Sponsor: Eagle Property Capital Investments and Promecap
Equity raised: $325 million
Acquisition pipeline: $883 million
Target: Value-add apartments
Target markets: Sun Belt
Miami-based apartment owner Eagle Property Capital Investments has a clear strategy. It wants to buy properties in markets with a high presence of Hispanic renters. Often, these metros also benefit from in-migration from other states, a limited supply of single-family homes and favorable regulatory and tax environments.
With the closing of EPC Promecap Multifamily Partners V, Eagle Property Capital has $883 million to acquire A-minus, B or C properties in high-growth Sun Belt markets that can be acquired at a discount to replacement cost and benefit from a full-scale repositioning.
Eagle partnered with Mexico City-based private equity firm Promecap to raise $325 million. The fund was launched in November 2021 and has already acquired 10 properties.
However, in the 18 months it took Eagle to close the fund, the market changed as interest rates increased.
“The capital markets were really affected and the transaction volume was reduced significantly,” said Gerardo Mahuad, managing principal at Eagle Property Capital. “We saw a huge gap between buyers' expectations and sellers’ expectations. Also, the different lending sources were readjusting to the new environment.”
The interest rate situation also made fundraising a little more challenging for the company, but Eagle overcame the obstacle.
“Our investors see the opportunity in our space and are convinced that we can provide the attractive risk-adjusted returns that we have provided in the past and especially in this environment,” Mahuad said.
While Fund V isn’t labeled as a distressed vehicle, Mahuad expects to see buying opportunities from motivated sellers.
“We still haven't seen pure distressed assets,” Mahuad said. “It is more in the capital structures of sponsors that used very aggressive leverage to acquire properties. Those are the ones where we see amazing opportunities for acquisitions with this fund.”
While Eagle Property Capital has traditionally focused on Dallas and Houston in Texas and Tampa and Orlando in Florida, the firm is open to opportunities in new areas.
“We are also paying close attention to the dynamics in South Florida and what's going on in Austin, Texas,” Mahuad said. “Our investment criteria also includes cities like Phoenix, where opportunities may come in the following months.”
With high supply in markets like Phoenix and Austin, Mahuad said he will be careful. But those new deliveries could help him add properties.
“That excess supply can provide a great opportunity,” Mahuad said. “We're starting to see some good opportunities with developers that have a construction loan that they need to refinance soon.”
But eventually, these deliveries will wane. When that happens, Mahuad likes the long-term prospects of these metros.
“Overall, we feel very comfortable in those markets,” Mahuad said. “But our underwriting would be very conservative in the first couple of years until this excess supply gets absorbed.”
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