'Timing Is Everything' For ECI Group As It Prepares To Target Sun Belt Multifamily

Betting the moment is right amid a national fall-off in multifamily construction starts, ECI Group plans to grow its presence in Texas and the southeast U.S. substantially following an influx of capital and the formation of a new debt platform.

The Atlanta-based development, construction, investment, and property management group announced last month that it had teamed up with Almanac Realty Investors to invest in Sun Belt apartments as the market recovers from oversupply and declines in performance related to interest rate bounces.

Almanac committed $350M in capital to help fuel that expansion a week after ECI announced the launch of a $250M private lending platform through Smith Hill Capital and InterVest. 

Together, the Almanac investment and the lending platform are expected to generate more than $3B in financing growth and investment in the next three to five years. 

“Timing is everything in the real estate business, and we feel like, particularly on the acquisition side, it's been one of the better fundamental times to buy in a while,” ECI Group Chief Acquisitions Officer Scott Levitt said to Bisnow.

“There's a lot of stress in the market, either performance stress or capital stack stress, and we're hoping that that's going to … create buying opportunities for us.” 

ECI is looking to acquire existing multifamily communities built in the 1990s or later, but Levitt said the company also has an active development group. The company currently has a portfolio of 7,600 units among 28 properties throughout the Sun Belt.

ECI has four properties currently being constructed, with a fifth that is finished and stabilizing, Levitt said. 

“It's a more challenging time for development because of where rents and costs are,” Levitt said. “Return on costs are low. Cyclically, it's a better time to purchase because you can buy [below] replacement costs in many instances.”

The common theme among the larger markets in Texas and the southeast that the company is targeting is that most of them are oversupplied, Levitt said. Because of that, ECI is looking for strong rent growth from the properties it acquires once new construction dries up. 

“It's real clear that supply is rapidly falling off – new deliveries and new starts … are really way down,” Levitt said. “They're down in ’25 but they're way down in ’26, so we feel like ’26 and ’27 should be real good performance years from an occupancy and rent growth perspective.”

The company is working to determine which markets have the best chance of delivering that rent growth, though Levitt noted it often comes down to supply and demand in specific submarkets.

“We see the opportunity for a fully integrated, experienced company like ours to invest in markets with substantial shortages of market-rate apartments of all types," ECI CEO Seth Greenberg said in a statement.

ECI won’t be alone in its pursuit of multifamily properties. CoStar reported AvalonBay Communities, Mid-America Apartment Communities and Thompson Thrift are expected to grow their portfolios this year following calls for capital and other commitments of more than $1.7B.

While not targeting affordable housing that requires tax credits or government subsidies, ECI does intend to acquire some properties that are within the cost range of the budget-minded consumer.

“We're targeting mid-’90s or newer product — all the way to new deals that are in lease-up,” Levitt said. “So it really runs a wide range of rent [but] some of it is going to be more affordable than others.”

The company is anticipating buying four to six properties over the next year before ramping up acquisitions in year two once it has worked through the logistics of working with Almanac. Levitt said ECI could nearly double its acquisitions in its second year.

“The Almanac deal is for three things,” Levitt said. “It's for platform expansion, it's for increasing our acquisition activity and increasing our development activity.”

Almanac is a division of Neuberger Berman that is looking to provide growth capital for public and private real estate companies.

“ECI is a deep and sophisticated platform with significant operating and investment capabilities,” Almanac Managing Director David Haltiner said in a statement.

While ECI hasn’t devised an exit plan from the acquisitions its planning, Levitt said the company could be open to a multitude of options. 

“If at the time that we're looking to exit these deals, a portfolio execution will create the most value then that's something we would certainly consider,” he said. “We could also sell them off in individual assets or in smaller groupings. A lot will depend upon the markets at the time.”

The equity influx from Almanac comes at a time when more investors have returned to real estate-focused debt markets thanks to declining interest rates. 

Real estate investment trusts have already outpaced the year-end totals from 2022 and 2023 with the nearly $65B they have raised through the end of September of this year, according to trade group Nareit. CoStar said its analysts see that increase in activity as evidence that investors are once again favoring debt offerings. 

ECI's private lending platform with Smith Hill and Intervest will offer first mortgages, mezzanine loans and preferred equity investments for existing multifamily owners that are looking to refinance or fund construction or acquisitions. Loans from the platform are likely to range from $15M to $100M. 

With the growing demand for development capital and refinancing, InterVest’s focus will be on structuring tailored debt and equity solutions, according to company Senior Vice President Rob Rothschild.

Smith Hill Managing Principal Brendan McCormick said the firm is enthusiastic about working with ECI and InterVest. 

“We believe that there is a large opportunity to serve as a capital solutions provider in the multifamily space and look forward to leveraging the collective expertise of our platform to provide innovative financing solutions,” McCormick said in a statement.