ATLANTA—Cohen & Associates is about to go on a spending spree. In fact, that spending spree has already started. Contrary to most investors, Cohen & Associates is spending in secondary and tertiary markets, purposely targeting so-called hairy deals.

Led by Israel-born Gidi Cohen, the firm is about to raise more capital to snap up more assets across the country. The Los Angeles-based firm has shined a spotlight on the Southeast, in particular, in recent months. GlobeSt.com caught up with Cohen to discuss his strategy, as well as his take on what to expect next in the ongoing commercial real estate recovery.

GlobeSt.com: In the past several months you have been able to acquire properties, such as Renaissance Walk in Atlanta and Tierra Vista in Orlando, at very deep discounts. What type of projects and what markets offer the greatest opportunity to acquire distressed assets?

Cohen: Cohen & Associates focuses on apartment buildings, mixed-use, broken condos projects, value-add properties and notes in the areas of California, the Southeast United States, and also the Southwest markets. We prefer projects that are more complex and have “hair” on them. These types of properties generally garner less attention from the larger institutional buyers and scare off less experienced investors. Because of our expertise with these properties we are comfortable taking on the higher level of risk which comes with them. In the end, this translates into higher returns for our investors.
 
GlobeSt.com: Cohen & Associates puts together capital to buy assets on a one off basis. Is there an advantage or disadvantage to this approach?

Cohen: As a growing firm, the one-off approach was done out of necessity. To date, all of our acquisitions have been purchased using primarily “friends and family” investors. This approach has various advantages and disadvantages for a growing company. Now that we are targeting significant growth of our portfolio, we are in the process of raising a fund of $50 million from a combination of private and institutional investors. This will help provide access to deals which without a fund are difficult to close.     
 
GlobeSt.com: The commercial real estate markets seem to be improving, but there is still worry about a double dip recession. Does this worry you and how does this affect your investment strategy going forward?

Cohen: We believe the economy to be improving, albeit slowly. As a primarily multifamily focused company, we expect the fundamentals for apartments will be strong for the foreseeable future. These fundamentals include employment growth and a continued trend towards homeowners transitioning into the rental pool. From these fundamentals we expect the trend of rising occupancies and rents to continue.

GlobeSt.com: Most firms are investing in class A properties in gateway cities. However, your investment strategy seems to be lesser quality value-add projects in secondary and even tertiary markets. Financing is difficult to obtain even for the best properties in the top markets, so how do you find financing for these types of investments?

Cohen: We maintain relationships with a number of lenders, providing us multiple financing options to close our transactions. In our experience, attractive financing terms have been available for nearly all of our transactions, including those considered to be of “lesser quality” or in secondary and tertiary markets.  

GlobeSt.com: You’ve said that Cohen & Associates invests in secondary and tertiary markets in California, Florida, Georgia, Colorado, Nevada, and Arizona. Of those markets, which one(s) do you think will recover first?

Cohen: Apartment fundamentals have been recovering across the board. The strongest growth has been seen in our California and Colorado properties where occupancy rates continue to rise even in the face of increasing rental  options.

GlobeSt.com: What do you see as the challenges to your growth and how will you tackle them?

Cohen: The main challenge to growing our portfolio is having a continuing pipeline of attractive acquisition opportunities. As more investors notice the strong fundamentals of the multifamily market, it has  become increasingly difficult to find deals that provide strong yields. By focusing on our target markets--California, Colorado, Florida, and Georgia--and seeking value-add properties between $5 million and $25 million, we believe we will continue to be successful in acquiring deals which exceed our investors’ expectations.