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To learn more about the structure and advantages that this business model brings to the private real estate market, we were introduced to Christopher Cameron, CFO of Rincon Partners, LLC – a vertically integrated, full service real estate investment and management firm. We asked him questions to share how they built their firm to provide competitive advantages across the full real estate lifecycle and stronger risk-adjusted returns for their investors.]
Hortz: What do you see as the competitive advantages of being a vertically integrated real estate firm?
Cameron: Our vertically integrated approach allows us to control and optimize every aspect of the real estate lifecycle – from acquisition to management and eventual disposition – resulting in enhanced returns and reduced risks for our investors. Some of the competitive positioning advantages include:
Enhanced Market Intelligence – Integration provides us with comprehensive, real-time market insights across all stages of the real estate lifecycle. This deep understanding allows us to identify promising investment opportunities that others may overlook and make more informed decisions throughout the investment process.
Operational Efficiency – Managing all aspects of our investments in-house can streamline operations, reduce costs, and allow us to respond quickly to market changes. This operational agility gives us a significant edge over competitors who rely on third-party service providers.
Quality Control -The ability to manage for quality outcomes across the full real estate lifecycle enables us to maintain consistent, high-caliber standards across all our properties and services. This level of control is crucial for maintaining tenant satisfaction, property values, and ultimately, investor returns.
Hortz: Can you go a little deeper into the particular investment advantages of being vertically integrated?
Cameron: As to the investment advantages, the following applies:
Cost Savings – Our integrated model allows us to benefit from economies of scale and eliminate intermediary costs. These savings translate directly into improved returns for our investors.
Risk Mitigation – By controlling all aspects of the investment process, we can better manage and mitigate risks. Our comprehensive oversight allows us to identify potential issues early and address them proactively.
Value Creation Opportunities – Our in-house expertise in property management and construction allows us to identify and execute value-add strategies more effectively. This capability is particularly valuable in our multifamily focus where strategic improvements can significantly boost property values and rental income.
Accelerated Timelines – With all necessary expertise under one roof, we can execute projects and implement strategies more quickly than firms relying on external partners. This speed-to-market can be a crucial factor in capitalizing on market opportunities and maximizing returns.
Aligned Incentives – Our integrated structure ensures that all teams within our organization are working towards the same goal – maximizing investor returns. This alignment of incentives leads to more cohesive strategies and better overall performance.
Also strategically important, our vertically integrated approach at Rincon Partners not only optimizes our competitive positioning and investment returns but also significantly enhances the living experience for our residents. By controlling all aspects of property acquisition, renovation, and management, we can create multifamily communities that truly meet the needs and expectations of modern renters, fostering long-term satisfaction, and loyalty among our resident base which translates to more consistent and growing revenue and investment payouts for our investors.
Hortz: How is your real estate deal process different from other sponsors?
Cameron: While many steps in our process may be similar to other sponsors, there are several key differences that set Rincon Partners apart:
Vertically Integrated Approach – Our in-house property management and construction teams are involved from the beginning, providing valuable insights into operational improvements and renovation costs.
Data-Driven Decision Making – We utilize advanced data analytics and proprietary market research to inform our investment decisions, allowing us to identify opportunities that others might miss.
Focus on Secondary Markets – We specialize in identifying opportunities in secondary markets with strong economic fundamentals, which may be overlooked by larger institutional sponsors.
Value-Add Expertise – Our team has deep experience in executing value-add strategies in the multifamily sector, allowing us to accurately assess and plan for property improvements.
Relationship-Based Sourcing – Our strong industry relationships often allow us to access off-market deals or get an early look at properties before they hit the market.
Flexible Investment Criteria – While we have defined investment parameters, we are able to consider unique opportunities that might not fit the rigid criteria of larger institutional sponsors.
Hands-On Asset Management – Our asset management team is involved from the initial stages, ensuring that our business plans are realistic and achievable.
Hortz: What does going “full cycle” on your properties look like and how do you create value along the way?
Cameron: Going “full cycle” on our multifamily properties involves a comprehensive process that spans from acquisition to disposition and focusing on creating value at every stage. Process steps include:
1.Value Creation – Once acquired, we implement our value-add strategy, which typically includes property improvements to justify higher rents and improve the overall tenant experience, operational efficiencies that our in-house property management team implements to reduce expenses and increase net operating income (NOI), and market positioning where we reposition the property through targeted marketing efforts and community engagement to attract high-quality tenants and improve occupancy rates.
2.Asset Management – Throughout the hold period, our asset management team closely monitors property performance, market conditions, and investment metrics. We make data-driven decisions to optimize operations and adjust strategies as needed.
3.Refinancing – When appropriate, we may pursue refinancing opportunities to take advantage of improved property values and favorable interest rates. This allows us to return capital to investors while maintaining ownership of the appreciating asset.
4.Disposition – As we approach the end of our targeted hold period, we evaluate market conditions and property performance to determine the optimal time for sale. Our team prepares the property for disposition, ensuring all documentation is in order and the asset is positioned to attract qualified buyers.
5.Full Cycle Completion – The full cycle concludes with the successful sale of the property. At this point, we distribute the proceeds to our investors according to the predetermined waterfall structure, realizing the full value created throughout the investment period.
Hortz: What kind of returns have you been able to achieve on average on your properties and how does that competitively stack up?
Cameron: Rincon Partners has consistently delivered strong returns for our investors across our multifamily portfolio. Since our inception in 2015, we have acquired 25 multifamily properties and achieved an average gross IRR of 39.1% and an average gross multiple of 2.25x on our realized investments.
These returns significantly outperform industry averages. Typical multifamily syndications aim for 15-20% IRRs and 1.7x-2.5x equity multiples over a 3-5 year hold period. Our average 39.1% IRR and 2.25x multiple places well above these benchmarks.
Our success stems from our value-add strategy approach across carefully selected markets with strong growth fundamentals and leveraging our vertically integrated platform where we are able to closely control the execution of our business plans and maximize returns.
While past performance does not guarantee future results, our track record demonstrates our ability to consistently outperform in the multifamily sector.
Hortz: What investment strategies and vehicles do you offer?
Cameron: Rincon Partners offers a range of investment strategies and vehicles tailored to capitalize on opportunities in the multifamily real estate sector mainly in the Southwestern and Southeastern United States. This regional specialization allows us to leverage our deep market knowledge and local relationships to identify attractive opportunities. Here is an overview of our key investment strategies and vehicles:
Value-Add Strategy – Acquiring well-located Class B/C multifamily properties built between 1980-2010 with potential for repositioning to Class B+ by implementing strategic renovations and operational improvements to enhance property value.
Core-Plus Strategy – Acquiring high-quality, stabilized properties in prime locations implementing minor improvements and operational enhancements focusing on steady cash flow and moderate appreciation.
Investment Vehicles include Single-Asset Investments in individual property acquisitions, providing targeted exposure to specific assets and markets, Joint Ventures for larger institutional investors, and Multi-Asset Funds that invest in a portfolio of properties, providing diversification across multiple assets and geographic locations including the Rincon Multifamily Fund II that we are currently in market with and is available to accredited investors.
Our focus on value creation, strategic improvements, and operational excellence underpins all our investment offerings, aiming to deliver solid risk-adjusted returns across various market conditions.
Hortz: What do advisors and their clients need to know about your private multifamily real estate investment approach and how it may benefit an overall investment portfolio?
Cameron: For a more comprehensive understanding of the current landscape and opportunities in private multifamily real estate investing, advisors should refer to our “Investing in Private Multifamily RE Today” white paper. This guide provides up-to-date market analysis, trends, and strategies specific to the multifamily sector, which can be invaluable for advisors looking to incorporate these investments into their clients’ portfolios.
By understanding these aspects of private multifamily real estate investments, financial advisors can better assess whether this approach aligns with their clients’ investment objectives, risk tolerance, and overall financial strategy. It is an investment vehicle that can potentially enhance portfolio diversification, provide steady income, and offer attractive risk-adjusted returns in the current market environment.
This article was originally published here and is republished on Wealthtender with permission.
About the Author
Bill Hortz
Founder Institute for Innovation Development
Bill Hortz is an independent business consultant and Founder/Dean of the Institute for Innovation Development- a financial services business innovation platform and network. With over 30 years of experience in the financial services industry including expertise in sales/marketing/branding of asset management firms, as well as, creatively restructuring and developing internal/external sales and strategic account departments for 5 major financial firms, including OppenheimerFunds, Neuberger&Berman and Templeton Funds Distributors. His wide ranging experiences have led Bill to a strong belief, passion and advocation for strategic thinking, innovation creation and strategic account management as the nexus of business skills needed to address a business environment challenged by an accelerating rate of change.
