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edition 1 (237)
January 2019
Investment & Finance

On the lookout for Miami investors

Aneta Cichla

On the lookout for Miami investors
Robert Jaś, president of the management board of Metropolitan Investment in Miami
Polish-based Metropolitan Investment is entering the US with a view to expanding its business.
Why did you choose the USA?

Robert Jaś, president of the management board of Metropolitan Investment in Miami: It is the best place to do business, especially for our company which looks for investors for property development projects. So where else is it better to look for business partners than the place where they are concentrated in their largest numbers and which is visited by investors from around the world? We considered a number of locations in the US: New York, Los Angeles and Miami. Our research showed that Miami would be the most suitable for us. This is because it has lower barriers to entry in regard to labour costs and investment as well as its location on the east coast which allows us to work with our Polish office. Florida’s GDP is similar to that of Turkey and over 5 pct of its population hold liquid assets worth over USD 1 mln.

What does your business do?

We sell shares in our projects and issue debt under the supervision of American institutions, including FINRA (Financial Industry Regulatory Authority) and the SEC (United States Securities and Exchange Commission). Real estate private equity is a commonplace here. There are two models that are commonly used here, 95:5 and 90:10, with passive investors taking the majority stake and benefiting from the work of the developer and profits generated by a building. Although in the United States private equity funds are preferred, we have decided to diversify our risk and we invite individual investors to get involved in a single project, as long as they are accredited and have the requisite capital. The majority of our partners (over 50 pct) are American. We put in our own equity and are supported by funds from investors and banks. However, we always retain a 5 pct in any given project as well as its management.

What does the future hold for business in the USA? Isn’t the Miami market highly saturated.

It is, indeed, but with funds that are looking to invest. It is less saturated by individual players, so there is demand for our projects. The growth prospects are attractive. We have recognised that individual investors have a strong need to hold their own stake in real estate. American financial institutions have mastered the sale of ‘black boxes’, which are like a pig in a poke. We offer a tangible product which allows an investor to make profit and, at the same time, to see its development and how it operates.

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What is Metropolitan Investment currently working on in Miami?

We are building a retirement centre in Tequesta near Jupiter Island in one of the most affluent regions of south Florida. There are a number of reasons for choosing this type of investment. Since the American economy is booming, we need to be prepared for a possible crisis and our project should be unaffected by any market turmoil. Moreover, the region is facing what they call a silver tsunami which means that the baby boomers are growing older and moving into retirement homes. Our data show that in around twelve years’ time the demand for such services is going to increase by around 20 pct, however the supply is only increasing by around 2 pct. Additionally, you need to remember that the number of such specific investments are limited and building permits for similar centres are not being readily granted by municipal authorities. We have such a permit and it will be the only centre in that region with individual housing units for independent living. The residents will be part of a community and will be highly independent. The centre will also include apartments for assisted living as well as apartments for old people with dementia or Alzheimer's disease. Our partner will be AgeWell Living which specialises in managing such facilities.

What stage is the project?

We have purchased an eight-acre (app. 3.2 ha) plot for the housing apartment building for the elderly, which will have 124 apartments and a total area of around 16,000 sqm. We have already completed the first stage of the two-phase proceedings to apply for the building permit and we are now required to submit the building permit design. The construction is scheduled to start around April/May 2019. We are planning to complete the project within a year and a half of its launch.

How much will the project cost?

Around USD 45 mln in total.

How many investors have you found for the project?

Negotiations are still ongoing. The project has attracted interest from a number of people who want to invest USD 20-30 mln, such as one wealthy family from Argentina, however, we have also receive plenty of enquiries about investing USD 1-2 mln. We are sure that we will have investors covering the entire cost of the project before construction begins.

What kind of return are you hoping to achieve?

It takes about a year to stabilise such a project and rent out the apartments. We have prepared an analysis report with CBRE. In the United States, the internal rate of return of similar projects averages at 14.1 percent after the payment of operator’s fee which for such a project is usually around 5 pct. Our aim is to achieve a margin on the capital invested in excess of 20 pct per annum. Our investors should receive at least 7 pct.

What are your future plans for Florida?

As well as the development of a network of retirement communities under the MI Senior Living brand in the United States, we also run a brokerage firm. We look for investment and residential real estate. We also operate a property management department and offer mixed-use real estate management services.

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