Kislak to Invest $200M in Multifamily Properties

Last Updated: July 28, 2010 03:46pm ET
By Hortense Leon
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Lam

MIAMI-J.I. Kislak Inc., a national investment company based in Miami Lakes, FL, is planning to expand its commercial real estate portfolio by acquiring multifamily properties, including broken condominiums, in the Sunbelt, primarily in Arizona, Florida and Texas.

The company expects to deploy upwards of $200 million in this effort, a figure which includes leverage and the support of partners as well as Kislak’s own capital, says Dung Lam, the company’s chief financial officer, who did not disclose how much of the capital is from the company’s own balance sheet.

Although there are no properties that Kislak has under contract, says Lam, “we are seeing lots of deals because the bid-ask spread between buyers and sellers (of multifamily properties) is narrowing.”

Kislak currently owns and operates about 3,000 multifamily units in eight properties in Florida, Arizona, Texas and Nevada. The company is interested in buying new properties with 150 units or more.

Kislak acquired about 5,000 multi-family units between 1999 and 2010, says Lam, but 2,000 of those units, which were located in Florida and Nevada, were converted into condominiums between 2002 and 2005, he says. “We could make 28 times the cash flow by selling the units and that strengthened our balance sheet,” says Lam, who adds that Kislak also has an unnamed Wall Street partner with which it will do future joint ventures related to multi-family properties on an asset-by-asset basis.

In doing the condominium conversions, Kislak  upgraded the units, then sold and closed on the properties in-house, says Lam. “The proceeds from those deals are the driving force behind Kislak’s capital today,” he says.

Lam says that he would like to acquire distressed assets from special servicers. In 2008, Kislak bought an apartment building in the southwest through an FHA auction. Today, a deal to sell the asset  should be finalized in the next 30 days, says Lam, and the net proceeds from the sale will be very lucrative.

The owner of the apartment property, which was in the midst of redevelopment, had defaulted on a loan with a face value of about $5 million, says Lam. Kislak purchased the loan for pennies on the dollar, then foreclosed on the property.

 

Although Kislak is interested in buying multi-family properties again, in 2009, when the commercial real estate market was at its lowest ebb, the company looked for an alternative investment to commercial real estate, so it started Sunshine States Certificates.

 

A wholly-owned subsidiary of J.I. Kislak, Sunshine States Certficates buys Florida tax liens. In 2010, the company created a fund to include the company’s capital, money from select investors and debt from Bank United in Miami which it invests in this business. In the last two years, Kislak invested $63 million in the tax certificate business altogether, says Lam.

The beauty of tax certificates, says Lam, is that it allows Kislak to get a 10% yield on its investment. This compares favorably to alternative investments with a similar risk profile, such as CDs, treasuries and some corporate bonds, which offer only 2% to 4%.

 

 

 

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