A firm that built its business buying distressed single-family houses and turning them into rentals is now switching strategies and pursuing traditional multi-family properties.
PIA Residential is the new name of a Miami shop that jumped into the South Florida housing market during the downturn a decade ago, snatching up hundreds of foreclosed homes at deep discounts and then renting them out. Then called PIA Group USA, it was an early entrant in a field that would soon include investment giants like Blackstone, Colony Capital and a number of REITs.
But in the past year, PIA cashed in those properties for about $100 million and started shopping for value-added apartment complexes in the Southeast and Texas.
“For us, it’s a natural progression,” said co-founder and partner Saul Levy. “Our experience in managing hundreds of single-family homes fostered a deep understanding of the residential markets.”
The firm is planning $150 million of value-added acquisitions over the next 12 months, with a long-range goal of reaching 10,000 units within 10 years. This month, PIA completed its first such deal, acquiring the 224-unit Crystal Lake Apartments in Pensacola, Fla., for $26.3 million, or $117,000/unit. Built in 1999, it’s 98% occupied. Cushman & Wakefield represented the seller, ExchangeRight of Pasadena, Calif.
PIA is seeking returns of 15-18% by targeting garden-style apartment communities of 200-350 units, priced in the range of $25 million to $45 million.
Saul Levy and his partners — brother Jimmy Levy and cousin Daniel Kattan — moved to North Miami from Bogota, Colombia, in 2000 and dove into the real estate business, each following a different route. Saul Levy concentrated on the construction of luxury townhouses and single-family homes. Jimmy Levy focused on buying and selling single-family homes and owned two WeBuyUglyHouses.com franchises, in Miami-Dade and Broward Counties. Kattan went into the financing side of the business.
After the financial crisis in 2008, the three joined forces. Their strategy of buying, remodeling and leasing single-family homes took off, and they picked up the backing of an unidentified family office that remains an equity partner.
“There was a huge market . . . and it was good for a number of years,” Saul Levy said. But as the housing market stabilized and prices rose, “finding good deals in real and relative terms [similar] to what we had been buying” became increasingly difficult, he said. “At the same time, the opportunity to sell and capitalize on our single-family rental and small multi-family investments looked increasingly appealing.”
PIA began its shift in July 2018, when it sold 200 single-family homes to Cerberus Capital of New York for $47 million. It followed up by selling smaller lots of houses and apartments to various buyers for over $50 million.
Meanwhile the partners turned their attention to the multi-family market, where they could apply their acquisitions, property-management and renovation experience — and gain efficiency by having their rental units concentrated in larger properties.
“The question was: after we sell, what?” said Saul Levy. “In the end we understood that we were ‘residential people,’ and within that space, institutional multi-family was the most-efficient asset.”
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OBTAINED FROM REAL ESTATE ALERT – SEPTEMBER 18TH 2019 EDITION
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