Tony Azar: It Is Going to Be Harder to Find True Value-Add Investments

Real estate entrepreneur talks about the trends, challenges in the industry and his expectations from 2017.
Tony Azar, Managing Director MACC Venture Partners
Tony Azar, Managing Director MACC Venture Partners

Gastonia, N.C.—Counting almost 14 years in the multifamily real estate industry, Tony Azar, managing director of MACC Venture Partners, believes that the road to success begins with thorough research, lots of dedication to the business plus extra attention for the employees. Together with his family, Azar started MACC Venture Partners and Capstone Multifamily Group, two companies to offer multifamily investors and owners a complete line of services. The real estate entrepreneur revealed his market predictions for the next 12 months and how he succeeded in launching and stabilizing the two firms.

CPE: Which would you say are the main trends in multifamily investment now?

Tony Azar: Appreciation of equity and gain, cash flow yield and returns on equity, safe investment environment.

CPE: What are the challenges in the industry?

Azar: Maintaining the rent growth that we have had the past few years and the equilibrium between cap rate compression and interest rates.

CPE: What are your expectations from 2017 in connection to multifamily real estate? Do you sense an investment slowdown?

Azar: It is going to be harder to find true value-add and value play investments. We are still a buyer, but we will be sifting through many deals to find the right one that would work for us and our investment criteria. We look to increase our portfolio by at least 1,000-1,500 units.

CPE: What about rent growth? Will growth rates come to a standstill in 2017?

Azar: I don’t think it will come to a standstill, but it will definitely slow down and drop down to our typical inflationary 2-3 percent increase versus the 5-7 percent of what we have been averaging, not accounting for the value-add and rent upgrades.

CPE: Will we witness cap rates expanding in the next 12 months?

Azar: I think as interest rates start and continue to rise, the offset will be an increase in cap rate, so investors can maintain their yields.

CPE: Tell us the story of MACC Venture Partners and Capstone Multifamily Group, the two companies that you own. Was it difficult to stabilize such a business?

Azar: MACC Venture Partners started in 2003 in the single family rehab and flips, and by 2007 we had flipped over 67 houses. Toward the end of 2006 we felt that we needed to change our business model due to the credit and loose lending of banks to our customers. We were going to the closing table paying these buyers closing assistances, etc. That was wrong and the pressure was on us for 2007 to revamp our business and enter the commercial arena.

After research, lots of learning and attending conferences, we have picked the multifamily sector due to its safe investment environment. It took us about nine months to buy our first property in Augusta, Ga., in April of 2008, which we still hold. From there we went on to add more properties using third party property managers, but yet again we had to revamp that side of the business because we were spending a lot of our time and resources managing the managers. Of course we had to wait for the scale of economics to tip our way, so we can setup the infrastructure, staff, etc. to start our own management company.

At the end of 2009 and beginning of 2010 we launched our property management company Capstone Multifamily Group and took over control and management of all of our properties and the rest is history. Today, MACC owns and manages over 4,000 units. We hit the 5,000 unit mark, but we have been selling most of our small assets (under 100 units) and some of the Texas holdings that were part of a joint venture.

CPE: You began your career in real estate more than a decade ago. What would you advise someone who is considering to start a business in the industry?

Azar: Research, learn, attend conferences and read. Once you have done these things, start building relationships with peers and successful investors in your field. Don’t hesitate to ask for help and don’t try to reinvent the wheel. Once you feel you have done your own self training and education, then my best advice to you is to always do what you say you are going to do. Our business is all about people and relationships. It is important that people perceive you as credible and a doer. Last, but not least, your VIP are your employees and staff. Take care of them because they will take care of your clients and tenants.