Every so often, I go back and read old blog posts to get a sense of my thinking at the time. It can be embarrassing (like the bearish case for multifamily in 2019), but others (such as why we prefer value-add deals and long-term holds and our 4 forms of sustainable competitive advantage) serve as incredible resource for me to understand my views at specific times and as a result, reflect on my decision-making.
One thing I’ve consistently said over the years is that by establishing trust with our investors, we can scale our high-net-worth capital base. With the use of technology and systems, HNW capital can serve as discretionary capital to win deals and close quickly. While that has been partly true, it’s flawed and naïve thinking when the goal is to build a large multifamily operating company with a portfolio of high-quality assets.
Over the past 12 years, Atlas has acquired/developed 10k apartment units across 52 deals. We’ve grown unconventionally, partnering with local operators who were the primary source of deal flow. We’d raise a majority of the capital, source the financing, and jointly operate the deals.
This was a great model in that it allowed us to grow, while remaining lean and local, but a terrible model in that we were heavily reliant on local partners for deal flow and execution. It was a hybrid private equity model for syndicators.
Over the past few years, we’ve evolved our model, built out in-house acquisition, asset management, and construction teams, and started expanding our capital base to include family offices, private investment firms, and pseudo institutional capital. Our goal is to scale our platform, control 100% of the deal, take a differentiated operational approach, and own a best-in-class portfolio of high-quality multifamily assets across the southeast.
In order to accomplish this, having a strong track record and a top-notch team are table stakes. The most critical element in the competitive world of multifamily investing is having access to a diverse capital base including investors who can stroke substantial checks. With the deals we’re focused on today our HNW investor base typically makes up 30%-50% of the capital, with the remaining 50%-70% coming from a single anchor capital partner. Our HNW capital base remains a major competitive advantage, but only serves as a portion of the capital stack. Having this diverse capital base provides the opportunity to win deals.
It’s a massive leap going from a syndicator buying 70’s/80’s vintage deals in secondary markets, to competing for 2010-2022 vintage deals in some of the hottest markets in the country. But that’s exactly what we’re doing.
Winning deals and evolving our model is exhilarating, but the ultimate goal is to deliver outsized returns to our investors.
In addition to growing our capital base, we’re becoming more vertically integrated, perfecting our execution, and honing our differentiated lens. Our intent is to design a product to an under-served yet growing market demographic, create highly functional and beautiful spaces, cultivate a recognizable local brand, and take an unwavering resident focus.
By being optimists and getting aggressive for the right deals, taking a long-term approach, and thinking differently, I’m confident we’ll look back in a decade and own a top-notch portfolio of high-quality multifamily assets across the southeast.
The syndication model is great, but we have grand aspirations which requires evolution. And as Bill Gates says, “most people over-estimate what they can achieve in a year and under-estimate what they can achieve in a decade.”