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U.S. Multifamily Investment Opportunity and Challenges in 2023: Five Takeaways from Eagle Property Capital’s Annual Investor Conference

MIAMI (June 8, 2023) – Eagle Property Capital Investments, LLC (“EPC”), a vertically integrated real estate investment manager focused on the value-add multifamily space, held its annual investor conference on May 16, 2023, in Mexico City, taking the opportunity to showcase its 12-year track record, discuss U.S. apartment sector fundamentals and demographic trends, and explain how it plans to deploy capital from its fifth multifamily investment fund, scheduled to close this fall.

Speakers included Rodrigo Conesa and Gerardo Mahuad, founders and co-principals of EPC; John T. Chang, Senior Vice President, National Director, Marcus & Millichap Research Services; and Oscar A. López Velarde, Partner with Ritch Mueller.

The Miami-based EPC was founded in 2011 with the goal of creating value and preserving wealth through investing in underperforming apartment assets in Sunbelt markets with a large Hispanic population. Over the years, EPC has acquired 39 assets totaling nearly 10,000 units and achieved an average of 28% rental revenue growth on upgraded apartments and NOI growth of 44%. Today, EPC has more than $1 billion in multifamily assets under management in Florida and Texas and has raised more than $540 million in equity through several different funds. Its most recent and largest fund to date, EPC Promecap Multifamily Partners V, LLC (“Fund V”), has raised $265 million in equity toward a $300 million cap, with final closing scheduled for this September.

“As the US economy continues to perform well and the multifamily investment market adjusts to other headwinds, we remain uniquely positioned to drive long-term investor value,” said EPC’s Mahuad. “Our disciplined and conservative investment approach maximizes investor value with superior risk-adjusted returns thanks to our robust and diversified portfolio and a strong foothold in key markets.”

Speakers addressed the outlook for the economy, apartment fundamentals, and portfolio risk-mitigation tactics. Below were some key takeaways from the presentation:

1. Demographics indicate favorable, long-term demand for Sunbelt rental housing – Millennials are renting for longer periods of time, there is pent-up household formation because of the pandemic, and the trend of young people moving to the South is expected to continue, Marcus & Millichap’s Chang noted. Furthermore, Texas and Florida lead the U.S. in numerous five-year apartment demand drivers.

2. Apartment demand is being bolstered by a huge “affordability gap” – The gap between monthly mortgage and monthly rent has widened dramatically – the spread is above $1,000 in many markets. The median income needed to qualify for a loan has also gone up from $80,000 to $120,000 in the past year. This will restrain the loss of renters to homeownership.

3. Multifamily liquidity backed by Freddie Mac/Fannie Mae – The media has overstated small banks’ CRE lending risk. “In reality,” said Chang, “small banks control about 23% of the debt…and Fannie Mae and Freddie Mac continue to lend to investors so they can continue to supply housing which is very much needed in the United States.”

4. This environment offers some opportunities for capital appreciation – EPC executives anticipate some opportunities deriving from distress later in the year. “On one hand, as a result of the current high interest rate environment, during this investment cycle there will be opportunities to acquire properties at attractive valuations,” EPC’s Conesa explained. “On the other, if we sell properties once interest rates lower (as it is expected), we will be able to capture relevant capital appreciation.”

5. Prudent leverage and a diversified portfolio offer some protection in today’s economic climate – EPC executives explained their playbook for acquiring properties with moderate leverage (65% LTV) as both an offensive and defensive strategy that has worked through multiple cycles. “In the face of recession, there is intrinsic protection of owning a low-leverage investment in a high-growth market where we have consistently managed to generate value year after year,” said Conesa.

About Eagle Property Capital Investments
Eagle Property Capital Investments is a vertically integrated real estate investment manager pursuing value-add investment strategies through the acquisition, reposition, and management of multifamily apartment properties in Florida and Texas. Since 2011, EPC and its affiliates have acquired 39 multifamily residential properties containing over 9,300 apartment units. To learn more about EPC, visit