In the two years since El Segundo-based real estate capital advisory firm Way Capital Inc. launched, the company has grown exponentially, recently surpassing $2 billion worth of real estate financing deals and expanding its footprint nationwide.

Way, which stands for “We Are You,” was founded by Malcolm Davies, as an ode to Davies’ own personal background as a real estate developer. While he admits he did not become as successful as he wished as a developer, he leveraged his real estate background in order to tap into the capital markets world which he attributes to much of the firm’s rapid success.

“We’re proficient in all capital markets, meaning efficient ones where times are good, but particularly when times are very choppy and very difficult,” Davies said. “I would say that in today’s capital markets environment, and commercial real estate, you need to have a tremendous amount of resources, and you have to have people with expertise to be able to garner not only the momentum for people to review your deals, but the fortitude to get them to sign off on them to do them.”

Since launching in April 2022, Way has closed financing deals for real estate owners and investors in 15 states, amounting to more than 10 million square feet of space, along with nearly 8,000 multifamily and hospitality units.

The firm is currently under application with over $1 billion worth of financing solutions for its clients and anticipates another $1 billion in new opportunities coming to market over the next six months.

Eye for opportunity

Capitalizing on some of the industry’s hardships, Davies said he sees greater opportunities in times of distress, which seems to be the general consensus for like-minded companies.

“With sales activity being relatively low, from a historical standpoint, what we’re seeing is more refinances and recapitalizations coming across our desk, as well as requests for construction financing, specifically either industrial or multifamily ground-up construction,” said Shlomi Ronen, a managing principal at Dekel Capital Inc., a Century City-based capital advisory firm.

Way specializes in something called transitional real estate – meaning the company looks for opportunities to add value to properties, both by investing in redevelopment or brand-new construction.

“We’ve seen a significant decrease in valuations and assets that are not worth what they were before and we’ve had incredible volatility,” Davies said. “We are more than double to triple the cost of financing than we were just two years ago. That’s very difficult to sustain. You have to restructure a lot of real estate partnerships because of that. I think that we bring a lot of that to the table and a lot of folks call us because they see our ability to actually get certain types of transactions done.”

Tapping into new markets

With an eye for multifamily, hospitality and mixed-use projects, Way has pushed east, a result of following population trends, Davies said. The company is now doing deals all over the country – namely in Miami, the Carolinas, Texas, Georgia, Alabama, Arizona, Utah, Oregon, San Diego, Colorado, Nevada and Idaho.

While Davies remains passionate about Los Angeles, he said regulations such as the Measure ULA transfer tax have made it a tough market to transact in.

“One of the things we’re involved in is going where capital is going,” Davies said. “You’re seeing capital following a bit of the headlines. You can see the growth in population in the state of Arizona, for example, has been pretty significant. Capital wants us to go there, and so do developers and investors.”

To balance this expansion, Way opened a second office in Phoenix last year and opened a third office in Austin in January.

“As we stretch across the country, we will likely open an office in Florida just simply because of the growth,” Davies said. “It’s fascinating to see how big the markets in Florida are today.”

He also mentioned a future office in New York may be in the cards.

Leveraging technology

One of the ways Way Capital has been able to manage its rapid growth is by leveraging technology, according to Davies.

The firm is launching its own equity introduction portal, dubbed “Curate by Way,” later this month, a technology service meant to foster introductions between equity and its clients.

“The reason why we call it ‘curate’ is because when you are directly introducing folks, you’re vouching for them,” Davies said. “We, in essence, vouch for both parties. When we actually introduce someone, it means that we have vetted them. So not only have we vetted the capital, we’ve vetted the sponsorship group.”

When signing up for the portal, parties are prompted to fill out information pertaining to specifics as a real estate sponsor, including geography of deal flow, type of assets focused on, typical size of transactions and more. Once these items are filled out, the Curate system will make automated and direct introductions to complementary equity capital platforms.

When Way makes these connections, it represents the partnerships in debt financings for which it receives compensation, Davies said.

Plans to make 2024 a banner year

And although Way has already seen lots of success as a relatively new company, Davies anticipates this year to be its biggest year yet.

Drawing connections to The Great Recession, Davies thinks now is a great time for opportunistic investors to enter the market because property values are lowering and, if they buy now, they can potentially get a better return on their investment in the future.

“2023 was like a stalemate, meaning that many transactions couldn’t occur because we had seen such a run up in interest rates. Nobody knew what to do and there wasn’t this level of capitulation or resetting of values and folks determining what their strategies were to go forward,” Davies said. “I really want to stress we’re (now) starting to see what I call the capitulation, which means that there is a realization that the market will change.”

“We’ll be moving with more transactional volume between buyers and sellers going forward because there’s a greater acceptance that we’re going to be in a higher interest rate environment for a much longer period of time,” he added. “And while folks don’t believe that there’s a correlation between interest rates and capitalization rates or value, I think they’re highly correlated.”

Looking ahead to the next two years, Davies expects transaction volume to increase as there’s a further reset of values and, as a result, restructuring of deals.