After the State of Michigan Retirement Systems sold its long-held stake in multifamily developer Simpson Housing to the Atlanta-based Domain Capital Group in March, its new owners are looking to expand the 75-year-old company’s leadership, offering, and platform. 

Simpson provides commercial and multifamily property management, development, and construction. SMRS originally invested in Simpson in 1995 and later took full ownership in 2018 before exiting the investment this year. SMRS has retained roughly $2.3 billion in assets that Simpson will continue to manage.

Domain has been Simpson’s investment advisor on behalf of SMRS since its founding in 2008 (though the investment firm’s founders had worked with the real estate company prior to that. The acquisition expands Domain’s role from advisor to owner.

As part of Domain’s plan to expand the multifamily platform, Jason Kern, a 30-year veteran in the real estate investment world, has joined Simpson Housing as president and chief investment officer. Kern will lead Simpson Housing’s investment strategy, portfolio and asset management, and transaction execution, as well as help Domain’s capital formation team bring new institutional opportunities to market.

“My appointment marks the next logical step in the strategy behind Domain acquiring Simpson,” Kern told Institutional Investor. “I’m not here to replace anyone or fix anything that’s broken,” he said, but to expand the platform. 

Kern’s appointment builds on Domain’s plan to build on existing institutional partnerships and develop new investment offerings that combine Simpson Housing’s operating capabilities with Domain’s investment management platform.

According to Kern, Simpson has been quietly providing this “deeply vertically integrated operating platform of investment management capabilities for a group of large, sophisticated institutional investors longer than anybody.” Now, the intention is to make its offering available to new capital partners and grow its AUM. Simpson has a staff of 640 overseeing 24,000 units spread across 21 markets in five states in the U.S., valued at roughly $7.5 billion. 

Kern was most recently president of investment management at Cortland. Previously, he was CEO of the Americas for LaSalle Investment Management, leading a business with approximately $24 billion in assets. Earlier in his career, he held senior real estate advisory and investment banking roles at HSBC and J.P. Morgan.

 

Betting on Multifamily

As Kern explained, there are real benefits in adding scale to the multifamily operating business. “Having had a 30-year career in real estate, I’m aligning myself with multifamily,” he said. “I fundamentally believe it has best long-term supply dynamics.” 

The real estate vet continued: “Multifamily has a pervasive undersupply issue. There’s not enough housing in the United States. It’s difficult to buy a house, unfortunately, so housing rentals continue to be in strong demand.” He added that multifamily is also a great diversifier and inflation hedge. 

It’s also particularly good cyclical timing for the next few years, according to Kern. “The sector’s been beat up over the last few years with the double whammy of higher interest rates and the supply response that multifamily developers had,” which had a negative impact. All of these factors should provide valuations with attractive entry points for global and U.S. institutions. 

This comes at a time when other real estate managers see opportunities in student and senior housing. “This is the time when you need hard assets in good and bad times,” Christopher Merrill, co-founder and global CEO of the student and senior housing specialist Harrison Street, told II earlier this year. Josh Pristaw, president of Clarion Partners, also sees housing as providing strong, long-term return potential. “Things like apartments or homes can’t be disintermediated by AI,” Pristaw said. “People still sleep in beds.”