August 19, 2020
By: Louis Rogers, founder and chief executive officer of Capital Square
This has been the most interesting and scary first half of any year I can recall. Capital Square enjoyed an exceptional 2019, when we broke all company records for new programs (DST and opportunity zone funds), fundraising and assets under management. Going into 2020, the United States economy was humming, and Capital Square was headed towards another phenomenal year. Then, out of nowhere, we were pounded by an invisible virus that stopped the US economy dead in its tracks – it hit us like a ton of bricks, without any warning.
The Capital Square team hunkered down; work from home protocols were put into action across all departments, and company operations transitioned seamlessly under stay at home orders. The hard work paid off with exceptional results considering the circumstances. Just one illustration: the asset management team worked tirelessly to ensure that over 100 properties performed their best under the unique circumstances of a global pandemic. This required discipline and hard work, and the results are impressive: over 98 percent of all rent has been collected on 33 apartment communities. Medical, industrial and other properties also performed well; some requiring short-term rent relief during the shut-downs, but most have recovered quickly now that tenants are permitted to return to work and operate their businesses.
In spite of the pandemic, this was the best second quarter in Capital Square history! Also, we retained 100 percent of our executives and staff members (and even hired new executives) while other real estate companies have experienced furloughs and cutbacks. This has been a tremendous team effort which could not have been accomplished without personal sacrifice from team members across all departments — asset management, investor services, acquisitions, accounting, cash management and development — in addition to the many executives who keep the machine running like a Swiss watch even when working from home.
The following are some of the milestones achieved in the first half of 2020:
- Transaction volume: Crossed the threshold of over $2 billion (based on investment cost)
- New programs: 7 DSTs comprised of 14 properties and 1 opportunity zone fund, plus a new program to acquire manufactured housing communities in coastal Florida
- New acquisitions: Over $340 million of real estate acquired (based on investment cost)
- New team members: Hired six new team members, including an executive vice president of capital markets and director of due diligence, a vice president of construction management, a senior regional vice president responsible for sales in the Southeast, an acquisitions and development associate, and two accountants.
- Top borrower status: Top-tier borrower status with Fannie Mae led to 10-year fixed interest rates in mid-to-high 2 percent range on multifamily properties. Other lenders provided favorable financing for medical and industrial properties and construction financing for opportunity zone developments.
- Credit facility: Capital is plentiful to acquire new properties and launch new programs
- Technology upgrades: All systems are being upgraded to maximize use of technology, create greater efficiency, ease of use and ultimately lower cost to investors
Additionally, with a growth rate of 231.06 percent, Capital Square ranked 1,838th on the 2020 Inc. 5000 list of fastest-growing private companies in America.
Capital Square’s vision is to provide five to seven quality replacement properties at all times, typically Class “A” and “B” multifamily, medical facilities and industrial properties; and now, institutional-quality, 55+ lifestyle manufactured housing communities in coastal Florida. Most DSTs have mortgage debt in place for exchangers who need debt to qualify for tax deferral under section 1031; other programs are all cash/no debt for exchangers who do not need or want debt. The goal is to provide a broad platform, with and without debt, to permit exchangers to diversify their 1031 replacement property by asset class, geography and tenants. By diversifying, investors can reduce their risk of having a more concentrated portfolio.
At a time when other DST sponsors hit the pause button, Capital Square expanded the product line. Look for more new lines of business as the company grows and evolves over time.
In conclusion, we have much work ahead of us to successfully close out the second half of 2020. We take this burden seriously. Rest assured the Capital Square team is on the job and up to the task.
I hope everyone is safe and finding a way to enjoy this challenging summer.
Capital Square is a sponsor of The DI Wire, and the article was published as part of their standard directory sponsorship package.