A Look at One Family Office’s Bet on the Multifamily Sector

Posted on Dec 6 2017 - 6:34pm by Lance Edwards
Puerto Rico-based family office Grupo Ferré Rangel recently formed a wholly-owned subsidiary to invest in multifamily properties in the U.S.

 

multifamily-illo-colorful-TSBy John Egan (NREI Article)  —  Puerto Rico-based family office Grupo Ferré Rangel is spreading its wings in multifamily real estate.

Grupo Ferré Rangel recently formed a wholly-owned subsidiary, Kingbird Properties, to invest in multifamily properties in the U.S. and Latin America. Kingbird is focusing on secondary and tertiary markets in the U.S.—with an initial burst of investment activity in Indianapolis and Columbus, Ohio—and on major metro areas in Latin America.

Kingbird Properties says it’ll tap into Grupo Ferré Rangel’s capital to buy value-add multifamily properties through Kingbird, and will form investment alliances with third-party investors, other family offices and local operating partners. Group Ferré Rangel’s current holdings are in sectors such as multifamily, office, health care and media (including Puerto Rico’s largest daily newspaper).

Grupo Ferré Rangel hired Ken Munkacy as senior managing director of Boston-based Kingbird Properties. He has more than 25 years of experience in U.S. and international real estate, including previous stints with GID Investment Advisers, GE Capital, Starwood Capital, TrizecHahn and Golub & Co. Antonio Luis Ferré Rangel, chief operations officer of Grupo Ferré Rangel, is chairman and CEO of Kingbird.

“We are looking to create long-term wealth and invest through and hold through cycles, as opposed to a seven-year, in-and-out approach, which is typical of most funds. We’re not a fund sponsor,” Munkacy says.

Kingbird Properties will concentrate on multifamily real estate segments like workforce housing, market-rate housing, student housing and seniors housing, he says.

Munkacy sat down with NREI and explained the investment goals and philosophies of Kingbird Properties.

The Q&A has been edited for length, style and clarity.

NREI: What is it about multifamily that has drawn Kingbird to this sector?

Ken Munkacy: Familiarity breeds content. Grupo Ferré Rangel’s first wave of real estate investing in the U.S. was multifamily, and it’s done exceptionally well. All the research points to the opportunity for consistent, stable returns in multifamily. Plus, there’s kind of a built-in downside protection factor. All the demographic factors that have played out in the last decade point to the fact that the apartment sector is strong, stable, consistent, less prone to volatility. (Drivers of the downside protection include the supply-and-demand gap in workforce housing, the downsizing of households, the decline in homeownership rates, and the “renter by choice” and “renter by necessity” inclinations of millennials.)

NREI: How will your investment strategy work?

Ken Munkacy: We will invest with local operating partners that are best in breed and vertically integrated. We will provide 75 percent to 95 percent of the capital to them, and we’ll manage the assets and they’ll manage the day-to-day activities. The objective is to do $500 million in multifamily property investments in the next two to three years.

NREI: Will Kingbird Properties consider new construction?

Ken Munkacy: If it’s built after 2006, I don’t want to see it. We’re in that 1980-to-2006 ballpark, stuff that’s already gone through cycles of owners—they’re getting tired, they’re absentee, they’re moving on, they need that next level of (capital expenditures) to stay competitive or to change the rent rolls.

NREI: You’ve mentioned Indianapolis and Columbus, Ohio, as markets where you’re buying property. Generally speaking, where will Kingbird Properties invest?

Ken Munkacy: We like the Carolinas, we like the Southeast U.S., we like the Midwest—typically markets where big institutional investors don’t tread.

NREI: Are you avoiding gateway cities in the U.S. so that you’re not competing directly with foreign and institutional investors?

Ken Munkacy: Exactly. Things are pretty fully priced in those markets. We will certainly look at gateway markets, but not center cities or close-in suburbs; it’ll be more outside the ring roads.

NREI: What return rates are you targeting?

Ken Munkacy: We’ll be in that 13 percent to 16 percent bandwidth. I think that’s realistic. We’re not going to do a lot of leverage. It’s going to be a prudent, measured approach; it’s going to be one that’s driven by fundamentals.