The once-hot apartment market may be taking a breather, but Gerardo Mahuad is not.
Mahuad is co-founder and managing principal of Eagle Property Capital Investments, a Miami-based real estate investment manager focused on Sun Belt apartment complexes. This month, Eagle Property Capital partnered with Promecap, a private equity firm based in Mexico City, to raise $325 million. Eagle Property plans to leverage that capital into nearly $900 million in acquisitions.
Mahuad, a native of Mexico, is especially focused on markets with large Hispanic populations.
This interview has been edited for length and clarity.
Commercial Observer: What’s your business strategy?
Gerardo Mahuad: Eagle Property Capital — we call it EPC — is a Hispanic-owned, vertically integrated real estate company focused on value-add multifamily. At EPC, we want to invest in high-growth cities in the Sun Belt, mainly Florida and Texas at the moment. We look for significant Hispanic presence. We have some unique insights into the Hispanic culture. Hispanics have become a major demographic force in the U.S. There is significant demand for high-quality housing in the cities where Hispanics tend to settle and start families.
Our value-add strategy includes capital improvements to reposition our properties as best in class. But we also add value to our residents through social programs, including programs that report payments to major credit bureaus to help renters boost their credit scores, rent-relief programs, after-school programs, English as a second language and Spanish classes, personal finance classes, health and wellness education, and economic advancement education and opportunities.
We believe our programs have a direct impact on our residents by providing them the tools to improve their lives. We’re helping them support our economy and the community, and we see better retention rates, better collections and a better sense of community, because they feel that they’re valued. At the end of the day, our goal is to add value for our investors and for our communities.
You mentioned your unique insights into the Hispanic community. How does that translate to the way you operate your communities?
We are believers in fair housing and equal opportunity. At EPC, we seek to build vibrant and diverse communities. We open our communities to the Hispanic demographic while welcoming other demographics. It’s a very subtle strategy that we implement. We have bilingual staff. We adapt amenities to cater to the Hispanic demographic, such as converting tennis courts to soccer courts and adding barbecue and picnic facilities that invite our residents to build community. We have our marketing materials in both English and Spanish. And we celebrate Hispanic heritage along with other important national festivities.
How do you define value-add communities?
We are focused on acquiring properties that are tired, mismanaged or haven’t gone through a repositioning program in some time. We can come in and implement a cap-ex program in addition to our social program. We’re currently focusing on late 1980s and 1990s properties, but we have properties from the mid-1970s to mid-2000s. As long as there’s an upside potential, it falls into our investment criteria.
Multifamily was on fire during the pandemic, but it’s cooling now. How are you seeing the market?
The multifamily and housing industry in the U.S. has very strong fundamentals. There just isn’t enough housing, and it’s very hard to build because of high construction costs, high labor expenses, the high cost of land and the difficulty to obtain permits. It has never been more expensive to buy than to rent, and the potential tenant pool is getting larger because of that. So we believe the fundamentals are there.
Also, we are seeing in our properties that some family members are making the decision to defer creating a household. People are staying with their families longer, or they’re staying with roommates longer. This is creating what we believe is pent-up demand. We believe that we need to navigate the next two or three quarters, and then we’ll have very good tailwinds. This market is providing very good opportunities.
Having said that, in the short-term, yes, there are some issues around the peaking supply of new construction. Our rent growth we were having last year — double-digit growth — has come back to more normalized levels. But by the last quarter of 2024 and in 2025, there’s not going to be enough supply coming to market, so that’s definitely going to be a positive for the industry and for investment managers like us.
What’s your biggest challenge?
Higher interest rates are a challenge, but at the same time it’s an opportunity. With higher interest rates, we’re able to find better opportunities. Insurance is also a challenge, but at the same time we believe we have very excellent insurance advisers, so we’ll be able to navigate the insurance challenge. Inflation is another issue, but we’re already seeing that stabilizing.
Jeff Ostrowski can be reached at email@example.com.