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Business Observer Friday, Apr. 3, 2020 8 months ago

Stoneweg US's portfolio tops $1 billion

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St. Petersburg-based apartment investor focused on workforce housing maintains ambitious plan to grow
by: Kevin McQuaid Commercial Real Estate Editor

The portfolio of Stoneweg US LLC, a St. Petersburg-based affiliate of a Swiss investment firm that buys and develops workforce-targeted multifamily rental properties, has surpassed $1 billion in assets.

The four-year-old Stoneweg US hit the ten-figure mark in late February, with a pair of acquisitions in the Southwest and in Raleigh, N.C., that together added 328 units.

In all, the asset management company’s portfolio of 62 apartment properties in tertiary and secondary markets experiencing high population growth now contains nearly 12,000 units.

To date, the company has invested in multifamily rental properties in 19 Midwest, Southwest and Southeast states. In Florida, which in the past decade passed New York to become the nation’s third most populous state, Stoneweg US owns 15 properties.

“The portfolio valuation gives us higher visibility with investors, and it provides, we believe, an image to external stakeholders,” says Patrick Richard, Stoneweg US’s CEO.

“But it doesn’t change the way we work.”

LORI SAX -- Patrick Richard is the CEO of Stoneweg US, which has focused on workforce housing in secondary growth markets and whose portfolio is now valued at more than $1 billion.

The $1 billion milestone also is part of a larger, more ambitious plan to amass more than 20,000 units by the end of next year and, in so doing, become one of the 50 largest multifamily rental owners nationwide.

“We want to grow to 20,000 units under management but we want to do it patiently and intelligently,” says Ryan Reyes, Stoneweg US’s chief investment officer. “Ours is not a race to build unit count but instead a race toward excellence.”

To meet the next mark, Stoneweg US is expanding geographically, into markets like Kansas City and cities in Tennessee, and it also is contemplating moves into Indiana, Ohio and parts of Southeast Florida.

The company also has created a U.S.-based acquisitions fund with $25 million in equity in partnership with various investors. To date, the fund’s capital has been used to acquire four properties, and another two deals are in the offing that would add an additional 1,000 units to Stoneweg US’s portfolio.

Since its creation in 2016, the company has deployed more than $380 million in equity, generating an internal rate of return of 18% and an overall yield of 9%.

Its growth has been exponential. When Stoneweg US debuted, for instance, the affiliate of Geneva, Switzerland-based Varia US Properties and Stoneweg Group -- a $3 billion investment firm -– oversaw a portfolio of 3,500 apartments valued at about $200 million.

As value-add acquisitions have grown more competitive in recent years, however, Stoneweg US has expanded its platform to include development.

On Florida’s Palm Coast, it intends to break ground later this year on a 120-unit complex, and in St. Petersburg, Stoneweg US has received approvals to develop a 275-unit complex on 10 acres along Sixth Street South beginning this summer.

When completed in 2021, Lake Maggiore is expected to also contain a community garden, a retail market, a coffee shop, community room and co-working space. Rental rates in the community are slated to range from $900 per month to $1,700 monthly, Richard says.

By 2024, Stoneweg US hopes to have developed more than 500 units from the ground up, Richard says.  Like the projects it acquires, Stoneweg US intends to install environmentally sustainable systems throughout the new complexes, in the form of water conserving plumbing, energy-efficient lighting and other initiatives.

But while development could be a way to expand going forward, Richard and Reyes say the company will continue to focus on buying existing assets for the foreseeable future.

“We need to walk before we can consider running as far as developing is concerned,” Richard says.

As it has with previous purchases, Stoneweg US plans to enhance its new properties with about $2.65 million in capital expenditures to enhance landscaping and amenities, rebranding and signage.

Still, adding units has come at a cost beyond mere capital. While the growing portfolio has added cache, it has also put a strain on existing company resources. To combat fatigue, Stoneweg says it plans to add seven employees to its staff of 15 in 2020.

“A larger portfolio means more work, more attention that needs to be focused,” Richard says. “We want to build a team for years to come, and that’s a long-term project, to find the right people, just as real estate is a long-term investment.”

Reyes agrees.

“We grew to $1 billion in a span of four years, with a very hands-on approach,” he says. “Now, we’re looking forward to the next milestone.”

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