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Commercial Real Estate
Business Observer Saturday, Sep. 19, 2020 2 months ago

Impact Driven

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Westside Capital Group balances profit with positive change in a formula it’s employed in Tampa and elsewhere.
by: Kevin McQuaid Commercial Real Estate Editor

When Jakub Hejl formed Westside Capital Group in 2016 — at the age of 26 — he made it his goal to improve both his and investors’ bottom lines and the lives of those in the communities the company would invest in.

The company’s mission statement would be no less idealistic: “To be the most innovative real estate investment firm.”

In the few years since, fueled by macro-economic trends, historically low interest rates, the careful study of evolving demographics and employment trends and Hejl’s own ambition, Westside Capital has exceeded in its initial objectives, and then some.

In all, the Miami-based company has acquired a half-dozen multifamily rental complexes containing more than 1,000 units in Tampa, Winter Haven, Orlando, Jacksonville and Port St. Lucie, though Hejl says not all of  his nor the company's holdings have been publicly disclosed.

Moreover, Westside appears positioned for even greater growth in the years ahead, through a series of development opportunities and expansion into new asset classes such as hospitality, offices or mixed use.

Its growth thus far has been fast but also incremental. Westside’s first purchase involved a 50-unit apartment complex in Winter Haven in early 2018, for roughly $5 million.

Most recently, in May, the company purchased its largest multifamily rental project to date — an Orlando complex with 150 units and nearly 50,000 square feet of commercial space — for $45 million.

“From an investment standpoint, Florida has several positive trends going for it,” says Hejl, a native of the Czech Republic who emigrated to the U.S. at 15 and attended high school at IMG Academy, in Bradenton, to play basketball.

COURTESY PHOTO -- Jakub Hejl formed Westside Capital in 2016. Since then, his firm has invested more than $120 million to acquire mostly apartment projects.

“There’s solid demographic growth and job fundamentals and a good quality of life,” adds Hejl, who worked at private equity firms DRA Advisors in New York and Westbrook Partners, in London, before starting Westside. In all, he says he's been involved in about $2.5 billion worth of real estate investment deals.

“And we see a big runway ahead still, lot of opportunity.”

Of the handful of cities it has invested in, Tampa is the only one where Westside has made multiple investments. Combined, it has spent $51 million on the pair of communities.

Hejl says he was drawn to the 240-unit Buena Vista apartments and the 337-unit Watermans Crossing complex, both in Tampa’s Wellswood neighborhood, because he saw an area poised for growth and one that had been largely overlooked despite a close proximity to downtown.

Since Westside’s initial purchase, the Bank of Tampa has developed a 50,000-square-foot office building in Wellswood, a 30,000-square-foot medical office building adjacent to Buena Vista has been completed, new speculative single-family homes have gone up and St. Joseph’s Children’s Hospital has executed capital expenditures as part of a $126 million plan.

“Tampa is extremely attractive to us because of its labor force, the diversity of jobs there, the city’s port, the infrastructure and developments downtown,” Hejl says. “It makes the city somewhat recession proof, and as a result, it’s becoming a major primary market in Florida.

“For multifamily projects, Tampa is one of the top performers nationally,” he adds. “We recognize that that can change quickly, and it hasn’t all been rainbows and roses, but it’s done well over time.”

The strategy has worked so well that Westside has been able to refinance and recapitalize several properties to buy out partners and redeploy capital.

Earlier this month, Berkadia Commercial Mortgage arranged a $25 million, 12-year fixed-rate loan with Fannie Mae for Buena Vista, which consists of 10 buildings on five acres developed in 1985.

It marked the fourth time in the past year that Berkadia, a joint venture between Berkshire Hathaway Inc. and Jefferies Financial Group, arranged debt for a Westside project. The Tampa recapitalization also represents the largest of its new mortgages to date.

“Fannie Mae looked at the performance of the asset over time, the level of improvements that Westside has made since owning it and the overall quality of the owner in deciding whether to participate,” says Berkadia Senior Managing Director Charles Foschini, who arranged the loan from the company’s Miami office.

“As for Jakub, I see him as a very meticulous, extremely driven and highly intelligent person,” Foschini adds. “He finds assets that have not been managed at an optimal level but have strong physical plants to them, and then takes those assets to the next level.”

Hejl credits the company’s values for bolstering its performance. Westside’s website notes that it “wants to make an impact in communities” and that “we care about our reputation in the marketplace.”

“We strive to make the world a better place not only by the improvement of what we do, but by the improvement of people,” Westside’s website states.

Hejl and the company will have ample opportunity to be catalysts for change if planned Westside developments in Orlando, Winter Haven, Tampa and elsewhere come to fruition, too.

Earlier this summer, in Orlando, Westside proposed redeveloping the derelict Lake Orlando Golf Club into a 128-acre, mixed-use development with residences, retail and public spaces.

COURTESY RENDERING -- Westside Capital has proposed transforming the derelict Lake Orlando Golf Club into a 128-acre, mixed-use development in Orlando.

The roughly $1 billion project, roughly 10 minutes from downtown Orlando in a federal Opportunity Zone, would be completed in phases over a decade.

Hejl says the company has submitted plans for the project to the city and is talking to stakeholders about the future of the property.

Even before then, though, Westside is expected to invest $25 million to add 130 new apartments to its Lakeshore Club property in Winter Haven, beginning next year.

Units might also be added to Westside’s Creekwood Club, in Jacksonville, and at the Watermans Crossing complex in Tampa.

Hejl says the expansions are being contemplated despite the uncertainty that the COVID-19 pandemic has wrought on the apartment industry.

COURTESY PHOTO -- Watermans Crossing was the second Tampa apartment complex that Westside Capital acquired.

“It’s something we’re monitoring carefully,” he says. Overall, our (rent) collections have remained pretty good, and people seem to be doing the best they can. Time will tell. But COVID has definitely created a lot of uncertainty.

“But what we’ve also seen, both in our portfolio and others nationally that we’re familiar with, is that properties that have been professionally managed have performed better.”

It’s why Westside is “actively looking” for more multifamily projects in the Tampa area, Hejl says.

“We recognize that we have to be careful, because with all the growth the pricing expectations are quite high,” he says.

To further hedge its risk, as well, Hejl says Westside is investigating purchasing hotels whose values have been damaged by the pandemic.

“We’re looking into hotels heavily,” he says. “There’s some distress there, certainly, as a result of COVID, but longer term, we feel there could also be some real opportunities.”

What Hejl can’t fathom is what Florida real estate, or his own creation, will look like beyond 2023.

“Life is teaching me of late to look in increments of 18 to perhaps 24 months,” he says. “Anything beyond that is too difficult to predict, because things are moving so quickly. We plan to work hard and do the right things and we believe the rest will take care of itself.”

 

 

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