Erik Weinberg, a longtime real estate professional in greater Washington, D.C., isn't concerned about being first. Rather, the former executive of private real estate investment firm FCP would prefer to watch other people take the riskier bets until he's certain the ground is solid enough for him to get to work.
It's the philosophy that now serves as the backbone for Montclif, a new office investment firm Weinberg has launched alongside his longtime peer and friend, Jackson Prentice. Combined, the two have decades of experience in hunting for, analyzing and closing office deals in markets across the country.
The idea for Montclif has long been percolating, but it took Weinberg and Prentice, who spent most of his career at Carr Properties and MRP Realty, a while to feel confident that the national office market was indeed on a solid upswing.
In the runup to the firm's debut in late April, they had "started talking jokingly about the idea years ago but in earnest probably around Christmastime in 2024," Weinberg told CoStar News. "It turned from a joke to 'gosh, what are we waiting for? We're in our mid-40s, the market is showing signs of recovery, and a couple of years ago the market wasn't as investable, and we would have been too early.' That's when we really started to roll up our sleeves."
And if there's anything office investors have become acutely attuned to over the past six years, it's that timing is everything.
With leasing among the nation's office tenants now boomeranging beyond pre-pandemic levels, and property valuations beginning to trend back up, Weinberg said the pair's track record and cumulative experiences have created a solid foundation for their new Chevy Chase, Maryland-based firm.
The company is set to focus on investments ranging from $30 million to $150 million across several U.S. markets — such as the D.C. area, Dallas and Nashville, Tennessee. Montclif is targeting institutional-quality properties with room to add value through improvements or lease-up efforts, Weinberg said. The firm will partner with equity investors for each deal, a strategy that means it will be able to create deal-by-deal joint venture structures as opposed to raising large funds.
Prentice will focus on the firm's portfolio management and operations, while Weinberg will lead the firm's sourcing and capital structuring for all new investments. He is also staying in close contact with his former employer, given that FCP will help support Montclif's platform operationally and could be an equity investor for deals.
"The two of us have been contemporaries for more than 15 years, and with him always as an operator and me dealing more with direct investing, we've seen things from both sides," Weinberg said.
'Ready to play'
That vantage point has meant the co-founders have carefully tracked the office investment market as it has stumbled out from the depths of the pandemic. While plenty of smaller, privately run firms have been quick to take advantage of significantly discounted deals, the Montclif partners adopted a more cautious approach.
"Over the last couple of years, there was a period where there were no major trades, and for good reason," Weinberg said. "From our perspective, we want to be on the early side of the movers, but not the first out of the gate. We're really trying to see things from a fundamentals perspective for the right type of office, and that's a big caveat since not everything is recovering at the same pace."
The national office market has become increasingly split between well-located, premium properties and older, less desirable alternatives, a gulf that has resulted in separate trajectories as landlords look to build back occupancy lost in the earlier years of the pandemic.
The vacancy rate for high-end office properties is about 8.5%, according to CoStar data, far below the roughly 14% average reported for the rest of the U.S. market. Asking rents for premier space also command a hefty premium of more than 60% over lower-tier options, changing the playbook for buyers such as Montclif as they assess whether deals can capitalize on the market's rebound.
"We've been waiting first and foremost to see the fundamentals improve on the leasing and operations sides," Weinberg said. "What really gave us some confidence has been the thinning out of buyers since a lot of firms have shut down or have moved to other uses. It has meant that there's still competition for deals, but with fewer groups."
That's especially important now that the firm is on the hunt for "higher-quality deals." While Prentice and Weinberg's extensive track record in the nation's capital means they'll be scouting for openings in the D.C. area, Montclif will also be targeting more than $1 billion of deals in regions including the Carolinas, Dallas, Boston, Nashville and Atlanta, which the partners believe are poised for prime time.
"We're seeing the leasing fundamentals perform better than the capital markets suggest, even in a place like D.C., which is still facing its own challenges," Weinberg said. "The good buildings are 100% leased with real rent growth, and there are good assets out there that may not necessarily be distressed, but are quality assets that don't have economically motivated owners. That's when we're always ready to play."