Swapnil Agarwal knows about the rumors and press reports swirling around his company, Houston-based apartment owner Nitya Capital.
And he has a message.
“Rumors can say whatever, but all you’ve got to do is look at the facts,” said Agarwal, the CEO and founder of Nitya. “Let my numbers speak louder.”
In March, MarketWatch said that Nitya’s annual interest payments have jumped by $60 million since it took out $2 billion in loans on a group of properties acquired in 2021.
As a result of the increased payments, Nitya was seeking to sell 40% of its portfolio, according to MarketWatch, which cited a Real Estate Alert report and research from Barclays. But contrary to the portrait of an owner forced to sell at a discount, Agarwal portrays the firm's recent sales as business as usual with strong returns, even if market values have dipped from their recent peak.
Agarwal said that his portfolio is more protected than observers think. It has interest rate caps on its assets with an average strike rate of about 2%, which is the interest rate at which the cap provider begins to make payments to the purchaser.
“We put floating-rate debt on our deals to give us flexibility because we're value-add players,” said Agarwal, who pointed out that he predicted many of the issues in the market in a 2022 interview with Multifamily Dive.
With the March disposition of four Texas properties acquired in the last three years, Nitya has sold 73 of the 129 properties it bought over the past 10 years. Overall, the firm has closed more than $8 billion in transactions including $4.2 billion in acquisitions, $2.4 billion in exits and $1.7 billion in recapitalizations.
Agarwal said Nitya had generated a 28% internal rate of return, and the last four deals generated a net multiple of 1.33 times. In addition, he says the company has never missed a mortgage payment.
And that’s not all. “We never lost money because we're not buying stabilized deals,” Agarwal said. “We’re buying value-adds.”
The four properties included:
- The 128-unit Candlelight Park Apartments in Duncanville, Texas, was purchased by Lone Star Capital in March.
- The 224-unit Terrain at Medical Center located in San Antonio’s South Texas Medical Center was purchased by Nord Group in March.
- The 268-unit Latitude Apartments in San Antonio’s South Texas Medical Center was purchased by Nord Group in March.
- The 248-unit Park at Crestview in North Austin was purchased by Nord Group in April
Nitya made interior and exterior upgrades, including pool and kitchen renovations, and added new community amenities to the four properties. He said the assets were sold for average cap rates of less than 4.5%.
“The prices that we achieved don’t represent where the market is today,” Agarwal said. “We sold these assets at a premium to where the market is today.”
Vertically integrated operation
With more than 600 employees in asset management, property operations, marketing, human resources, information technology and construction, Nitya has a fully integrated operation that distinguishes it from some other investors who bought at the height of the market, Agarwal said.
“We're not just a syndicator, as people love to call it,” Agarwal said, distancing his company from syndicators like Dallas-based Applesway Investment Group, a Texas investor that defaulted on nearly $230 million in loans in April. “We're a vertically integrated platform.”
“A lot of these new buyers that entered this market in the last three years took it for granted that it was an easy business,” Agarwal said. “It's very difficult. It's a management-intensive, tedious business. And people who don't have their boots on the ground and don't understand the cycles are always going to be at the mercy of the capital markets.”
Nitya still has the portfolio to support its operation with about $3 billion of apartments and student housing under management in places like Phoenix; Las Vegas; Indianapolis; Orlando, Florida; and Tennessee.
“[The remaining portfolio] is made up of assets where our purchase price represents an over 60% to 70% discount on the replacement value,” Agarwal said. “So I have no problem in terms of my basis. I have no problem in terms of the quality and in terms of the location of these assets. Those are the assets we're going to be patient with.”
Once the sector recovers, Agarwal said the company would pursue more opportunistic deals in Sun Belt states and high-growth markets. “We're going to try and enter stronger assets and stronger markets,” he said.
Already, Agarwal says lenders are calling him to take over assets that other borrowers have defaulted on. “Given our operations and track record, we actually stand to benefit,” he said.
Nitya also has seven more assets under contract to sell, with IRR’s ranging from 8% to 21%. The company has owned these properties for between three and five years.
“It's not out of desperation that we're selling these deals,” Agarwal said. “We have added value there, increased the NOI and improved the properties.”
But Nitya’s CEO ultimately admits there have been better times to sell. “Of course, I would love to monetize in a great market like 2021, but the reality isn't 2021 anymore,” Agarwal said. “Given the circumstances and the market, I feel we did really, really well in those sales.”
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