensive real estate experience, while also conveying a deep sense of responsibility to his clients and community. Both take an optimistic yet cautious approach to navigating current market volatility.

Summary Takeaways

• Evergen offers a differentiated model for family offices lacking in-house real estate teams—long-term, hands-on, steadier returns with tailored structures.
• Current market uncertainty makes basis and operational performance paramount; liquidity is a greater concern than simply interest rates.
• Migration, market cycles, and policy/affordability are shaping real estate’s future—investors must take the long view and focus on fundamentals.
• Troy champions stewardship, passion, and the compounding value of relationships—for both business and personal life.

For Further Listening

Listen to the full episode for more real-world insights and market anecdotes, and catch upcoming content at www.sklarkirsch.com or on your preferred podcast platform.