Winter 2019 marks our company’s 10-year anniversary. It’s hard to believe that 10 years ago, life threw me a curveball and I didn’t know what to do.
In June 2009, I was laid off from my job as an analyst at Capmark and couldn’t get another job in real estate, so I decided to try my luck investing in real estate, even though I didn’t have a formal education in this space.
At exactly that time, I had a fortunate meeting with a role model who had purchased 7,000 units between 2004 and 2007. I was thinking about investing in distressed houses or small apartment complexes of 4-10 units. We discussed the difficulties in generating wealth in those property types, and the lack of cash flow in both. He was losing a large portion of his portfolio and suggested that I consider large apartment complexes.
asked about the toilets, and how I could possibly fix hundreds of toilets before I learned how to fix one. He told me that I’d never have to fix toilets if I focused on large properties, because there would be staff to manage the day to day operations. In addition, this was where the opportunity was because the loans were non-recourse. Borrows weren’t dipping too far into their pockets to save the properties.
This meeting marked a transition point in my thinking. I didn’t realize that the opportunity existed, and this advisor opened my eyes to see what I was too young and inexperienced to notice. I’ll be forever grateful to him.
Over the past 10 years, we have accomplished a lot. Here's a brief overview, or our 10 in 10:
- Grown from one employee (me) to over 50
- Acquired nearly 5,000 units
- Invested over $126 million
- Sold 791 units and returned approximately $73 million via distributions and sales
- Completed over $50 million in construction projects
- Started a construction company and a property management company
- Expanded into Dallas, San Antonio, and Atlanta
- Started on our first ground-up development
- Made many new friends and partners who’ve joined our journey
- Been tested by difficult situations and built a reputation as a best-in-class operator in our market
Going into our next decade, we are preparing for further growth and improvement. We are in the process of setting up an advisory board to help us scale into a great investor, operator, and developer of multifamily properties.
As many of you know, a big part of my role is to meet with investors. We raised over $50 million in the second half of 2019 from high net worth investors. Trust me, that didn’t happen from my couch. I traveled a ton this year and had face-to-face meetings with hundreds of people. In the process, I learned a few things that differentiate our organization from other groups. Here are a few:
- Patient and principled investment strategy. We run a lean operation that’s not reliant on deals to survive. Obviously, we want to grow and find opportunities to place capital, but the fees are not driving our decision making.
- No pressure to invest. We share deals that we have under contract and will close regardless of a single investor’s participation.
- Pick the deals you like. Unlike a fund, this isn’t a blind pool. You can invest in deal A and pass on deal B. We’ll keep you on our distribution list until you tell us to take you off.
- Large sponsor co-invest. I’m the largest (or one of the largest) investors in every deal. My typical check size ranges from $1-2 million and our average investor contributes $150,000.
- Fair return structure for investors. We can offer similar returns with a fair structure that benefits both the sponsor and the investor, because we’re cutting out the middleman (i.e. private equity firms) and raising funds directly from investors.
In 2020, we expect to sell four properties:
- Oak Lawn Heights in February 2020
- Alora, Ellis, and Redwood Gardens in Q3 2020
This will free up capital for our organization and our partners.
We will also break ground on our first development project in Q2 2020: an opportunity zone development in the Texas Medical Center. There’s still some room left if you’re interested.
By Q4 2020, we will finalize the development plans for a large mixed-use development in Houston. The timing of future acquisitions is uncertain, but we’ll be looking for opportunities.
In 2019, we underwrote over 100 apartment communities, offered on 47 deals, made best and finals on 19 and were awarded two. That’s a 2% hit rate. We are evaluating ways to improve our percentages moving forward, without sacrificing our return expectations.
All of this is made possible by our partners. Our team and I are the guides who can make partners' investments work, and we take that responsibility very seriously. I’m excited for the future and preparing for both opportunities and challenges ahead.