The sunshine state’s population is soaring as more and more Americans are migrating south. It may be the beautiful weather and landscape, the favorable taxes, or the growing job market, but this appears to be a trend that is here to stay.
According to the Demographic Estimating Conference, Florida’s population will surpass 22 million residents by 2022. Florida is already the nation’s third most populous state behind California and Texas. For many, this increased growth is exciting as it brings about opportunity for the state, but it begs the question if the current housing supply in Florida real estate can meet this increasing demand.
Forbes reports that from 2010-2016, on average there were 114,744 new households per year, but only 57,952 new housing units. With the surge of population growth that we are witnessing in 2019, this disparity will only increase. Given this lack of availability, now is the ideal time to invest in Florida real estate that is so sought after to meet the swelling demand.
New households, families in Florida FIGURE 4 FROM STALEY, MILLSAP, AND NASTASI (2019)
VIENNA, Va. – April 2, 2019 –Shelters to Shutters(S2S), a national non-profit that transitions individuals and families from homelessness to economic self-sufficiency, today announced a $100,000 donation from Miami, Fla.-based Lloyd Jones LLC, a real estate investment, development, and management firm specializing in multifamily and senior housing throughout Florida, Texas and the Southeast.
“The majority of individuals experiencing homelessness in this country are looking for an opportunity to improve and change their circumstances,” said Andy Helmer, CEO of S2S. “This partnership with Lloyd Jones gives us the ability to provide that opportunity to more deserving individuals and their families by strategically boosting our efforts in the Southeast region. We are thrilled that Lloyd Jones is taking a leadership role through this generous contribution as well as partnering to place candidates into full time leasing, maintenance and groundskeeping positions at their properties. Together, we will make a meaningful long-term impact with S2S’ private industry solution to a very public social issue.”
S2S partners withapartment management companies – including AvalonBay Communities, Equity Residential, Gables Residential and Waterton – to place people experiencing homelessness in onsite, entry-level jobs and provide them with housing at the same communities where they work. S2S works with a number of homeless-focused non-profits to identify suitable job applicants, changing the lives of individuals and families and providing quality, motivated employees for a rapidly growing industry in need of talent.
“We are proud to team up with Shelters to Shutters to further the positive impact this organization has on the communities it serves,” said Stacey Hess, head of Human Resources at Lloyd Jones. “As the demand for workforce housing continues to rise in many U.S. markets, so does the need for qualified candidates to work in the property management industry. We look forward to working with Shelters to Shutters as our firm continues to grow.”
83% of the homeless population is situationally homeless due to a life-altering event such as job loss, medical or health emergency, divorce, domestic abuse or the loss of a primary income earner. The donation from Lloyd Jones will help further ensure S2S can serve people who want to work and return to a life of self-sufficiency but may not receive the governmental support services needed.
S2S relies solely on private companies, foundations and individual donors to support its operations which provide a hand up not a hand out to individuals and families on their path from homelessness to economic self-sufficiency.
Since its founding in 2014, S2S and its multifamily partners have assisted individuals and families out of homelessness in markets throughout the Mid-Atlantic, Midwest, Northeast, South and Texas.
About Shelters to Shutters
Shelters to Shutters is a national 501(c)(3) organization that transitions individuals and families from homelessness to economic self-sufficiency by educating and engaging the real estate industry to provide employment and housing opportunities. Across the country, Shelters to Shutters pairs leading property management professionals with individuals experiencing homelessness who are ready to work. The result is an innovative program that provides mentorships for careers in property management, along with full-time employment and housing opportunities for individuals facing homelessness and a pipeline of high quality, motivated employees for the multifamily housing industry. More information can be found at www.shelterstoshutters.org or by following the organization on LinkedIn, Facebook and Twitter.
About Lloyd Jones LLC Lloyd Jones LLC, is a private-equity real estate firm that specializes in multifamily and senior housing. With 38 years of experience in the real estate industry, the firm develops, acquires, improves, and operates multifamily and senior housing communities throughout Florida, Texas, and the Southeast. The firm is based in Miami, Florida. Its partners include institutional investors, family offices, individual accredited investors, and its principals. For more information, visit www.lloydjonesllc.com or follow the firm on LinkedIn or Facebook.
In a competitive, fast-changing environment, meeting client expectations calls for unprecedented sophistication about business strategy, finance and other areas. Experts name five key areas to focus on.
by Robyn Friedman
Waters Edge at Harbison, Columbia, S.C. In the midst of massive local layoffs that caused multifamily vacancy in the area to skyrocket, the community held the line through stepped-up resident engagement and new programs. Image courtesy of Lloyd Jones LLC
The days are long past when managing a multifamily community was primarily a matter of collecting rent, paying bills and maintaining the physical asset. Adding value is now a standard part of the job, because of the much-discussed evolution of the profession into a strategic role. In broad terms, the mission is to think like an owner, rather than a caretaker. But the question remains: What do owners and asset managers really want? READ THE DIGEST
Answering the question is a high-stakes affair. “You’re taking somebody and giving them the responsibility of managing potentially a $50 million asset,” said Christopher Finlay, chairman & CEO of Lloyd Jones Capital, a diversified investor and operator. “If you don’t have the right manager, you absolutely will not achieve the business plan. And that could have drastic financial results.”
CHANGE DRIVERS
Strategies for meeting the needs of ownership stem from a handful of trends that are reshaping the property manager’s role. Fee compression. Management fees vary widely depending on the size of the property, the size of the owner, the market and the size of the cashflow stream, so it’s hard to pin down ranges for property management fees.
But things are getting tighter. Twenty years ago, the fee for managing a typical 200-unit community was close to 5 percent of the total revenue generated at the property, recalled Walt Lamperski, president of Atlanta-based Stonemark Management. A decade ago, the fee was 4 percent; today, it’s 3 percent. “It’s the new competition,” he said. “Everybody is involved in third-party management.”
From left, Dustin Read, Virginia Tech; Kim Collins, CBRE; and Bryan Furze, Federal Realty Trust, at the 2018 IREM Global Summit in Hollywood, Fla.
Labor squeeze. Good multifamily managers are hard to find, a fact exemplified by rising compensation. Ten years ago, the annual salary for managing a 400-unit asset in Atlanta was $40,000; today, Lamperski pays between $65,000 and $75,000 for someone to manage a comparable community. So competitive is the market for skilled managers that National Multifamily Housing Council members give their business cards to potential managers when they receive good service in other settings, reported Rick Haughey, NMHC’s vice president for industry technology initiatives. Savvy clients. Institutionalization of ownership spearheaded by REITs and other investors have raised the bar for information gathering and financial reporting, noted Haughey. Technology. Robust development has raised competition, held down yields and forced owners to sharpen their pencils. As some traditional property management functions are automated, a growing number of properties are eliminating the on-site manager’s position. “A lot of that has to do with competition in the marketplace,” said Dustin Read, an associate professor of property management at Virginia Tech. “The market has been so frothy for multifamily that yields have been driven down.”
MEETING EXPECTATIONS
So how do property managers meet the rising expectations of the asset managers they serve? For service providers seeking to answer that question, step one is to recognize the headaches shared by both groups. “A lot of property managers think that asset managers sit on high and don’t feel the same pressure to do more with less and wring every dollar out of a property,” Read said. “The more property managers and asset managers understand what each other does, the more opportunities for collaboration.” Here are five essential qualities that asset managers expect today. Create value. Managers should look beyond the physical confines of an asset in order to understand its place in the larger market. Yet Read’s research suggests that most asset managers think their on-site counterparts don’t fully understand the owner’s objectives. “They’ll say that their property managers are worried about the blocking and tackling on the ground and don’t have any idea what our investors’ long-term goals are,” he noted. A good start: reading the owner’s prospectus, which will help the property manager recommend steps that will help meet or exceed the client’s goals.
At Stonemark Management, Lamperski adds value for his clients by training his team in effective negotiation with vendors. “We’ve been able to create lots of savings without sacrificing the work,” he said. Stonemark renegotiated contracts or switched contractors at Barrington Hills, 376-unit Class B community in Peachtree Crossings, Ga., an Atlanta suburb. The effort saved $20,000 per month on maintenance-related expenses and advertising without cutting services.
To add value most effectively, property managers should be ready to think boldly and willing to take the initiative. So says Bryan Furze, senior vice president of asset management at Federal Realty Investment Trust. Speaking at the Institute of Real Estate Management’s Global Summit in September 2018, he elaborated: “I need someone who’s going to demand a seat at the table.” And he issued a warning to asset managers that don’t provide that seat: “You’re setting yourself up for failure.”
As Furze reminded his IREM listeners, reducing expenses is much easier than driving revenue. Such was the successful approach at one Federal Realty property. After an ineffective, overpriced security contractor was dismissed, management set several cost-effective alternatives in motion. The staff asked local law enforcement to step up its presence and enlisted the property’s other service providers to watch for suspicious activities. All told, the change saved tens of thousands of dollars annually, Furze reported. Speak the language of finance. Managers should always bear in mind that each decision they make has an impact on the asset, which is, after all, an investment vehicle that creates cash flow. For that reason, talking about cap rates, NOI, absorption, fair market rent and vacancy costs should be second nature. “Even if you are talking to ownership in really simple return metrics—things as simple as payback period or cash-on-cash return—it signals to asset managers that you understand this piece of real estate as an investment vehicle,” Read said. Triage effectively. At almost any community, the staff could come up with a substantial wish list of upgrades and programs for residents. But before recommending any new items, managers must think about the economic payback. Apart from safety issues and legal mandates, every proposed expenditure should ultimately be tied to cash flow.
During the summer of 2017, the multifamily market in Columbia, S.C., took a major blow. The expansion of the V.C. Summer Nuclear Generating Station, a $9 billion project northeast of the state capital, was halted after years of delays and construction problems. The move cost some 5,000 local jobs. Occupancy at some communities slid as low as 30 percent. Waters Edge, a community owned by Lloyd Jones Capital, was among those affected.
Yet management’s efforts kept the impact in check and prevented occupancy from dipping below 85 percent. The key was investing in activities that promoted resident morale and involvement at the community. Highlights included a monthly breakfast bar; on-site and off-site activities, such as pizza night and an Easter egg hunt; and purchasing items like tennis equipment and air compressors which management made available for residents to borrow. The upshot of the strategy was a happy environment that encouraged residents to stay—and their friends to move in. Serve as a resource. Property managers should aspire to to serve as the go-to information resource for ownership. Rather than merely reporting what’s happening at a community, it’s far more valuable for a manager to provide insight into the local market. Nor are facts and figures regurgitated from market reports what asset managers are looking for. Instead, they need what Read calls the water-cooler chatter—for example, “how are consumer preferences changing, how are tenant demands changing, what’s influencing whether tenants are staying or going.”
Read predicted that technology will streamline reporting and other management functions in the future, allowing managers to operate more efficiently. “That will free up time for property managers to engage in different things,” he said. “Technology will fundamentally change property-management expectations.” Be creative and communicate clearly. Property managers must speak up whenever they have an idea about improving a property’s performance, even when the topic doesn’t fall within their stated job description. And when they do speak up, managers should take care to convey information effectively and deploy it in the field. “Show up, be very confident, know your stuff and be part of the team,” Federal Realty’s Furze urged his audience at the 2018 IREM Global Summit. “If you’re not welcome at the table, it says more about the asset manager than it does about you.”
Defusing tensions between client and service provider is also vital to communication. Friction tends to arise most often “when there is some disconnect on the quality of trust,” said Kim Collins, associate director for asset services in CBRE’s Indianapolis office, during the IREM Global Summit. In one case, Collins’ team remedied a frustrating breakdown in communications by creating a master spreadsheet that provided an all-in-one tracker for functions at the property. Read the March 2019 issue of MHN.
Lloyd Jones is a real estate investment, development and management platform that has operated in the multifamily space since the 1980s, doing more than $750 million in projects in total. Now, the Miami-based firm is pursuing a senior living pipeline, developing “independent living-light” properties under the Aviva 55 brand.
“In general, what we feel is that technology is going to rapidly allow people to age in place and not have to end up going to an assisted living, which as we know is getting more and more medically acute,” Lloyd Jones Chairman and CEO Chris Finlay told Senior Housing News.
Finlay’s perspective appears to be widely shared among senior living professionals. In a recent survey of industry pros conducted by architecture firm Perkins Eastman, respondents identified “aging in the community — decentralized care and services” as the No. 1 disruptor of the standard senior living business model.
In particular, respondents said that new technologies are enabling aging in place and decreasing older adults’ reliance on professional caregivers in settings such as assisted living.
Lloyd Jones is aiming to create middle-market, 55-plus age-restricted properties with these trends in mind.
“We’re not looking to do super high-end, we’re looking to do it as cost effectively as possible and do it where we provide services on an a la carte basis through relationships with food vendors, health care agencies, transportation and other services that these folks will need and use,” Finlay said.
The Aviva 55 model
Lloyd Jones is not a total newcomer to the senior living sector. The firm first developed an independent living/assisted living building in New Hampshire about 20 years ago. Currently, Lloyd Jones owns between more than 700 age-restricted units with no additional services, all located in Florida.
The idea for Aviva 55 came, in part, from observing the dynamics at these current 55-plus properties.
“We see how people really want to stay there and age in place,” Finlay said. “In one property, in Jacksonville, we have a lady who is 103 years old. She is completely independent. [The residents] make friends with their neighbors and they’re taking care of this lady … They become like little mini-families.”
For Aviva 55, the idea is that by layering on some services, Lloyd Jones can further facilitate aging in place in a middle-market product that should appeal to aging boomers who want to maintain their independence for as long as possible.
The plan is for Aviva 55 buildings to have a health and wellness coordinator and an activities coordinator on staff, to facilitate socialization and residents’ wellbeing. Lloyd Jones also intends to forge partnerships with local organizations to provide support services on an as-needed basis.
Already, older adults are increasingly embracing the on-demand economy to meet needs such as grocery delivery and transportation. To support this, Aviva 55 buildings will have robust internet infrastructure, Finlay said. Strong WiFi will also enable health care-related technology that might be put in common areas.
For example, Finlay is interested in facilitating telehealth by creating spaces equipped with tech for virtual doctor visits. It’s possible these spaces could also be used for onsite exams or treatment through partnerships with area providers.
From a physical plant perspective, expect Aviva 55 buildings to be three to four stories, with surface or podium parking, and between 100 and 200 units. It’s a 100% rental model, and Finlay is estimating development costs of about $250,000 per unit.
“You can provide a very nice amenity package and common area packages without getting crazy,” he said. “Most of what I see is over the top … We’re going to try to be as efficient as possible in the design … we’ll try to keep the interiors, while very nice, not ridiculous.”
In multifamily, Lloyd Jones has carved out a niche in workforce housing, and the firm plans to target a similar demographic with Aviva 55. This strategy also should insulate the properties from oversupply pressures currently hitting assisted living and more high-end independent living communities, Finlay said.
“I think there’s certainly some softness and a lot of competition in the high end space, in independent living and assisted living,” he said. “I think in most cases … when you start charging $7,000, $8,000, $10,000 a month, that’s a very small demographic that can afford that. Those properties are meeting with some resistance.”
The rollout
Lloyd Jones currently has three Aviva 55 projects on the books, and would like to eventually be developing 10 or more a year, Finlay said.
“We’ve got a big team out looking for sites,” he said. “We’re really hoping to scale this part of our business pretty rapidly.”
Last December, the firm closed on a deal to build a 150-unit building in Sunrise, west of Fort Lauderdale. The other projects are in Port St. Lucie and Naples. In Port St. Lucie, Finlay hopes to break ground before the end of the second quarter of this year, and in Naples, the timeline is to start development on the site within 6 months.
Lloyd Jones is also exploring acquisitions of existing independent living or assisted living buildings, to scale them back to the “IL-light” model of Aviva 55. Going the other way — acquiring a multifamily building and layering on services — is more complex from a regulatory perspective. In some cases, it could involve emptying the building of residents for 90 days before reopening as an age-restricted property, Finlay said.
Lloyd Jones has a number of capital partners for Aviva 55 projets, Finlay said, although he declined to disclose their names.
“There’s a ton of capital going after this space right now, because I think everybody realizes that the demographics are certainly overwhelming, and there’s a lot of need,” he said, adding that “capital is not a concern” in terms of scaling up Aviva 55.
Going forward, Lloyd Jones is looking to expand the Aviva 55 footprint beyond Florida. Texas is the next state being targeted, followed by Georgia, South Carolina and North Carolina.
Finlay has demonstrated good timing not only in his real estate career but prior to that. He was a pilot for Eastern Airlines for 15 years but took early retirement and got out of that company two years before it went bankrupt in 1989. Finlay describes that as “fortuitous timing”; it’s possible that the timing is also fortuitous for Lloyd Jones to be early mover in this emerging independent living-light product, if demand and competition ramp up as Finlay anticipates.
“I think there’s going to be a big move to this asset class,” he said.
If he’s not in the newsroom, Tim likes to be on the tennis court or traveling to a new destination. Recent highlights include Sri Lanka and Iceland.
MIAMI, FL – Lloyd Jones, LLC, a Miami-based multifamily investment and development firm, has acquired a two-property work force housing portfolio in Daytona Beach, FL. The acquisition of the Daytona Beach Portfolio brings the firm’s total AUM to $487 million.
Berkadia Commercial Mortgage, LLC provided Freddie Mac-sponsored senior and mezzanine financing to Lloyd Jones in connection with the acquisition.
Chris Finlay, CEO of Lloyd Jones, says, “With this acquisition, we now have five properties in the Daytona market and look forward to continuing our value-add, workforce housing strategy, allowing residents access to reasonably priced housing in this vibrant community.”
Built in the mid-1980s, the Daytona Beach Portfolio consists of two adjacent properties totaling 384 units. Lloyd Jones plans to invest $2M in upgrades, while keeping rents affordable for middle-income families
Raul Ramirez, the company’s CFO, stated, “Our goal is to take these currently under-performing communities and through the right management and cost-effective upgrades, create a better community for our tenants.”
This is the first investment opportunity that Lloyd Jones is offering to private, accredited investors. Previously, the firm partnered only with institutional investors on its investments, which have yielded an average realized IRR of 32.09% for the past ten years. Finlay added “This will allow individuals to access investment opportunities typically reserved for large institutional “check writers,” for as little as $25,000 per investor, and to tap Lloyd Jones’ seasoned investment and property management teams which underwrote and will own and manage these properties.”
For more information, please email: investments@lloydjonesllc.com About Lloyd Jones, LLC
Lloyd Jones, LLC, is a private-equity real estate firm that specializes in multifamily and senior housing. With 37 years of experience in the real estate industry, the firm develops, acquires, improves, and operates multifamily and senior housing communities throughout Florida, Texas, and the Southeast. The firm is based in Miami, Florida. Its partners include institutional investors, family offices, individual accredited investors, and its principals.
Chris Finlay, CEO of Lloyd Jones LLC, shares his view on trends in elderly housing investment, the firm’s strategy and future plans. He also predicts how technology will impact the sector.
by Beata Lorincz
Lloyd Jones LLC is a real estate investment, development and management firm that specializes in multifamily and senior housing throughout Florida, Texas and the Southeast. The company focuses on independent living and age-restricted facilities (ILFs), as opposed to communities that include a medical component, such as assisted living facilities (ALFs) and memory care (MC).
According to the National Investment Center for Seniors Housing & Care (NIC), senior housing occupancy in the U.S. averaged 87.9 percent in the second quarter of 2018, representing an eight-year low. Multi-Housing News reached out to Lloyd Jones CEO Chris Finlay for further insight on the senior housing market.
What do you look for in a senior community? Finlay: Ideally, for existing assets, we look for properties 10 to 20 years old that we can acquire at substantially below replacement value, then improve or redevelop them so that they are competitive with new product. Unfortunately, very few of these opportunities exist. Consequently, our focus is on ground-up development, where we can create an active senior community designed specifically to our specifications—and to the expectations of our residents.
What are the latest trends in senior housing? Finlay: More and more seniors are renting by choice. They are looking for lifestyle flexibility as well as freedom from taxes and household/yard maintenance. And they like being around like-minded friends, in a socially active and healthy-lifestyle-focused environment.
What are the greatest challenges in owning senior communities? Finlay: Getting too attached to your residents. Our senior residents are wonderful. They are great to work with and so appreciative of the opportunities our communities provide.
Research shows that senior housing occupancy hit an eight-year low of 87.9 percent in the second quarter of 2018. What can you tell us about this drop? How does this impact the sector? Finlay: Fifty-five-and-over occupancy is over 95 percent and ILFs are at 92 percent. ALFs/MC are overbuilt in nearly all major markets. We just got back from a seniors conference and our strategy was absolutely confirmed. This is where they’ve headed and will be staying for a long time and thanks to technology, many seniors may never have to go to an ALF/MC or skilled nursing facility (SNF).
What are your predictions for the senior housing market going forward? Finlay: I see less demand for assisted living and memory care. With all the technology advances, seniors can avoid institutional facilities and stay independent for much longer.
Which are the most active multifamily markets at the moment? Finlay: Jacksonville and Daytona are two of the hottest markets in Florida. We also like Houston and Fort Worth, Texas.
What are your predictions for the market? Finlay: I think we have a few more years in this cycle, but demographics will continue to be positive for our industry for a very long time.
What can you tell us about the company’s strategy going forward? Finlay: We are not planning to expand to any new markets. Our strategy is to focus on 55-and-over independent senior living, which is still doing very well.
The senior housing industry is in the midst of a big disruption. Occupancy in assisted living hit a record low in the first quarter of 2018 – and continues to fall. There could be numerous reasons for this, including a bad flu season, but I think there’s something bigger going on.
At a recent conference I attended, one of the speakers addressed this subject. He suggested that two major influencers are driving the disruption.
Labor shortage. A labor shortage is anticipated for high-intensity facilities such as assisted living, memory care, skilled nursing facilities. The average wage for a CNA (certified nursing assistant) is currently $11 per hour. Soon, the speaker projects, it will be $15. This will cause an 8% drop in NOI which translates to a 27% decline in asset value! Or, more likely, rents will rise, and such facilities will become even less affordable.
Technology. And this is where it gets cool! Technology is focusing on aging-in-place, allowing seniors to avoid institutional facilities longer. The speaker shared that aging-in-place technology will become a $7 trillion economy. Venture capital is investing 10:1 on technology versus operational improvements.
So how does this affect you and me?
It means we can age in place almost anywhere. The secret is in choosing the place. If we live long enough, each of us will need assistance at some point, (although most of us refuse to admit it). But technology will allow us to live wherever we choose with on-demand assistance as necessary.
Even today, technology is available to get us what we need, when we need it: a voice activated communications system connected with family or emergency-response team; a sensor to monitor activities and detect irregularities; a wrist band connected to an AI platform that alerts the doctor if anything is out of kilter; apps to remind us to take our pills; apps to call a ride; apps to order meals; apps to request assistance with dressing or bathing; apps for help hanging pictures or rearranging furniture.
And that’s today. Just wait until that $7 trillion investment is realized!
I project the future of senior housing will be focused on the independent-living model with limited services – which will be offered a-la-carte. Technology will replace the need for personal assistance. We will not need (nor can most of us afford) the full staff that comes with assisted-living facilities. With this exciting new technology, we will remain independent much longer as we age in place.
But aging-in-place doesn’t mean staying in your four-bedroom colonial with stairs, narrow doorways, and slippery bathtubs. Forward-thinking baby boomers are eschewing their large family homesteads that require constant up-keep and high taxes for luxury apartment living. Here, they can age in place, but in a place with more amenities, more fitness activities, more social involvement, and more companionship. And that socialization is very important. Studies show that social isolation increases the risk of death by 30%; some show it as high as 60%!
Assisted living and memory care facilities, of course, will still be needed, but they will have a much higher cost and be even less affordable to the average senior. That said, senior housing still ranks as the most attractive property class for investment according to a recent survey of commercial real estate owners, managers, developers, and lenders.
So, we will age, in place, independently, and wherever we want. And I suspect most of us will choose an independent-living community surrounded by like-minded, active, involved friends – and cool technology!
Christopher Finlay is Chairman/CEO of Lloyd Jones, a real estate investment firm that specializes in the multifamily and senior housing sectors. Based in Miami, the firm acquires, develops, improves, and operates multifamily and senior housing communities in growth markets throughout Texas, Florida, and the Southeast. The firm’s investment partners include institutions, family offices, and individual accredited investors.
Lloyd Jones Capital’s purchase of The Westcott Apartments marked its second purchase in the market in less than a year. The Miami-based real-estate private equity firm paid $57.8 million for the 444-unit garden-style apartment complex in Tallahassee, Fla., expanding its footprint in multifamily assets located primarily in Florida, Texas and the Southeast.
Lloyd Jones, which specializes in the multifamily and senior housing sectors, was launched just four years ago, but its principals have been active in the industry for 38 years. The firm’s core strategy is to invest in cash-flowing assets that are undercapitalized or poorly managed and therefore offer value-add opportunities.
Lloyd Jones acquires, improves and operates multifamily assets with a holding strategy that ranges from three to 10 years, depending on the needs of its investors, which include institutional partners, family offices, private investors and its own principals.
Despite headwinds faced by multifamily—such as rising interest rates and construction costs as well as concerns about oversupply in some markets–Chris Finlay, chairman & CEO of Lloyd Jones Capital, remains bullish on the sector.
“It’s absolutely the best asset class to invest in, primarily due to demographics,” he said. “You have 75 or 80 million Millennials, and about a third of them are still living with Mom and Dad, so there’s a huge untapped market. On the other side of the spectrum, you have the Baby Boomers, about a third of whom are renting now, and every indicator seems to show that percentage is going to increase as they get older.”
Finlay said he’s not concerned about an oversupply of apartments, an issue he feels has been “exaggerated.” Due to high construction costs, most of the new supply coming online is Class A, he said, but his strategy is to focus on what he calls “market-rate workforce housing,” or housing that’s affordable to a median-income family. Since there’s little new workforce product in the pipeline, Finlay is confident that Lloyd Jones is transacting in a niche that will lead to good returns.
MARKET FUNDAMENTALS
Tallahassee is the state capital of Florida, and the multifamily market there is stable, with further growth projected. According to Yardi Matrix, in the second quarter of 2018, monthly rents averaged $1,173, up from $1,088 in the second quarter of 2016. Yardi forecasts average monthly rents to increase to $1,347 by the end of 2023. Occupancies have been holding steady, at 94.6 percent in the second quarter of 2018 and forecast to rise slightly to 94.8 percent by the end of 2023.
Unit in The Westcott Apartments
“The supply/demand balance is very good there,” Finlay said. “It’s an extremely stable market because the state government is there, and irrespective of the economy, that always chugs along.”
In addition, there are two major universities in Tallahassee—Florida State University and Florida Agricultural and Mechanical (A&M) University—that drive both the student housing and off-campus multifamily markets.
“Tallahassee is one of those markets that don’t boom but they don’t bust,” Finlay said. “It’s just a nice progressive growth—reasonable growth that you can count on.”
Other experts agree. “The Tallahassee market has seen consistent growth over the last few years, both from a value-appreciation standpoint as well as rent growth and stabilized occupancy,” said Jad Richa, managing director of Capstone Apartment Partners in Tampa, who handles investment sales.
Richa said that every deal he’s sold recently in the area “has some value-add component to it.” Cap rates on closed deals range from 6 to 7.5 percent, he said, attracting investors priced out of gateway markets that are “chasing yield” in Tallahassee.
THE DEAL
The Westcott Apartments is a 444-unit Class B+ property located at 3909 Reserve Drive, just five miles from the state capital building. Most of the apartments were built in 2000 (300 units), with an expansion completed in 2005 (144 units). The floor plans include one-, two- and three-bedroom units. Rents at the time of acquisition ranged from $950 to $1,250, and the occupancy rate was about 93 percent. Finlay said the trailing cap rate was 5.5 percent.
“It’s a great asset in a great location,” he added. “It’s in an area of Tallahassee that we see a lot of expansion happening, so there’s still room for growth. And it’s very easy to get to downtown.”
Public records disclose that Lloyd Jones, which took title to the property in the name of an affiliated entity named LJC Westcott LLC, paid $54.6 million for the property. The $57.8 million purchase price reported by the company represents its total investment, including its anticipated capital expenditures and rehab costs.
The Westcott Apartments Amenities
Finlay said he was presented with the opportunity by the listing broker, Jones Lang LaSalle’s Capital Markets Group, which also arranged a $40.3 million 10-year floating-rate mortgage through Freddie Mac on behalf of the buyer. The seller was Irvine, Calif.-based Oaktree Capital, and the deal took about 90 days to close.
The prior owners invested $4.8 million in capital improvements such as landscaping, playground updates, exterior painting, two clubhouse remodels, two fitness center upgrades and unit upgrades. In line with its management strategy, Lloyd Jones plans value-add upgrades and improvements to The Westcott’s existing amenities, which include two swimming pools, two fitness centers, playgrounds and tennis courts.
Finlay said he’s spending some $7,000 per unit to upgrade about a quarter of the units, adding granite countertops, tile backsplashes, stainless-steel appliances, vinyl-plank flooring, and washers and dryers—what Finlay calls “a standard upgrade package typical in a value-add strategy.” Although the program hasn’t been implemented yet, plans call for an average $125 rent premium for upgraded units.
After improving the units, repositioning the project and raising rents, Finlay expects to sell. “This will probably be a five-year hold,” he said. “The strategy is to do the improvements and try to operate the property more efficiently and then position it to sell in five or seven years.”
CRITICAL NEED
The Westcott is just one example of Finlay’s strategy to capitalize on the critical need for workforce housing in the United States. According to the Joint Center for Housing Studies of Harvard University’s “The State of the Nation’s Housing 2018,” nearly one-third of all U.S. households paid more than 30 percent of their incomes for housing in 2016. For renters alone, however, the cost-burdened share is 47 percent. And of the 20.8 million renter households that are burdened, some 11 million pay more than half their incomes for housing and are severely burdened.
“What we focus on is something that differentiates us from a lot of investment firms,” Finlay said. “We focus on the affordability of workforce housing.”
He added that the firm’s first-year projected rents at The Westcott are at 25 percent of the median income for Tallahassee. “HUD basically stipulates that 30 percent is the guideline, and anything above 30 percent is considered rent-burdened,” he said. “We’re not even close to that 30 percent. We’re providing great housing for workforce families in that market when all the new stuff is unaffordable.”
by Robyn A. Friedman
Lloyd Jones Capital got a $38.2 million loan to finance its acquisition of the 397-unit apartment complex
Miami-based Lloyd Jones Capital bought a 397-unit apartment complex in Fort Myers for $55 million, or about $138,000 per unit.
Lloyd Jones financed its acquisition of the apartment complex with a $38.2 million loan secured by the South Florida office of Berkadia Proprietary Holding LLC.
Lloyd Jones got the fixed-rate, 10-year loan though Freddie Mac’s “Green Up” program, which requires borrowers to commit to such property-improvement initiatives as a reduction in water consumption.
The Miami-based private equity firm acquired a rental housing property called The Fountains at Foresthead, which opened in 1985 and has a swimming pool, a 25-hour gym, jogging trails along a lake and a car wash center.
The apartment complex’s address at 1734 Brantley Road in Fort Myersis near Interstate 75 and Florida Southwestern State College. Lloyd Jones now owns 25 rental housing properties across Florida including the 120-room Granite at Miami Beach, the 432-unit Vibe at Gateway in St. Petersburg, and the 160-unit Meetinghouse at Collins Cove in Jacksonville. [Business Observer] – Mike Seemuth
Fountains at Forestwood, Coastal Village trade hands in recent deals
A pair of recent apartment sales in Estero and Fort Myers have generated nearly $100 million in proceeds, according to Lee County property records.
Miami-based Lloyd Jones Capital acquired the Fountains at Forestwood community in Fort Myers for $55 million, adding to its portfolio of 18 multifamily rental complexes in Florida containing 3,600 units.
The 397-unit complex, at 1735 Brantley Road, was completed in 1985 and features amenities such as a resort-style swimming pool; 24-hour fitness center; lakefront jogging trails; and a car wash center.
The property also is located in close proximity to both Florida Southwestern State College and Interstate 75.
Lloyd Jones completed the transaction with roughly $38.21 million in financing provided by the South Florida office of Berkadia Proprietary Holding LLC, a joint venture between Omaha-based Berkshire Hathaway and Leucadia National Corp.
Berkadia obtained the funds from Freddie Mac’s “Green Up” program, which stipulates borrowers must commit to initiatives including water usage reduction. Freddie Mac’s loan to Lloyd Jones carries a fixed rate and matures in 2028.
Lloyd Jones officials did not return telephone calls for comment on the purchase. In all, the company owns 31 complexes in six states: Florida, Texas, New Hampshire, Michigan, Virginia and South Carolina. In Florida, the company’s portfolio includes the 432-unit Vibe at Gateway in St. Petersburg and the 160-unit Meetinghouse at Bartow.
In the other deal, Coastal Ridge Real Estate bought the 800-unit Coastal Village apartments in Estero for $44 million.
The 19401 Skidmore Way complex last traded for $32 million in January 2015, property records show. The community is located just a few miles from Gulf Coast University.
Coastal Village becomes the company’s fifth Florida holding, according to its website. It also owns multifamily rental properties in Gainesville, Panama City Beach and Lutz.
Earlier this year, Coastal Ridge spent $71.4 million to buy the 324-unit Spectra Apartments in Fort Myers, which had been completed in mid-2017 by Naples-based Stock Development.
Founded in 2013, Columbus, Ohio-based Coastal Ridge owns more than 4,300 apartments nationwide valued in excess of $1.6 billion, according to its website.
