In a market crowded with value-add home investors pursuing fix and flip strategies, GDL Asset Management is motivated by more than just earnings.
“When I founded the company in 2009, my vision was to provide a life of dignity for the people who are the economic engine of this country,” said Genaro Díaz, President and CEO of GDL Asset Management and Greenwater Real Estate Management. Díaz firmly believes that these people have the right to the same “A-Class” life as everyone else. The company’s strategy is to buy Class D assets and bring them as close as possible to a Class A property.
During its 13-year history, GDL Asset Management is a general partner that has acquired more than 32 properties and 8,500 units in Texas, Arizona, Florida and New Mexico. “We buy problems and fix them,” adds Díaz. The solutions the company offers go beyond repairs and renovations. The company eliminates crime and the bad elements to create safe, family-friendly homes with modern amenities, free activities, and exceptional customer service. “It’s about creating a community for the people who live there,” he says.
Díaz left Mexico City in the late 1990s with a law degree, a family history in real estate, and a desire to live a better, more meaningful life. Many of the communities he has transformed have been predominantly Hispanic areas struggling with security concerns. He’s always believed in the power of impact investing, and he has strives to empower people and create happier societies where children play outside, spend time with their families, and connect with nature.
For investors, the Company follows a one to two year strategy of buying, repositioning and then selling an asset. “We are focused on the longer term strategic picture of maximizing the values of each rental property and delivering the highest return on investment or ROI for investors,” says Veronica León, Senior Executive Administrator. However, it’s not just a one-time investment where the company makes improvements and then moves on to the next project, the philosophy is to create value for investors, residents and the community, she adds.
Added value for heavy loads
GDL typically targets deferred maintenance assets built in the 1960’s, 70’s and 80’s. “We’re looking for what we call the ‘diamond in the rough,’ which is often a property that hasn’t been touched since it was built,” said Joshua Stewart, district manager of Greenwater Real Estate Management, GDL’s full-service real estate management company , which oversees remodeling, property management and rentals.
Often the first step is to eliminate problem tenants and crime and create a safe environment for residents. The company is creating gated communities to control access, improving lighting, adding surveillance cameras and working with local police to increase patrols. Renovations include extensive repairs and improvements to both the exterior and interior, including landscaping with new trees, plants and flowers to create a park-like setting.
“Honestly, properties are in pretty bad shape when we get them, but we see so much potential in them,” says León. Typically, the interior and exterior model is complete and a year after the company acquires an asset, there is a whole new tenant base.
In keeping with its focus on community building, adding or enhancing existing common spaces is another priority. GDL installs city park-style playgrounds with equipment, outdoor fitness areas and mini-soccer fields for children to play in many of its properties. If there’s a pool, the company removes it and installs a new resort-style pool, usually with awnings and outdoor grills, so people can swim in the pool and grill out with their families, Stewart notes.
The property management team also implements new services and programs ranging from tutoring to soccer tournaments and movie nights. “We create a nice community where people and families end up interacting,” says Díaz. Building relationships and relationships with tenants helps improve the tenant experience and improves tenant retention and ROI for investors, which currently stands at 30% at the limited partnership level.
GDL has a strong track record of delivering results for its investors. For example, in December 2020, the company acquired the 212-unit Huntington Park Apartments in Tucson for $17.2 million, or $81,132 per unit. Management successfully implemented a repositioning program that significantly improved the performance and value of the property.
Cap-Ex improvements included interior and exterior renovations and repairs, the construction of carports, significant landscaping improvements, and the addition of family-friendly recreation areas such as a playground, mini-soccer field, and barbecue area. In addition, GDL has significantly improved security, including creating a fenced and gated entrance, improving the outdoor lighting and adding surveillance cameras. The project is contracted for sale with an outstanding price of $40.2 million, representing a profit of $15.5 million and an overall IRR of 67.4% for investors.
One of the keys to GDL’s success has been a hands-on approach to the operation and management of its investment properties. While other investment groups typically hire a general contractor or third party management team, Greenwater Real Estate Management allows GDL to draw on its own in-house team. Greenwater creates additional cost efficiencies and ensures everything gets done as planned and nothing is overlooked, Stewart notes.
The city and local authorities are also aware of the success of GDL in repositioning problem properties. The company often gets a warm welcome when it acquires another asset because it knows the company will invest the labor and capital needed to improve those problematic properties, Díaz notes. “We’re not just a solution for the people, we’re a solution for the city and local government,” he says. GDL has many examples where the company bought a property or portfolio of properties that had problems with crime and drug dealing. “We fix these problems by creating a safe atmosphere where people and families can live and interact with dignity,” he adds.
For Díaz, the reward isn’t just a paper formula that dictates an investment per unit to achieve a specific IRR. The reward is when the work and investment result in that “magic” where people have a beautiful community where kids run and play. “There are many places where people don’t live properly and we want to be the solution,” says Díaz.