The world has changed since billionaire Andrew Carnegie famously said “Ninety percent of all millionaires become so through owning real estate,” but multifamily investing is still a powerful wealth-building tool.

Wise investors and high-net-worth individuals have always included real estate in their portfolios to hedge against inflation and market volatility. Today’s investors are still choosing multifamily real estate because it produces reliable cash yield regardless of market forces. According to research from CBRE, U.S. multifamily investment volume is predicted to reach about $148 billion this year, as investors get back in the game post-COVID.

The current market is full of uncertainty about the value of stocks and bonds as well as inflation rates. With so much inherent risk in the market, many people choose to diversify their portfolio with investments that also produce a steady cash yield to provide for their future. That’s why they’re turning to high-yield investments like junk bonds, high-dividend stocks, and real estate.

Multifamily real estate investing offers a passive regular income while providing a sense of security if the stock market or other investments were to fail.

Why Is Multifamily a Good Investment in 2021?

Real estate investments offer more regularity than stocks, bonds, and other investments. In addition, some investors like the idea of a predictable income after retirement instead of unknown stock market fluctuations or inflation rates that could significantly reduce their current cash flow level.

Here are five reasons multifamily real estate is an ideal yield-producing investment:

1.    Reliable Yields

Many people are looking for an investment with low-risk protection in case something unexpected happens, such as another recession. Real estate makes an excellent yield instrument because it produces a regular cash flow, offering a sense of security in an uncertain economic climate.

Most income investments that allow investors to estimate and predict yields, like bonds and dividend-producing stocks, either have a very low rate of return or very high volatility. Investing in multifamily real estate lets buyers plan their futures with a clear, predictable cash flow that dependably beats inflation and a base price that reliably increases.

2.    High Demand

Demand for rentals is strong. Single-family homes are in short supply, and more baby boomers are choosing to rent. Stagnant wages, high interest rates, and rising property prices are causing many young families to put homeownership on hold as well.

Early 2021 saw peak prices as post-pandemic buying soared. Signs indicate that prices may begin to stabilize soon, but demand is still expected to outstrip supply.

3.    Diversified Risk

Tenant risk in larger multifamily properties, like those that experienced investment firm Lloyd Jones often invests in, is diversified. A few residents within a 200-unit property, for example, who may be delinquent on their monthly rent, are unlikely to tank the asset’s operating income. An experienced management firm, especially one with an in-house asset management team, can anticipate everything from expenses to vacancies to maintain a steady, manageable cash flow.

Furthermore, adding real estate to a traditional stock and bond portfolio provides a stable position if the market goes into freefall. Investors who’ve weathered events like the subprime mortgage crisis of 2008 or the COVID-19 crash of 2020 understand the value of having holdings outside the S&P 500.

4.    Inflation Protection

Yields have to outpace taxes and inflation in order to prevent losses. It’s difficult for traditional income investments to deliver the necessary returns to meet those criteria during times of high inflation.

Multifamily investment has a unique advantage in this area. When prices are rising, rents also tend to increase, which means multifamily real estate can hedge against inflation. In addition to rising rents, the appreciation of the property itself can outpace inflation in some markets.

5.    Passive Income

With the right management firm handling the details, multifamily real estate is a passive, hands-free investment. Investors in multifamily assets enjoy the peace of mind of knowing that a professional asset manager and property management firm is managing vacancies while growing rents, taking care of repairs to improve the asset’s value, and maximizing net operating income.

Not only do investors in institutional-quality multifamily properties avoid hands-on involvement with business details, but they also don’t have to monitor and respond to market swings or political events. Real estate prices don’t react in wild swings during election years, market bubbles, or industry scandals. While local bubbles sometimes rise and burst, an experienced investment management firm knows how to protect against those events.

Multifamily investment is a long-term, completely passive source of income that investors can truly buy and forget.

Work With Professionals

So, what kind of yield should investors expect? Steady annual yields of 6% to 7% or more are possible if you choose an experienced partner and asset manager who knows how to manage net operating income to maximize cash yields. Working with the right firm allows multifamily real estate investors to leverage the wealth-building power of real estate without stress or worry.

Mandy Doucet is executive vice president of Lloyd Jones Multifamily Management, which has 5,500 apartment units under management throughout Florida, Texas, and the Southeast. Throughout the pandemic, as other property management companies struggled with delinquent rent collection, Lloyd Jones has beaten the national collection averages—consistently collecting at least 95% of rents. Doucet shares a few strategies she and her leadership team implemented to maximize rent collection in the properties managed by Lloyd Jones.

Be understanding

As the pandemic unfolded and residents were faced with unemployment, reduced hours and furloughs, the financial impact was overwhelming. Many residents were embarrassed and anxious about their finances and hesitant to come forward. I met with our leadership team and had each community create a video from the property manager—sent via email—with the message that “We haven’t heard from you, and we want to work with you. We’re here to help.” It was a personal approach that resonated with residents and helped boost our rent collection percentages.

Offer flex payment options

We worked with residents by offering flexible payment options and updated our system to be able to accept partial payments. In addition, we paused any increases on renewals, offered shorter-term leases, if necessary, and didn’t require any break-lease fees. We also let people use part of their deposit as payment, and waived the minimal online processing fee. These measures demonstrated our compassion and empathy for our residents and helped keep people in their apartments.

Use creativity

Because of COVID-19, residents were apprehensive about letting maintenance crew into their apartments for small repairs, so we encouraged managers to create DIY guides to common repairs (accessible through the online resident portal). The guides provided instructions on basic maintenance issues such as the proper way to plunge a toilet, giving residents the option to make the repair themselves. Of course, maintenance was always available if the resident requested service. The residents appreciated our concern for their safety.

Share information about resources

Through their online resident portals, our communities let residents know about resources available to them, whether through local charities, or government agencies. We also had several properties conduct their own food drives, so residents could stop by the office for pantry essentials. And in some cases, where residents were intimidated by the complexity of applications for federal funds, we helped complete the paperwork for them.

Kindness goes a long way

Keeping our residents and our teams safe was one of our first priorities, and we were among the first property management firms to install plexiglass in managers’ offices, institute virtual tours, and make the investment in electrostatic sprayers to be able to sanitize quickly. These measures conveyed our care and concern and helped build a relationship of trust and good faith with our residents.

While there isn’t a single silver bullet to improve rent collection during a crisis, these strategies and tactics reflect our core values as a company: passion, compassion, and optimism. Our goal is always to make lives better and create communities where people feel truly at home.

Mandy Doucet has been in the real estate management business since 1995, and has a diverse background in marketing, training and resident services. In her role as EVP, she directs property operations and training development for Lloyd Jones Multifamily Management. Mandy is a CPM and holds CAPS, ARM, HCCP and C3p designations.

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.

1. 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.
2. 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!

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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.

“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.

 

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

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The joint company will be known as Lloyd Jones LLC

Multifamily real estate investment firm Lloyd Jones Capital has merged with its sister company, property management firm Finlay Management, Inc.  The newly formed Lloyd Jones, LLC will encompass investment, development, and management of multifamily and senior communities in Florida, Texas, and the Southeast.
Although Finlay Management was the exclusive manager of Lloyd Jones Capital’s multifamily investment portfolio, the merger will lead to “improved efficiency and communication,” stated Chris Finlay who remains the chairman of both companies.

Finlay formed The Finlay Company in 1980 to focus on commercial brokerage and property management. By 1990, the company had grown into one of the largest commercial real estate firms in New England and a major asset manager for FDIC.

Over the ensuing years, the company expanded into multifamily development and investment, supported by Finlay Management, the property manager of the growing portfolio.

Success in the investment arena led to the 2013 launch of the investment firm, Lloyd Jones Capital, which offered third-party investors an opportunity to participate in Finlay’s investment strategy.
Under Finlay’s leadership, both Lloyd Jones Capital and Finlay Management have benefitted greatly from their vertical integration and mutual ownership. Because of their strategic alignment, merging the two companies was the logical next step toward further streamlining the asset lifecycle. Finlay added, “Through our combined resources, we can deliver a better product for our investors.”

About Lloyd Jones
Lloyd Jones is a private-equity real estate firm that specializes in the multifamily and senior housing sectors. Building on thirty-eight years in the real estate industry, the firm develops, acquires, improves, and operates multifamily real estate in growth markets throughout Florida, Texas, and the Southeast. Its investors include institutional partners, family offices, private investors, and its own principals.

Lloyd Jones Capital, a Miami-based private equity firm, acquired a recently renovated apartment complex in Tallahassee for $57.8 million.

Lloyd Jones’ per-unit cost was about $120,000 for the 444-unit complex at 3909 Reserve Drive in Tallahassee, located five miles from the Capitol Building.

The rental complex, called The Westcott Apartments, was built in two phases, 300 units in 2000 and 144 in 2005.

It is the second apartment property in Tallahassee that Lloyd Jones has acquired. The Miami firm also owns Jackson Square Apartments, located six miles from The Westcott Apartments.

The Westcott has one-, two-  and three-bedroom units, and its amenities include two swimming pools, two gyms, playgrounds and tennis courts.

Lloyd Jones specializes in investments in rental housing and senior housing. – Mike Seemuth
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Lloyd Jones Capital, a private equity firm based in Miami, acquired Westcott Apartments for $57.8 million.Lloyd Jones Capital website.

Miami-based private equity firm Lloyd Jones Capital purchased Westcott Apartments near Tom Brown Park for $57.8 million.
Built in 2000 off Conner Boulevard, the apartment complex has 444 units ranging from one to three bedrooms. It also features two pools, tennis courts and two fully-equipped gyms.

This marks the company’s second acquisition in Tallahassee following the purchase of Jackson Square Apartments.

Lloyd Jones Capital specializes in multi-family and senior housing properties in growth markets throughout Florida and the Southeast.
Contact TaMaryn Waters at tlwaters@tallahassee.com or follow @TaMarynWaters on Twitter. 

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TALLAHASEE – Real estate private-equity firm Lloyd Jones has purchased The Westcott Apartments on the east side of Tallahassee for $57.8M. The 444-unit apartment complex at 3909 Reserve Drive is a newly renovated multifamily residence located five miles from the Capitol Building.

The Westcott was built in 2000 (300 units)/2005 (144 units) near Tom Brown Park and offers one, two- and three-bedroom floor plans. A key feature is the property’s metro connectivity and its direct access to downtown Tallahassee.

The Westcott is the private equity company’s second acquisition in the Tallahassee area, only six miles from its Jackson Square Apartments.
In line with its management strategy, Lloyd Jones plans value-add upgrades and improvements upon the Westcott’s already numerous amenities which include two swimming pools, two fitness centers, playgrounds, and tennis courts.

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About Lloyd Jones 
Lloyd Jones  is a private-equity real estate firm that specializes in the multifamily and senior housing sectors. Building on thirty-eight years in the real estate industry, the firm acquires, manages, and develops multifamily real estate in growth markets throughout Florida, Texas, and the Southeast. Its investors include institutional partners, family offices, private investors, and its own principals.

MIAMI – Lloyd Jones, a multifamily real estate investment firm has purchased the Anatole Apartment Homes in Daytona Beach.  The 208- unit apartment community enjoys a central location at 1690 Dunn Avenue, near retail shopping and dining, and minutes to the beach.

The investment strategy is a light value-add program: upgrading units and creating expanded outdoor entertaining opportunities.  Says Chris Finlay, chairman of Lloyd Jones, “It is always fun to provide new and improved amenities for our residents. I know they will love the results.  And our investors will love the steady income and capital appreciation this property will provide.”

This is the firm’s third community in Daytona, after the Granite at Porpoise Bay and The Meetinghouse at Daytona Beach, a 55+ senior living complex.  Says Finlay, “We’ve been in Daytona for ten years now. It’s a fabulous market.  Our properties perform exceedingly well, and we are thrilled to continue to expand our presence here.”

As an owner/operator, Lloyd Jones manages its own properties with its long-established operations team, formerly called Finlay Management.

About Lloyd Jones
Lloyd Jones is a private-equity real estate firm that specializes in the multifamily and senior housing sectors. Building on thirty-eight years real estate industry, the firm acquires, manages, and develops multifamily real estate in growth markets throughout Florida, Texas, and the Southeast. Its investors include institutional partners, private investors, and its own principals.