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Revitate’s ESG Returns

Raising $150M for Newest Apartment Fund; Mixed-Use Focus

The philosophy of environmental, social and governance (ESG) is one of the pillars of Newport Beach’s Revitate, according to co-founder Lisa Bhathal Merage.

“Social impact in general is woven through everything that we do,” Merage, Revitate’s partner and chief impact officer, told the Business Journal.

“With every investment, we look to see how we can include social impact. It’s very authentic to who we are as people.”

It’s found enough success with its first workforce housing fund that it’s now in the market to raise another $150 million for its Revitate Cherry Tree Fund II.

The investment firm has found three heavyweight believers in its strategy.

Revitate’s board of directors added three new members with deep pedigrees in business: Chris Cox, former chairman of the Securities and Exchange Commission and a former longtime congressman; Jeremi Gorman, a former top executive at Netflix, Snap and Amazon; and Bill Cvengros, a former chief executive at Pacific Investment Management.

In October at the Orange County Museum of Art in Costa Mesa, Revitate hosted its annual Social Impact Summit where it celebrates “leaders making unique contributions at the intersection of business and social impact.”

Revitate is one of several companies highlighted in the Business Journal’s inaugural ESG Special Report, which begins on page 25.

Coming Attractions

Merage in 2021 co-founded Revitate with her brother Alex Bhathal, the company’s executive chairman and partner who this year won a Business Journal Excellence in Entrepreneurship award.

Revitate is the family office of Orange County’s Bhathal family, best known for apparel manufacturer Raj Swim and as co-owners of the NBA’s Sacramento Kings.

They have transformed the family office into a scalable investment platform open to outside investors where they focus on the three investment verticals they know best: real estate, sports and consumer.

Thus far, it manages about 10 different funds in real estate such as opportunity zones and workforce housing.

Revitate executives indicated they will be rolling out big plans in the coming months for investments in sports and consumer products.

“We’ll have an exciting 2024” for sports and consumers, said Kunal Merchant, a Revitate partner and chief operating officer. “We’re really close to realizing that vision.

“The aspiration is to build out three verticals that have social impact spread throughout.”

$150M Search

Revitate in September announced it is back in fundraising mode to find $150 million for its second real estate investment fund for workforce housing, which it describes as Class B built between the 1970s and 1990s.

Two years ago, it began a joint venture with real estate veteran Chris Marsh, founder and CEO of Newport Beach’s Cherry Tree Capital Partners. Marsh had previously overseen a development and acquisition push for the Irvine Co.’s apartment division.

Its first fund, Revitate Cherry Tree Fund I, raised $110 million, which was invested in six apartment complexes in the Midwest.

Its projected net internal rate of return (IRR) is 17.2%, significantly outperforming its original 11% to 13% IRR projection, according to a Revitate investor presentation.

“We’re projecting very strong returns, well ahead of our initial underwriting,” Bhathal said.

“Based on that success and investor interest, we are back in the market.”

Government incentives to invest in workforce housing have helped. For example, in August it closed a property with a 63% loan to value, 10-year loan, interest only for first five years, at 5.6% from Fannie Mae.

“Because our mission has a social impact component to actively preserving workforce housing for communities in the Midwest, agencies have very attractive programs available, including generous terms for rates,” Bhathal said.

Cherry Tree Fund 1 has a seven-year life span with a couple extensions built in. None of its six apartment complexes have yet been sold.

“Fund I was designed as a proof of concept,” Bhathal said. “Fund II will continue as an expansion.”

Opportunity Zones

Revitate is also investing in low-income communities through its RevOZ Capital opportunity zone platform. Revitate has led or co-led four opportunity zone funds with investment into 15 projects with an estimated total project value of $1.5 billion.

For example, Revitate invested $44 million to get a 95% equity ownership of a 344-unit project in northwest Albuquerque.

“There’s a really compelling job story as Intel is making a multi-billion expansion of its facility within a short drive away from our development,” said Bhathal, adding that Netflix and a solar company are also creating jobs in the area.

Revitate executives are particularly proud of a project in Charleston, S.C., called Morrison Yard Residences, or “NoMo,” where a former storage yard for a nearby port was transformed into a complex with 380 upgraded multifamily rental units and approximately 27,250 square feet of ground-floor retail space.

Revitate, which contributed equity to complete the project that cost several hundred million dollars, helped shape the development through a “community compact” with the developers to provide items ranging from climate friendly buildings to enhanced parks to bus stop shelters.

Set on over 5 acres, the community offers an open-air saltwater pool with sundecks, cabanas, grilling stations and TVs; 1.5 acres of outdoor courtyards; a dog park; a state-of-the-art gym with fitness classes; and group gatherings such as wine tastings and cookouts.

“This was a part of town that needed investment,” Merchant said. “It was a part of Charleston that didn’t have the basics. There were no sidewalks or grocery stores or basic transit.”

The development is part of a larger master-planned mixed-use development of the same name that will eventually have a cumulative economic impact more than $1.4 billion by 2030 via new developments such as 138,000 square feet of Class A office space in a 10-story building and a new hotel.

“Morrison Yard is a terrific example of how we seek to generate both positive impacts for communities and compelling risk-adjusted returns to our investors,” Bhathal said. “Through a business lens, the project reflects our strategy of partnering with top-tier sponsors to build new multifamily housing in high-growth communities nationwide.”

At the inauguration in July was U.S. Senator Tim Scott, a Charleston native, co-author of the 2017 federal legislation that established the Opportunity Zone program, and Republican presidential candidate.

Revitate wants its investments to cause positive changes, Merage said.

“We’re not looking at it under E or S or G,” she said. “We’re weaving all of that through and seeing where we can affect change.”

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