Greenwater Asset Management combines an impact investing approach with stellar results for investors

Rising interest rates haven’t slowed momentum for Greenwater Asset Management. The multifamily investment firm maintains an active pipeline of projects that it believes will translate into positive results for its investors, residents, and communities.

Greenwater is a value-add investor that targets problem properties requiring significant capex repairs and improvements — and tough love to rid properties of crime and delinquent tenants. Over its 13-year history, Greenwater has acquired more than 32 properties comprising 8,500 units in Arizona, Florida, Texas and New Mexico. When The Real Deal last spoke with the firm, they highlighted their business strategy and successful track record. 

While many of the company’s peers are hitting pause amid rising interest rates, Greenwater has maintained a steady flow of investments, including several projects in the Tucson market that are in various stages of renovation and stabilization. Two recent examples of that are the successful acquisitions of La Mirada and Sierra Vista Apartments. “We are very pleased to have cemented our position as an active institutional buyer in the Tucson market with this landmark transaction,” according to Genaro Díaz, president and CEO. 

Greenwater’s commitment to this market — and its nimbleness — are demonstrated by its own recent relocation from its longtime Miami headquarters to a newly built office in Tucson. That move reinforces the firm’s commitment to the market and establishes a strong “boots on the ground” presence. Díaz believes that planting the firm’s flag locally will allow it to better address more buying opportunities in Tucson and the broader Arizona market over the next few years. “We are entering into an uncertain era because interest rates are climbing, but we also view it as an opportune time for which we are well positioned to selectively purchase properties that align with our value-add business model and company ethos of creating safe and inviting communities,” says Díaz.

Focus on Tucson

Tucson is a market that has landed squarely on the radar for real estate investors. Part of that interest is due to a growing population across demographic segments, which is driving demand for all types of housing. In addition, a recent market report released by Northmarq noted that institutional investors have been more aggressively placing capital in Tucson in recent years. The average multifamily transaction size has recorded a steady upward climb since 2019, approaching $30 million for the year to date, which is in line with the recent Greenwater deals. 

For Greenwater, that growing pool of buyers supports the firm’s exit strategy to sell its stabilized assets. Over the course of its history, the company has delivered results for its investors that include an average IRR at exit in the high 20% range and 1.7x in equity multiples with an average three-year hold period. The firm’s track record has been validated by a base of repeat institutional and high-net-worth investors.

In addition to the acquisitions of Sierra Vista and La Mirada, the firm is rounding out the 2022 portfolio additions with nearly 300 unit apartment complex of 1970s vintage assets in Tucson called Eastyn Park. Greenwater recognized these “diamonds in the rough” investment opportunities and saw the potential to raise values and net operating income (NOI) by renovating to a Class B level. Upon stabilizing the assets, the firm anticipates that rents at each property will increase by nearly one-third compared to pre-acquisition levels, while NOI within the expected hold period will likely improve by more than two-thirds.

Greenwater’s business strategy delivers what many investors are still looking for in today’s market — quality assets in secondary and tertiary markets, says Ajoy Chandra, CFO of Greenwater Asset Management.

“The key factors that attracted me to the company are the infectious energy that Genaro exhibits for this sector of the housing market, his successful track record in delivering results for both communities and his investors, as well as the company’s desire to continue building on that track record in a far more challenging market.” 

Transforming troubled properties

Greenwater’s vision is to transform distressed urban properties into safe communities for families. “At the end of the day, what is important is to create community,” says Díaz. That transformation involves a multi-step process that starts with significant investment in capex improvements to the property both inside and out, with renovations to units, common areas and grounds. Landscaping goes well beyond simple maintenance. In some cases, the firm comes in and plants hundreds of trees throughout a property, notes Díaz.

Enhancing security is another key step. Greenwater cleans up the tenant base, eliminates criminal activity and opens the door to families seeking good-quality housing. “We start with a strong capex plan and creating a gated community,” says Díaz. “That involves paying for added patrols and security as well as better lighting” he adds.

Importantly, creating a community goes beyond the walls of individual apartments. Greenwater builds playgrounds and soccer fields for children and families and includes equipment for all ages, whether it is young children or adults who can use it for exercise. The company also organizes activities to support strong families and communities, such as after-school tutoring for children and soccer tournaments.

Hands-on approach

One of the keys to success for Greenwater has been taking a hands-on approach to the operation and management of its investment properties. “We have an operating principle that every single maintenance request from any tenant has to be resolved the same day,” says Díaz. While other investment groups typically hire a general contractor or third-party management team, Greenwater is able to leverage its own internal vertically integrated team that oversees management, leasing and construction work. 

The transformation of the properties is evidenced by the fact that they often become the safest in their respective neighborhoods, and for investors, that means achieving within a short timeframe cap rates that are well below their peers, adds Díaz.

Greenwater has proven that its business model works across different metros, including Jacksonville, Fort Myers, San Antonio, Dallas and Albuquerque. Oftentimes, Greenwater is stepping in to acquire properties that no one else wants to touch, and in the process, providing needed workforce housing for families. “We like to purchase problems and fix those problems to create better communities and better neighborhoods,” says Díaz.