By: Nicholas Nehams
December 11, 2016
Real estate investor Chris Finlay got his start as a commercial airline pilot.
“I’d fly down to Acapulco, spend a day and a half, then fly back to New York,” Finlay said. “It’s not a bad way to make a living.”
He says he learned one lesson from his old profession that applies to his new one: “Don’t run out of gas.”
Finlay runs Miami-based Lloyd Jones Capital, which owns about 25 multifamily apartment buildings with 5,000 units in Texas, Florida and South Carolina. Total value? More than $500 million.
His firm looks for deals in the $20 million to $50 million range, renovating buildings and expecting at least a 20 percent return on the improvements. He also leads Jacksonville-based company Finlay Management, which manages the properties.
“Florida is booming,” Finlay says, but his company avoids investing in South Florida because of exorbitant prices. It recently sold its last property in Miami Beach. “It’s like New York City. The returns are very low. A lot of money wants to be here.”
He answered these questions from the Miami Herald via email.
Q: How did you go from being a pilot to investing in real estate?
A: I began my career as an airline pilot for Eastern Airlines. I married a Miami girl, but my flying took us north to New York and Boston.
In those days, airline pilots enjoyed an abundance of free time, so in 1980, I started a commercial real estate company. The Finlay Company took off as we opened offices throughout New England and expanded to include property management and appraisal divisions, in addition to commercial brokerage. Eventually, I took early retirement from Eastern in order to concentrate on my real estate businesses. Sadly, a few years later, Eastern closed its doors.
In the late ’80s, the FDIC shut down many of New England’s largest banks, and the commercial real estate industry came to an abrupt halt. We worked our way through that period by expanding our property management arm to become the asset manager of the FDIC’s second largest portfolio of OREO assets.
By the early ’90s, things had settled down and we entered our “development” phase. Specializing in affordable housing, the low income tax credit program in particular, we developed and constructed approximately forty affordable apartment communities throughout the country, including some award-winning historic renovation projects. At the same time, we continued to expand our property management arm, Finlay Management, to accommodate our growing portfolio of multifamily assets. We also found a niche “build to lease” opportunity with the US Postal Service, so we spent several years acquiring land and building post office facilities as far west as Oregon and New Mexico. Our final real estate development was in 2008 when the Orlando Housing Authority chose us to be the developer of its $50 million HOPE VI inner city revitalization project.
Then the “Great Recession” hit, and we started acquiring multifamily communities. In 2010, our model was to acquire underperforming multifamily assets, operate and improve them with the help of Finlay Management. This proved to be extremely successful, so in 2014, we officially established Lloyd Jones Capital to open our investments to private investors and institutions. And the establishment of Lloyd Jones Capital brought us happily back to Miami.
Q: What was your first real estate deal and what did it teach you?
A: Back about 1970, my new father-in-law suggested that we share an investment in a South Florida avocado grove. That investment launched my interest in real estate, and the words of the grove manager have stayed with me throughout my career: “The best fertilizer is the farmer’s foot on the soil.”
Q: What do you look for when investing?
A: We are multifamily investors. Multifamily has been the most secure and least volatile of all real estate assets classes. In fact, all real estate has outperformed the equity markets for years. And we specialize in workforce housing. In our model, workforce housing represents housing affordable to median income households. Our goal is to identify and acquire assets that can be improved – through strong management and/or through the addition of amenities and unit upgrades, including energy efficiencies and water conservation—to provide a quality, but affordable, lifestyle for our residents.
We focus on metro areas of Texas, Florida and South Carolina. Our acquisitions are “C” and “B” properties in good neighborhoods. We look for highly rated school districts and low crime rates — and always areas with high population and job growth.
Priorities: Preservation of capital, i.e., don’t lose money, even in down markets. Reasonable return throughout our hold period. Our acquisitions are not predicated on big “pops” at disposition. Capital appreciation.
Q: Why do you focus on Texas, Florida and South Carolina?
A: ▪ Job growth.
▪ Population growth.
▪ Pro-business, low tax, “low bureaucracy” states.
Q: Why is investing in South Florida a challenge?
I think this is due to the amount of international money flowing into the area. People just want a “trophy asset” in Miami regardless of its economic value (or lack thereof). The area’s desirability to foreign investors pushes up prices and erodes returns.
Q: How can we fix America’s affordable housing system as it exists today?
Government bureaucracy, special interests and subsidies have created a very expensive system. It costs $240,000 per unit to produce a property under the Low Income Housing Tax Credit program. A market-rate developer can build the same product for $140,000 per unit.
Instead of burdensome, bureaucratic subsidies to developers, perhaps a better solution would be to provide subsidies directly to the users themselves. Give them vouchers, depending on their income, to help bridge the gap. (But not like Section 8 vouchers that limit their choices.) Let them choose where they want to live, their neighborhoods, and their schools, instead of relegating them to specific buildings and even specific unit sizes. In my opinion, that approach would at least double the number of households receiving help.
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