David Zar & North Point Capital’s Story of $66.5M Lakes of Margate Sale

• ➡️ Address: 5750 Lakeside Dr, Margate, FL
• ➡️ Acquisition Price: $50,750,000
• ➡️ Sales Price: $66,500,000
• ➡️ Hold Period: 8 Months!
• ➡️ Buyer: Carroll Organization - Patrick Carroll
• ➡️ Price Per Unit: $237,500
• ➡️ Square Footage: 234,320
• ➡️ Price Per Square Foot: $284

What drew you to buy the Lakes of Margate?

Lakes of Margate was our first deal in Florida, making it the 13th state that North Point operates in. The South Florida market boasted strong market fundamentals and we really liked what was going on there even before everyone flooded into the market during the pandemic. We purchased Margate right before Covid hit from a New York-based firm that we went back and forth with for quite some time. Our purchase price was roughly $108/sqft and this deal had a strong value-add component which made it desirable. We tend to focus on these types of deals that offer significant value-add opportunities that yield outsized returns for our investors and ourselves.

The deal selection process begins with finding a strong partner that checks all of our boxes and is aligned with our business plan and core values. We were able to expand into Florida by partnering with the right sponsor and through our rigorous deal screening process. We receive upwards of 1,200 deals annually at North Point, and we generally close roughly 1% of them. We take a hard look at the market, determine what the demand drivers are, and make sure to do an in-depth market study by thoroughly analyzing comps, neighboring businesses, and growth.

How did you secure financing for the property?

When we were doing this deal, interest rates were very low so there wasn’t too much of an issue securing financing on deals. The climate has changed after rates rapidly spiked so we have refocused our efforts on finding deals with fixed financing or where we can assume loans from existing owners. For example, we are under contract for another property in Illinois that has a 30-year fixed loan with 27 years until it’s due. Finding opportunities with attractive fixed-rate debt lower than the prevailing market rate is a great way to make deals work given the current climate.

Why did you decide to sell?

We were planning on holding this property for roughly 3-7 years before we got an unsolicited offer for $66.5M from The Carroll Group just 8 months after acquiring the asset for $50.75M. Based on this offer, we hit our year four projections after 8 months, which is incredible. We were opportunistic and decided to sell the deal which was for great our investors and ourselves. Deals like this don’t come around too often but when market conditions provide significant tailwinds and the timing is right, you can find these grand slam deals throughout your career.

What are North Point’s investment criteria?

As I mentioned earlier, we form strategic partnerships with strong regional sponsors that have been thoroughly analyzed and have a significant stake in the deal. North Point provides solution capital across the capital stack and reviews opportunities through our rigorous due diligence process and detailed underwriting criteria. We aim to achieve the highest return possible while tactically balancing risk, primarily by focusing on value-add assets, and an overall diversified pool of current income-producing properties that have potential upside. Asset types include but are not limited to multi-family (value-add, core-plus), student housing, single-family rentals, and built-to-rent across the United States. Our hold period tends to be 3–7 years and target returns are reviewed on a deal-by-deal basis.

What are some of the strategies you used to increase the property value?

Our deals typically have a value-added component and we aim to deploy roughly $8,000 to $12,000 per unit on renovations. This CapEx mainly consists of replacing floors, cabinets, countertops, and appliances, painting, along adding washers & dryers to the units. We also typically add a facelift to the bathrooms to make. We also try to do things that are outside the box such as snacks for kids after school or providing them with backpacks and school supplies at the beginning of the school year. These are low-cost ways to enhance the tenants' overall experience at the property and reduce turnover.

How did you begin your real estate career?

I didn’t know much about real estate when I first started. My father bought a 60% occupied shopping center in Massachusetts and I took over the property management myself. I knew nothing about managing a shopping center but I went to ICSC and got a list of all the big tenants in America. I went on LinkedIn and cold messaged brokers that handled those tenants and started building good relationships. I was very honest with them about the situation and we got the center 100% leased.

I really enjoyed that deal and the real estate industry so I ended up partnering with childhood friends of mine from The Hakimian Organization, and 7 years ago started North Point Capital and its been a great journey so far. It’s an honest group of people and I can trust them which is important in all relationships in life. If they tell me something I know that it’s truly from the heart and it's important to surround yourself by honest people with high integrity. Obviously, you have growing pains, and being an entrepreneur is never as bright and glamroius as it seems, but it’s rewarding nonetheless.

What advice would you give a CRE pro starting in the industry?

In my personal opinion, I think real estate is an incredible place to be an entrepreneur. If I were to go back to the beginning of my career I would’ve taken more chances starting out. The early stages are when you can make more mistakes and learn from them. I think everything is meant to be, even if something goes catastrophically wrong and you think it’s the end, hopefully something good will come out of it. I’ve personally done deals that got to third base but suddenly fell apart, and despite being down on myself those same deals sometimes came back and I made three times more than I thought I would originally. You need to work hard, have faith, and be honest. Be the best person that you truly can be. Once you have that reputation, deals and relationships will come to you.

Also, don’t be shy because you never know who you might meet. Everywhere I go I’m talking to people and trying to make a connection no matter who they are or what they look like. Never judge a book by its cover because they could potentially be investors in your next deal. At the end of the day, your success can largely be attributed to who you know, so maintain your relationships and keep a strong reputation. Be a bull, be a bear - but don’t be a pig.

Traded Student Ambassador Program

This interview was conducted through Traded's Student Ambassador Program in collaboration with Thomas DeRuvo of Rutgers University.

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