Jun 29, 2023 · 1h 9m · capital-allocators
Don Mullen –Single-Family Rentals at Pretium (Capital Allocators, EP.324)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Capital Allocators, host Ted Seides interviews Don Mullen, founder and CEO of Pretium Partners, who shares how his 30-year Wall Street career informed the institutionalization of single-family rentals and outlines Pretium's tech-driven operations and strategic multi-asset expansion.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 9.2% of the talking time here. How this is scored →
Ted as informed peer 2.5 Guest teaching 2.7 Guest disagreement 0.2 Ted pushing back 0.2
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 44:50 Rebutting claims that SFR harms prospective homebuyers
Don forcefully rejects the mainstream critique that institutional buyers crowd out retail buyers, arguing Pretium enables families to access superior school districts and acts as a vital safety net for homebuilders.
Hardest push from Ted ▶ 43:38 Pressing on public critiques and tenant relationsTed directly challenges Don to answer common public criticisms of institutional SFR landlords and how the firm handles negative PR when maintenance issues arise.
Biggest teaching moment ▶ 49:45 Revealing the 14-year inventory freeze caused by aging demographicsDon provides compelling empirical data showing that Baby Boomers now exit single-family homes at age 74 rather than 60, removing 14 years of housing inventory from the market.
Ted holds their own ▶ 13:50 Framing scale via credit derivative standardizationTed demonstrates deep capital markets expertise by proactively connecting the evolution of bespoke credit derivatives into standardized liquid products to Pretium's scaling blueprint.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Capital Allocators University Cohort Announcement | 1 | 0 | 0 | 0 | Ted opens with a promotional announcement for Capital Allocators University before welcoming Don and asking an open-ended conversational prompt about entering Wall Street. | |
| 30-Year Journey Across Wall Street's Premier Desks | 1 | 1 | 0 | 0 | Don delivers an extensive narrative covering his 30-year career through First Boston, Drexel, Salomon Brothers, Bear Stearns, and his eventual recruitment to Goldman Sachs by Lloyd Blankfein. | |
| Cultural Dynamics and Risk-Taking Across Wall Street Firms | 3 | 2 | 0 | 0 | Ted asks a thoughtful question regarding cultural nuances across Wall Street desks, which Don answers by contrasting the sales-driven ethos of Bear Stearns with Goldman and Salomon's extreme risk appetite. | |
| Standardizing and Scaling Complex Financial Products | 5 | 2 | 0 | 0 | Ted demonstrates solid institutional knowledge by picking credit derivatives as a case study for financial standardization, prompting Don to detail the mechanics of liquidity creation. | |
| Identifying Market Dislocations and Structural Trends | 2 | 3 | 0 | 0 | Ted asks how Don spots macro dislocations, and Don draws a direct historical parallel between the post-GFC housing market collapse and the 1991 junk bond selloff. | |
| Founding Pretium to Capitalize on Residential Foreclosures | 2 | 3 | 0 | 0 | Ted asks why Don founded Pretium outside Goldman Sachs. Don explains walking foreclosure tracts personally and why Goldman's political scrutiny post-Senate hearings precluded building it internally. | |
| Mapping Demographics, Housing Supply, and Strategic Asset Selection | 2 | 4 | 0 | 0 | Don provides an educational breakdown on why Pretium shifted away from distressed foreclosure homes to standard owner-occupied 3-bedroom houses in high-growth Sunbelt submarkets. | |
| Building a Permanent SFR Asset Class vs. Short-Term Trading | 2 | 3 | 1 | 0 | Don outlines his contrarian view during 2018-2019 when peers were going public, explaining why Pretium treated SFR as a permanent secular asset class driven by demographic deficits rather than a cyclical trade. | |
| Scaling Home Acquisitions Through Proprietary Search and Workflow Tech | 3 | 3 | 0 | 0 | Ted digs into the logistics of buying 59,000 homes individually, leading Don to explain their iPad inspection workflows, custom Salesforce pipelines, and screening for risks like Chinese sheetrock. | |
| Sourcing Portfolios and Driving Servicing Alpha | 3 | 4 | 0 | 0 | Don educates Ted on how in-house property servicing transforms beta into alpha, citing how internalizing operations lifted net operating income margins from 30% to over 65%. | |
| Institutional Exit Strategies for Single-Family Rentals | 4 | 4 | 2 | 3 | Ted presses Don on public critiques that institutional investors lock individuals out of homeownership. Don energetically pushes back, arguing institutional SFR provides access to premier school districts and stabilizes builder demand. | |
| Expanding Pretium into Real Estate Adjacencies and Active Adult Housing | 2 | 4 | 0 | 0 | Don shares demographic insights regarding active adult housing, highlighting how aging Baby Boomers remain in single-family homes until age 74 on average compared to age 60 in previous generations. | |
| Buy-vs-Build Decisions and Manager Consolidation Dynamics | 3 | 3 | 0 | 0 | Ted inquires about buy-versus-build strategies for asset management adjacencies. Don analyzes why compressed valuations will trigger widespread GP consolidation across mid-tier alternative managers. | |
| Pretium's Ten-Year Roadmap and Future Asset Disciplines | 2 | 2 | 0 | 0 | Ted asks Don to project Pretium's roadmap a decade out. Don shares ambitions of scaling to $250B AUM by targeting private credit dislocations, distressed commercial debt, and intellectual property finance. |
Statements from this episode (29)
Mullen: David Solomon was hired from his team before recruiting him to Goldman
“That person they'd hired away from me was David Solomon, and so David Solomon was recruiting me.”
Mullen: Goldman Sachs initially rejected him as a cultural misfit after 56 interviews
“I then spent, must have been 56 people or something crazy, A person who's pretty well known from Goldman Sachs reaches out to me and says, listen, after 56 interviews, we come to the conclusion you just don't fit here. You're culturally a bad fit. We think you…”
Mullen: Bear Stearns was a sales firm, not a trading shop
“And Bear Stearns wasn't a trading firm, despite the image of it. It was a sales firm.”
Mullen: Goldman's leveraged finance desk took less risk than 1980s Salomon
“When I ran Goldman Sachs' leverage finance trading desk businesses, we weren't as big in some things as Salomon Brothers had been 15 years earlier. The scale of risk-taking was extraordinary.”
Mullen: I overestimated post-COVID credit defaults by misjudging stimulus impact
“I had a higher expectation for credit defaults after COVID hit. Didn't properly gauge the amount of stimulus versus its impact on credits.”
Mullen: Invested $25 million of personal capital to test single-family rentals
“And then eventually invested twenty-five million dollars on my money and bought houses, put a small asset management layer on top of it, For people to manage local property managers.”
Mullen: Pretium pivoted to buying owner-occupied 21st-century homes
“We ended up having to map the industry out by only buying owner-occupied houses, so houses that homeowners are choosing to sell, and therefore, we're buying high-quality assets, not distressed assets, and by driving homogeneity in the earliest phases, similar …”
Mullen: US housing shortage is between 3 and 7 million homes
“And whether you look at Stanford, Harvard, Fannie Mae, almost any economic analyst will tell you we're short somewhere between three and seven million houses.”
Mullen: Jon Gray is arguably the best real estate investor of all time
“John Gray is arguably the best real estate investor of my lifetime, right? And I say arguably because somebody may disagree with me, but I, you'd have a hard time finding someone who would disagree with that statement, I think, generally. One of the best real …”
Mullen: 70% of US mortgage holders have rates under 4%
“We have 70% of Americans have mortgages less than four percent. They're not selling their house anytime soon. I think when you go to five, the number's 95%.”
Mullen: Pretium bought its first 59,000 homes individually
“Our first 59,000 houses, we bought one at a time.”
Mullen: Single-family rental sector required modern off-the-shelf tech to exist
“The ability of off-the-shelf technology to create a lot of the things I'm going to describe is one of the reasons this industry exists.
The technology wasn't ready and cheap enough to build it off the shelf using things like Salesforce and basic modifications …”
Mullen: Pretium will likely acquire 15,000 to 20,000 houses in 2023
“And now in portfolios, as an example, we'll probably buy 15 to 20,000 houses this year. But almost entirely in portfolio form.”
Mullen: Internal operations drove Pretium's rental NOI margins to 65%
“When I owned houses and those folks serviced my house, you had NOI margins of like 30%. When we put an asset management layer and create a federation of them and force tech on them, we were able to get to 45%. Once we built our internal structure where we did …”
Mullen: Smaller SFR operators lack scale to run internalized operations efficiently
“The next tier down just doesn't have the scale for owning your own workforce, owning the strategic purchasing, being able to rent houses because of your advertising budget in a more efficient way.”
Mullen: Single-family rental will permanently remain an asset class like multifamily
“Framing it broadly is I think this will always be an asset class that people invest in like multifamily. It's never going away, right?”
Mullen: Office real estate has the greatest dispersion in its history
“I mean, office has the greatest dispersion today ever in office history.”
Mullen: Institutional rentals invest billions annually in new home construction
“We're putting billions every year into building new houses that during a cycle like this wouldn't take place.”
Pretium is actively seeking to acquire or build multifamily servicing platforms
“As we continue to drive the efficiency of asset servicing, we should bring that to multifamily in the same communities that our single family homes are in. So we're actively seeking out platforms to purchase in those communities or create one.”
Pretium is expanding staff and capital to lend to regional homebuilders
“We have platforms that have been lending to construction. We're increasing our staff and increasing our capital to be in a position to take on these regional home builders as a part of our Ecosystem.”
Mullen: Pre-COVID data shows Americans stay in single-family homes until age 74
“If you went back to the data, you turned 60 years old, and you moved out of a single-family home, and it was like a rock dropping out of the sky how fast the curve goes down. And you looked at that same curve in 2019 pre-COVID, which is gonna make this even mo…”
Mullen: Acquiring asset management teams is currently far better than organic growth
“I think that acquiring people right at this moment is far more attractive than it is doing it organically. 24 months ago, it was all about organics. Now it's about acquisitions.”
Mullen: TPG-Angelo Gordon deal marks the start of a massive M&A wave
“I think you're going to see what Angelo Gordon did with TPG is the beginning of a massive wave of this. There's a lot of mergers that are going to take place.”
Mullen: Institutional allocators find unconstrained absolute return mandates unappealing
“While a lot of people like to be absolute return people, most of the investors that I've come in contact really find that abhorrent. Just like, how do I allocate that into my broader portfolio that the mandate is do whatever the hell you want.”
Mullen: Pretium aims to scale to $250 billion AUM within 10 years
“So our aspirations are to be a two hundred billion or two hundred fifty billion dollar alt manager, hopefully faster than 10 years.”
Mullen: Private credit will experience a default cycle impacting distressed investing
“I think some of the categories that will morph private credit's going to change a lot over time, and we're going to have a default cycle in private credit, which will have a impact on distressed investing,
They'll have a new round of expertise required.”
Mullen: Office real estate faces massive restructuring spilling into other sectors
“It's going to be a massive restructuring of that space. I suspect it'll spill into others, and so the debt part of that market is going to be great.”
Mullen: Allocators face no penalty for choosing consensus giants like Blackstone
“The infrastructure of it is a little bit reminiscent of the Apple, IBM computer debate of the nineties, where it's like you were never incented to buy an Apple product if you were a corporate purchasing person, because you got no penalty for buying IBM and you…”