Recently, PPR’s Real Estate portfolio manager Chris Cordes attended the Lone Star Capital Summit in New York City and participated in the LSC Summit Equity panel. The panel discussed some top-of-mind topics in navigating the ever-changing landscape of real estate investment. Chris used the opportunity to share some of his, and PPR’s strategies and insights, that have helped the firm succeed in the current market environment.
Leveraging IR and Multifamily Deals
PPR’s approach to winning deals is heavily focused on investor relations and multifamily properties. While market deals have been scarce, the firm has found success in loan assumptions and keeping deals on shorter terms, typically around three years.
The team has also been exploring tax-advantageous opportunities, particularly in the affordable housing sector. Structures like Public Facility Corporations (PFC) and Housing Finance Corporations (HFC) have proven to be quite lucrative.
Navigating the Current Investment Landscape
In the current environment, PPR’s success has been largely relationship-driven. The company has built a strong network of sponsors over the past year, which has been instrumental in sourcing deals. This approach involves:
- Structuring the waterfall effectively
- Aiming to be the main equity provider
- Taking on the role of general partner when possible
Interestingly, it occasionally happens that PPR’s main competition often comes from within – the internal portfolio management team – particularly given the company’s significant deployment in non-performing loans.
Evaluating Sponsors: Our Screening Process
When it comes to evaluating sponsors, PPR has a rigorous screening process in place. Some key factors for consideration include:
- Vertical Integration: Preference is given to sponsors who are vertically integrated to minimize miscommunication with third-party property managers.
- Reporting Quality: Robust, on-time reporting from our sponsors is essential.
- Skin in the Game: It’s crucial that sponsors have a significant stake in the deal, demonstrating true partnership.
- Specialized Expertise: Value is given to sponsors with specific knowledge areas, such as construction expertise, which can reduce reliance on third-party contractors.
Managing Struggling Deals
When deals face challenges, the approach is adapted to ensure the best possible outcomes:
- Enhanced Communication: In some instances, increasing the frequency of calls and reporting helps to stay on top of developing situations.
- Grassroots Marketing: For occupancy issues, employing old-school marketing tactics to boost tenant interest work well.
- On-Site Presence: We recognize the importance of having a physical presence for current tenants, showing that the operations team is there to support them.
- Cultural Sensitivity: In diverse communities, it’s important to ensure there are bilingual team members to effectively communicate with all tenants.
By staying flexible, maintaining strong relationships, and adapting to market conditions, PPR has been able to navigate the challenges of today’s real estate market successfully. As we move forward, PPR will continue to refine strategies and seek out new opportunities for growth and success.
