Weekend Interview: Nectar CEO Derrick Barker On Providing Alternative Lending Where Others Won't

This series goes deep with some of the most compelling figures in commercial real estate: the deal-makers, the game-changers, the city-shapers and the larger-than-life personalities who keep CRE interesting.

When Derrick Barker was embarking on his college career at Harvard in 2002, he also launched his commercial real estate career. With his roommates, he began buying properties in his home city of Atlanta with the hope of providing his community with affordable, quality housing options. Bonus: he and his buddies could crash at his parents' house when they came down from Boston to tour properties.

After a career on Wall Street with Goldman Sachs post-graduation, he realized his heart was still in fixing and flipping properties in his hometown, so he returned to the real estate game in 2013.

He noticed that when working on developments, it takes extra capital here and there to reach the finish line. He also noticed how hard it is for small businesses — especially ones of color — to obtain funding. That is getting worse, not better: Capital-raising for Black-owned companies fell 71% in 2023 and 79% in Atlanta.

To help bridge that gap, he and his wife, Brittany Mosely, founded alternative lender Nectar in 2020, a year where people of color made up only 15.4% of C-suite roles in real estate financing. 

Nectar has since worked with $61B in capital requests to help clients — mostly small businesses — grow their real estate portfolios. His model is based on funding projects, mostly multifamily, single-family rentals and assisted living, that already have a cash flow and are stable but just need that extra push to go forward. 

And as interest rates are still sky-high, more clients have come knocking on Nectar's door.

Barker spoke to Bisnow about being a Black man in the VC funding sphere and how Nectar snags opportunities other lenders pass up.  

This interview has been edited for length and clarity.

Bisnow: How'd you get your start in your field?

Barker: My senior year [at Harvard], I started buying real estate with a couple of my roommates. 

[After graduating], I worked at Goldman Sachs as a bond trader but kept building a real estate portfolio. And by 2013, I had about 500 units worth of multifamily and decided to quit. I ended up leaving Goldman and coming to Atlanta to buy rundown apartments in my own neighborhood. I did that for a dozen years, $50M worth of real estate bought, renovated, asset-managed, developed, operated. 

And then I realized, even if you have a stabilized, cash-flowing portfolio, that's a really capital-intensive business and you just need cash sometimes to finish renovation or to buy a new property, or to buy out a partner, or whatever it is. 

And you know, there are no banks, there are no lenders that serve those really small businesses, because it might sound like a lot. You have $50M in real estate, but it's not like "Here's a small business that has million-dollar liabilities that come up out of nowhere."

So I started Nectar in 2020 with my partner and wife. We provide liquidity to people who own low-leverage, stabilized cash-flowing commercial real estate, mostly affordable apartments, and then we package those deals and sell them to investors.

Bisnow: What made you and your roommates at Harvard start buying real estate?

Barker: Our first organization was very connected to Wall Street. We had Wall Street jobs. We saw the market go down [in 2008], and we're like, "Well, what are we going to do?"

Prices were low, so maybe we could get in now and we can write it up at the beginning of our career. We didn't know if it was going to keep going down. 

We were all from working-class neighborhoods, and we felt like they were just underinvested in. 

We were connected to a place where there was money, and we believed that there was an opportunity to take capital and just deploy it into these undercapitalized neighborhoods where there is a lot of demand for housing. 

Bisnow: With Nectar, do you make it a point to take a shot on someone that might not get funding elsewhere? 

Barker: We are set up as a business to supply capital in places where larger institutions are not focused on. So we're focused on the small- and medium-sized real estate companies who, you know, they're too big for friends and family capital. If you have a $75M or $115M portfolio, it's hard to pass the hat around, but Goldman Sachs isn't going to give you money. 

And that's where most of the people are who own Class-C apartments and nationally affordable housing that's in neighborhoods of color. It's a lot of these small- and medium-sized real estate companies that might own $100M or $200M in real estate, but they're really undercapitalized because institutional capital isn't there, and that's where we focus our business on.

Bisnow: Alternative lenders are having a moment right now as banks have pulled back their lending. So how are you taking advantage of that moment at Nectar?

Barker: I mean, this thing goes in cycles. They always have their moment. Like after the [banking] crisis, there was a moment, and things went up and down.

We're getting in where we fit in. We're focused on exploiting, or really plugging, the gap where there is opportunity. And there's always going to be something going on. 

Right now, banks are pulling back. Right now, interest rates have risen. So there's a gap in the capital markets for our target customers, for the people who are on the front lines of the affordable housing prices, actually on the ground, building and operating these properties. 

From the beginning of my career, I've been focusing on filling the gaps in these places, whether that be jumping in and developing the properties myself back in 2013, or filling the capital gaps now. But that's where the opportunity is.

Bisnow: You say you seek out stable and low-leverage properties. Can you give me specifics on what you mean by that?

Barker: They're cash-flowing, so they're already operating. They've been generating consistent income every month for a year, usually multiple years. 

It's not a bridge. It's not someone who's distressed. It's not someone who's trying to get it fixed up. 

It's already an apartment complex that's operating 95% occupied, making money. Across our portfolio, we average in the 60% range [of leverage]. These are people who are prudent real estate operators, they have a good property and good portfolio.

Now, sometimes they might use the capital. They might have one bad property in their portfolio that they need capital for to help bridge. But by and large, the projects that we finance, they have cash flow coming in every month. They're well-occupied and they have good debt, not overleveraged. 

Bisnow: What keeps you in commercial real estate?

Barker: Commercial real estate is a place where you can still really create impact on people's lives at scale. This is something where the work that I come in and do every day can actually move a community and change the way people interact with their built environment. 

It's something that's very exciting to me, personally. To take housing that was once decrepit and once gang-ridden, and once a problem, and make it so that it's a place where someone can grow up or raise a family or be a launching point to start a career and move on to something else. And now being able to do it from the capital side of things, where we're enabling a new generation of real estate developers to go and continue to build and expand their portfolio, is incredibly rewarding.

Bisnow: Did you have a mentor when you were first starting out?

Barker: Herman Russell was somebody who built an empire here in Atlanta back when it was a lot harder than it is right now for Black people specifically. And so he's someone who we always looked at as a role model.

He helped us buy our first apartments by helping us to get the mortgage. 

He's been an inspiration. He passed away in 2004, but he was a trailblazer and someone I still admire.

Bisnow: Do you have a bold prediction for the rest of this year?

Barker: Ultimately, as some of this debt comes due on some of these properties, there's going to be people that are forced to sell, and that's going to put pressure on commercial real estate prices, and we are closer to the beginning than the end of that.

Bisnow: Do you think that there is one asset class that's going to feel that the most, as opposed to others?

Barker: I mean, clearly office. 

But I'd say, instead of focusing on the asset class, it's really just a profile of the borrower, like people who bought properties in 2021 and in 2022 with short-term debt that needed to push rents aggressively, 3-5%, or do a construction project and have rents go up. You know, they have a three-year or four-year mortgage. Those are the people that get distressed no matter what the asset is.

Bisnow: Since this is the weekend interview, what do you like to do on the weekend?

Barker: I have four children, and they're very much into sports, and so going and chilling at a park and watching the kids’ soccer game or gymnastics competition, that's some of my favorite things to do on weekend, or just be at the house and hang out and watch the kids jumping and climbing and playing.