Podcast Summary: Real Talk Real Estate Discussions with Andrew Kirsh

Episode 88: Winning the Lower & Middle Market: Pref Equity and Mezz Debt with Apparent Base
Air Date: February 17, 2026
Host: Andrew Kirsh
Guests: Dan Joseph & Eli Mugavin, Co-Founders, Apparent Base

Overview

This episode marks the last under the “Real Talk” name, as host Andrew Kirsh prepares to rebrand the show. Andrew welcomes Dan Joseph and Eli Mugavin of Apparent Base, a company they formed after Andrew introduced them. Apparent Base specializes in providing preferred equity in the lower-to-middle market (deal sizes under $8 million) for commercial real estate. The conversation dives into market dynamics, deal structure, asset class trends, the unique value proposition of Apparent Base, and their outlook for the coming year.

Key Discussion Points & Insights

1. Formation and Strategy of Apparent Base

• Origin Story
  • Andrew introduced Dan and Eli; their complementary backgrounds led to the creation of Apparent Base about 18 months ago.
  • Apparent Base focuses on preferred equity (“pref equity”) deals under $8 million, targeting the “lower middle market,” with plans to scale.
• Strength of Collaboration
  • Dan’s firm brought infrastructure and operational experience; Eli’s background and team added depth in structuring and scaling.
  • Cohesive partnership: “It’s been a great year and a half... We’ve become really close friends and really enjoying being in business together.” — Dan Joseph [04:05]

2. Market Outlook for 2026

• Renewed Optimism
  • 2024–2025 saw market dislocation, including impacts from wildfires, tariffs, and “Liberation Day.”
  • “I’m seeing that same type of optimism heading into this year… It was our department's largest year, actually.” — Andrew Kirsh [05:23]
• Deal Flow
  • Eli notes unusually high activity starting January 1, 2026: “It looked like people were back in the office, motivated to do deals… my inbox was full, phone was ringing...” — Eli Mugavin [05:56]

3. Apparent Base’s Investment Approach

• Preferred Deal Types
  • Favors fresh acquisitions over cash-in refinancings to avoid complex legacy relationships and existing conflicts between sponsors, LPs, and lenders.
  • “You can get on a call and... everyone is nice, but you don’t really know what’s going on behind the scenes.” — Eli Mugavin [07:16]
• Pricing and Returns
  • Offers tailored capital solutions, charges a premium versus commoditized players — 16–20% IRR for sub-$8 million deals (vs. 12–13% in more competitive larger deals).
  • “There isn’t a lot of competition… we’re able to spend the time and the energy coming up with something creative.” — Dan Joseph [08:30]
• Terms
  • Typical terms are 2–4 years with extension options aligned with the senior loan.
  • “We’re here to give sponsors an opportunity to make their money, solve their problems, as long as they comply with what’s important to us…” — Dan Joseph [09:27]

4. Navigating Lenders and Capital Stack Challenges

• Types of Lenders
  • Local banks and debt funds are most collaborative; agencies and CMBS lenders are more resistant to the pref equity structure.
  • “There hasn’t been a lender that we haven’t been able to get comfortable with.” — Eli Mugavin [09:53]
• Deal Flexibility
  • Contains adaptable documentation and structures to placate even challenging lenders.
  • “We’ve got our separate suite of documents depending on what that lender is going to push back on…” — Eli Mugavin [10:43]

5. Preferred Asset Classes & Trends

• Current Target Sectors
  • Small bay industrial: “That’s hot right now… operating with waiting lists…” — Eli Mugavin [12:24]
  • Well-anchored retail: Attractive yields, though there’s less need for pref equity in these deals due to ample equity.
  • Multifamily: Still a gap between buyers and sellers; more challenging to complete transactions.
• Less Interest
  • Data centers: “Probably not interested in seeing a data center deal…” — Dan Joseph [13:18]

6. Impact of the Interest Rate Environment

• Resilience Through Rate Cycles
  • Product maintains demand even in low interest rate periods: “I've been able to hold yield and haven't really changed the product much. So even in an extremely low interest rate environment we were still able to get deals done.” — Eli Mugavin [14:48]
  • “There will always be a broken deal, a hairy deal, an opportunistic deal where somebody needs to close the gap.” — Dan Joseph [16:10]

7. Geographic/Market Concerns

• Sun Belt vs. Coastal Markets
  • Shift from Sun Belt to selective coastal markets; oversupply is a major watch item.
  • Regulatory unpredictability is a major concern: “The tweets that get sent out that change the entire game... That's not going anywhere.” — Dan Joseph [18:27]

8. Competitive Landscape

• Limited Competition at Small Scale

  • Sub-$8M space is supply-constrained and non-institutional; little direct competition.
  • “I don't think I've ever lost a term sheet to another pref equity group. If we're getting beat out, it’s usually by JV Equity or… a rich uncle.” — Eli Mugavin [20:48]
  • Above $8 million: Dozens of competitive offers flood the space, compressing yields.

• Focus on Relationships

  • “We want to be programmatic. We'd much rather do five deals with the same sponsor... We're not trying to screw anybody ever. That's the way you build a long term business.” — Dan Joseph [21:52]

9. Goals & Outlook for 2026

• Business Growth Targets
  • Volume: $30–50 million in deals and bringing in a programmatic partner, ideally a family office, to scale to a $100–200 million portfolio.
  • Long-term discipline: Zero losses and maintaining credit standards as paramount.
    • “I'm a young guy, I'm trying to do this for the long haul… only do that if you're minimizing losses and staying disciplined.” — Eli Mugavin [23:34]
  • “I say thank you. Because you found the kind of partner [where] I sleep well at night…” — Dan Joseph [23:54]

Notable Quotes & Memorable Moments

• Origin of Partnership:
  “You put us together. So you basically created a business.” — Dan Joseph [03:17]
• On Market Optimism:
  “Waking up on January 1st with a full inbox made me feel pretty good about what this year's going to look like.” — Eli Mugavin [05:56]
• On Product Uniqueness:
  “We're able to spend the time and the energy coming up with something creative that is designed to meet the sponsor's needs.” — Dan Joseph [08:30]
• On Asset Class Strategy:
  “Small bay industrial... that's hot right now... I just love that thesis.” — Eli Mugavin [12:24]
• On Relationship Building:
  “We want to be programmatic... We're not trying to screw anybody ever. That's the way you build a long term business.” — Dan Joseph [21:52]
• On Success:
  “No losses, keeping discipline, especially in this market.” — Eli Mugavin [23:34]

Timestamps for Key Segments

• Formation & Partnership Background: [02:49]–[04:30]
• 2026 Market Outlook & Deal Flow: [05:01]–[07:00]
• Deal Preferences & Pricing: [07:00]–[09:10]
• Navigating Lender Constraints: [09:53]–[11:29]
• Asset Class Preferences: [12:18]–[13:28]
• Interest Rate Environment: [14:18]–[16:33]
• Market Geography & Risks: [16:33]–[19:30]
• Competition in Pref Equity: [19:30]–[21:52]
• Goals for Next Year: [22:35]–[23:54]

Tone & Atmosphere

The episode is collegial and candid, blending professional insight with light banter and mutual respect. The guests' rapport illustrates the strength of their partnership and their values-first approach to growing Apparent Base. The discussion is accessible yet detailed—valuable for newcomers, potential sponsors, and industry insiders alike.