In May, Miami-based real estate investment firm Participant Capital Advisors announced the launch of its latest fund, the Participant Capital Sun Belt Multifamily Development Fund 1. It targeted $250 million in commitments to allocate to multifamily development projects in the Sun Belt region.
Daniel Kodsi owns and controls both Participant and Miami-based Royal Palm Companies, which has developed 50-plus real estate projects over 40 years. He formed Participant Capital, to be able to raise fund capital to invest in the projects that Royal Palm develops, Participant Capital President Bernie Wasserman told Multifamily Dive.
The new fund’s primary target is Florida, where it hopes to have its first closing by the end of this month.
“That's where we have operated for 30-plus years,” Wasserman said. “We are looking at building garden-style apartments, which Royal Palm has done for decades in places like the Tampa and Orlando areas. And in more urban centers closer to South Miami, be it in Aventura or downtown, we look at projects that tend to be mid- to high-rise buildings.”
Here, Wasserman talks with Multifamily Dive about the financing environment for development, new sources of financing and what he likes about Florida.
This interview has been edited for brevity and clarity.
MULTIFAMILY DIVE: Florida could be facing some near-term supply issues. What makes you confident in the long-term rental picture in the state?
BERNIE WASSERMAN: We're very, very biased toward development, and we take a long-term view. If you look at the demographics for Florida, principally migration, both individual and corporate, you'll see that [migration] was a trend that existed for a long time and only accelerated during the pandemic as work from home became the norm. And it's likely to be with us for the foreseeable and indefinite future.
The fund is called the Sun Belt Multifamily Fund. Will you seek opportunities throughout the Southeast or stick to Florida?
The focus is on Florida, but we will look at other deals in the Sun Belt. In Florida, we did a lot of work, and we bought our properties off-market. We've been at this for years before the fund started. We have a healthy pipeline of deals today, largely concentrated in South Florida, Tampa and Orlando.
How is the lending environment for you right now?
As banks step back, you’re seeing other capital sources come to the forefront. Multifamily is a bankable asset. Banks haven’t left the multifamily market. If we were building retail or office or even data centers, those things would be harder to finance.
We haven’t been having difficulty finding capital for multifamily. Traditional lenders are out there. Non-bank lenders are out there. Banks are lending a bit less. But there is an abundance of capital that's available to fill that gap. If somebody's generally coming to provide capital to the real estate market, multifamily is where they are most comfortable. It’s not a typical capital stack, but the trend that we see is that things are starting to open up.
Still, large national developers tell me it's getting much more challenging to get financing. How are you able to get projects financed?
They’re at a scale that we’re not. We've got a handful of projects. We're raising a fund for $250 million and looking to deploy that over the next three years. And we have an ample pipeline.
We're not a firm with $1 billion worth of land and are looking to build on it right away. So they face different types of pressures. We have the benefit of being very focused on a property type and a market that has performed quite well in the recent past and has some really good underlying demographic drivers that point to a very positive outlook.
What other sources of financing are out there outside of the traditional banks?
There are a lot of real estate credit vehicles that are out there looking for deal flow. There are a lot of financial entities that are in the credit space in non-bank products. There's a lot of capital being raised for the credit space right now. It's probably the most active when it comes to real estate.
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