The Art of the JV: Southern Waters Capital’s Blueprint for Success
Southern Waters Capital leverages partnerships to accelerate growth and create value
In a market where many developers are putting projects on hold, Fort Lauderdale-based Southern Waters Capital (SWC) is keeping its foot firmly on the gas.
The flow of people into the Florida market coupled with the already tight supply is continuing to fuel demand for all types of housing. “It’s tough to be a borrower right now, but the rest of the equation – equity and demand from the consumer – remain in place,” says Ray Mazzie, co-founder and managing partner at SWC. The company is a ground-up developer across all types of rental housing ranging from urban high-rise, mid-rise and garden-style apartments to build-to-rent single-family and manufactured housing.
When The Real Deal last sat down with the team at SWC, they discussed the company’s growing platform that focused on building market-rate attainable rental housing for America’s workforce across Florida. In just 3.5 years the firm’s pipeline has grown to 2,100+ units in the Southeast, and a key driver behind that growth is strong partnerships.
SWC has a history of partnering with industry leaders, like The Procopio Companies, a multigenerational Boston-based multifamily developer, and Merrimac Ventures, a preeminent developer behind the landmark development known as “Miami World Center.” SWC utilizes JVs to not only bolster the balance sheet but also to drive value through efficiencies other firms possess by way of vertical integration. “Pooling resources with development partners has allowed us to undertake larger scale and thus more impactful developments,” says Dean Myerow, SWC co-founder and managing partner.
Finding the right partner
SWC has a track record of leveraging joint ventures across a variety of different structures that include both passive and active partnerships, as well as working with public entities as part of public-private partnerships (P3s). When assessing JV partners, the first box to check is obviously capital. Beyond that, SWC is looking at other factors that can help benefit the bottom line of a project, such as in-house property management, construction, engineering or architecture. “Any group that can bring another ‘layer of the cake’ to the development process with in-house expertise helps us to save on costs, time and ultimately helps to mitigate risk across the development life cycle,” adds Mazzie.
SWC is also expanding outside of Florida with development opportunities in the Southeast. For example, the firm is currently working on a new project in the Charleston MSA that involves both a passive equity partner and an active developer partner. SWC is taking on a planned development with multiple components, which include traditional multifamily housing, ALF/ILF products, and out parcels of commercial/retail.
“The three critical components of a successful JV are the alignment of interests between the parties; complementary skillsets; and most importantly personality fit,” says Myerow. “It’s important to have a shared vision that keeps all the partners focused on the same goals, as well as diverse skillsets to ensure that all aspects of the development process are analyzed from every angle,” he adds.
SWC typically creates a matrix for each project that assigns different roles and responsibilities to each partner in accordance with their respective strengths and expertise. “Every deal is unique, and so is every partnership. The roles and responsibilities are essentially predetermined by the individual partner’s particular skills and other assets that they bring to the table,” says Mazzie.
P3 structures in particular can vary vastly from a simple land contribution or CRA incentives to complex tax abatements in exchange for affordable set-asides and other desired development components. For example, SWC is planning a P3 with a central FL city in one of its designated Opportunity Zones. The city is providing a discount on the price of land and additional incentives in exchange for a certain amount of residential and commercial space being built to a particular quality and aesthetic in its downtown core.
Strong partners bring added value
SWC brings a number of value-add strengths to the table for its project partners. When it comes to ground-up development every market is nuanced, and as such, local knowledge and expertise are critical to a project’s success. SWC always serves as the “boots on the ground” partner throughout the development lifecycle to ensure the partnership successfully navigates the treacherous politics of development and the pain of local bureaucracy. Additionally, SWC has a strong predevelopment skillset, including land acquisition, structuring transactions, entitlement, site prep, and of course, playing local politics. What SWC does better than most is securing projects at a great basis in superior locations within growing markets.
“We’re a natural fit for development groups willing to JV that want to enter a new market with a head start allowing them to run full speed at projects from day one,” says Mazzie. “We typically hand off the baton where they want to pick it up and it’s a relay race that can be really efficient when both sides are aligned and working together.”
SWC is helping large real estate firms enter the Florida market with opportunities to do large-scale projects. For example, SWC has partnered with Boston-based Procopio Companies on SoLiv at Wildwood, a 360-unit mixed-product development that incorporates casitas and traditional multifamily assets. The project is located adjacent to The Villages, a master-planned age-restricted development southeast of Ocala. In this case, SWC acquired five different parcels and rezoned the land into a 26-acre development site. Procopio Companies is an ideal partner for SWC for a multitude of reasons. Procopio Companies is a full-service development and construction firm that will be an active partner in developing the project. This is their first entrance into the Florida market, and the personality fit is perfect with the Procopio Companies.
In addition to equity partnerships, SWC is expanding its expertise to include third-party development services to landowners and out-of-state operators looking to enter the Florida market. “We understand that all groups are not fit for partnership, but that doesn’t mean we can’t help them. Our expertise and command of the Florida market position us to be a valuable asset to any owner/operator in need of development services throughout the Sunshine State,” says Myerow. “We look forward to serving our clients just like our partners because we know exactly what it feels like to have your money at risk in a volatile market.”