Gaia Real Estate and Starwood Capital Group have exited their PJ Portfolio investment, delivering more than a 15x multiple to investors. The portfolio is comprised of more than 9,500 multifamily units in high-growth Sun Belt markets, including Atlanta; Corpus Christi, Texas; Dallas; Fort Lauderdale, Florida; Houston; Nashville, Tennessee; Orlando, Florida; and Phoenix.
The acquisition of the portfolio occurred in May 2012 through a Chapter 11 bankruptcy. At the time, according to the firms, the multifamily communities were undercapitalized with almost 8% of the portfolio’s units in unleasable conditions. Gaia Real Estate and Starwood Capital executed a capital improvement plan, which brought the portfolio from over 20% vacancy at the time of purchase to 5% at stabilization.
The exit from the portfolio culminates a nearly 10-year partnership between Gaia Real Estate and Starwood Capital; the joint venture selectively refinanced and strategically sold certain assets in the portfolio while buying out minority shareholders.
“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 yearslong 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.”
Christopher Graham, senior managing director of Starwood Capital, added that this one of the first of many successful investments in suburban multifamily communities in the Sun Belt.
“Given its structure, this was highly unique because it had little to no downside, with considerable upside potential,” he said. “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.”