NEW YORK, NY - Gaia Real Estate and Starwood Capital Group announced today that they have fully exited their PJ Portfolio investment. The portfolio consisted of over 9,500 multifamily units located in major metropolitan areas throughout the high-growth Sunbelt region. More than 45% of the units are located in Dallas, TX, with additional concentrations in Phoenix, AZ (19%), Atlanta, GA (8%), Houston, TX (8%), Fort Lauderdale, FL (7%), Corpus Christi, TX (6%), Nashville, TN (5%), and Orlando, FL (3%).
The acquisition of the portfolio was executed in May 2012 via Chapter 11 bankruptcy. At the time of purchase, the assets in the portfolio were undercapitalized with almost 8% of the portfolio’s units in an unleaseable condition. The partners addressed this challenge head on, executing a comprehensive capital improvement plan that injected tens of millions of dollars into the cash-starved assets. These capital expenditures brought the portfolio from over 20% vacancy at the time of purchase, to 5% upon stabilization.
The exit culminates a nearly 10 year partnership between Gaia Real Estate and Starwood Capital during which time the joint venture had selectively refinanced and strategically sold certain assets in the portfolio while buying out minority shareholders. At the time of exit, the project delivered a more than a 15x multiple. The success of the investment can be attributed to the early adopter mentality shared by the partners who capitalized on emerging opportunities in workforce housing real estate in the Sunbelt.
“What started out as winning the acquisition, after spending days and nights at bankruptcy court following the 2008 crisis, has brought a very successful, 10 years-long investment. We are thrilled with the outcome of this investment and could not have asked for better partners at Starwood Capital,” said Danny Fishman, CEO of Gaia Real Estate. “This was one of the last great distressed investment opportunities that arose from the Great Financial Recession. We are proud to have executed on our business plan to improve these assets and realize substantial value for our investors.”
“This was one of the first of many successful investments in suburban Sunbelt multifamily assets made on behalf of our investors. Given its structure, this was highly unique because it had little to no downside, with considerable upside potential,” said Christopher Graham, Senior Managing Director of Starwood Capital Group. “Ultimately, our partnership was able to realize significant upside through heavy value add and proactive asset management to increase value over a long period of time.”
Gaia Real Estate: Gaia Real Estate Holdings is headquartered in Manhattan. Gaia is a full-service real estate investment company with integrated in-house asset management and property management capabilities. Since its inception in 2009, Gaia and its affiliates have invested in a range of real estate opportunities on behalf of, and alongside, leading institutional investors and high-net-worth individuals. Gaia specializes in alpha generating projects: value-added properties, creative structures, and outside-of-the-box transactions, alongside broad-based market themes.
Starwood Capital Group: Starwood Capital Group is a private investment firm with a core focus on global real estate, energy infrastructure and oil and gas. The Firm and its affiliates maintain 16 offices in seven countries around the world, and currently have approximately 4,000 employees. Since its inception in 1991, Starwood Capital Group has raised over $65 billion of capital, and currently has over $110 billion of assets under management. Through a series of comingled opportunity funds and Starwood Real Estate Income Trust, Inc. (SREIT), a non-listed REIT, the Firm has invested in virtually every category of real estate on a global basis, opportunistically shifting asset classes, geographies and positions in the capital stack as it perceives risk/reward dynamics to be evolving. Starwood Capital also manages Starwood Property Trust (NYSE: STWD), the largest commercial mortgage real estate investment trust in the United States, which has successfully deployed over $76 billion of capital since inception and manages a portfolio of over $24 billion across debt and equity investments. Over the past 30 years, Starwood Capital Group and its affiliates have successfully executed an investment strategy that involves building enterprises in both the private and public markets. Additional information can be found at starwoodcapital.com.