Elliott Sud is the President of The Sud Group, a private real estate development firm founded by his father over 65 years ago. Elliott has been active in sourcing and investing in new real estate development opportunities and joint ventures in Phoenix, Arizona and across the United States and Canada for over the past 35 years.
Fundscraper is pleased to welcome The Sud Group’s latest US offering Thunderbird, based in the Glendale neighbourhood of Phoenix, Arizona, on Fundscraper’s platform. Elliot sat down with Fundscraper’s Gregory Colford to chat about the Sud Group’s latest offering.
Gregory: Elliot, welcome to Fundscraper! We’ve worked together in the past on US deals. Tell us – what makes Thunderbird special?
Elliot: Before we talk about the project, let’s chat about the asset class and then location. With those two pieces in mind, you’ll have a better idea of why we at Sud Group think this project really works.
Gregory: Terrific. We’re talking “multi-family” then – a great space in the Canadian market. What do you see?
Elliot: Although 2020 was a challenging year for real estate investors, multifamily investing was in large part resilient in the pandemic. Multifamily assets that aren’t over-leveraged and have a strong and engaged tenant base fared well throughout 2020 despite the significant economic headwinds brought on by the pandemic.
Gregory: What are you seeing in the US that backs that up?
Elliot: Number one – During this COVID-19 period, Phoenix has become the number one growth market in the US for appreciated home prices. The population of Phoenix today has grown rapidly to over 5.5 million and is now approaching to be the fourth largest city in the United States. In North America there are only two cities that have a net migration of over 100,000 people per year . Those cities are Toronto and Phoenix.
Gregory: That’s good news, but we thought there was a lot of resistance right now.
Elliot: You’re right, but market studies are telling us that while major markets faced a net negative absorption amid pandemic during our last quarter, leasing activity remained resilient in the Phoenix apartment market. Phoenix remains one of the top markets in the country for rent growth.
Gregory: I see the argument for the asset class. Tell us more about why The Sud Group likes Phoenix.
Elliot: Once we settle on the asset class, where’s the best place for it? That’s the next exercise we engage. COVID-19 certainly forced many to rethink where they live for a few reasons: space, cost of living, and the ability to work remotely. Major employers such as Microsoft, Shopify, and Facebook encouraged remote work with new policies. Accordingly, we saw an increased interest in suburban and small-town settings. Although increasing vacancy rates and drops in rental prices in metros proved to be challenging for some landlords, it also presented opportunities for many multifamily investors in secondary and tertiary markets.
Gregory: And Phoenix?
Elliot: Phoenix hits all the right buttons. During this COVID-19 period, Phoenix has become the number one growth market in the US for appreciated home prices. Phoenix posted the lowest unemployment rate out of the 15 largest US metros again last September, the second straight month Phoenix led the country.
Source: CBRE Market Insider: Phoenix
Gregory: Unemployment is a key indicator of the health of the housing market. Moody’s published a report last year noting that there is a strong correlation in the Canadian market.
Elliot: Well, if you like that, Phoenix had the lowest recorded net job loss since the onset of the pandemic, says CBRE. But there are lots of other factors. Attractive affordability, a “pro-growth”/”pro-business” state, an undersupplied housing market, and an economic downturn NOT driven by a lack of liquidity and financial distress – this ain’t 2008!
Gregory: So, you’re bullish on Phoenix?! (grin)
Elliot: [laughing] We are.
Gregory: So, tell us a bit about the Thunderbird project.
Elliot: In a nutshell, it’s a ground-up development of 266 residential rental units spread over a 15-acre campus. The construction financing loan amount is $48M with a construction finance loan to cost ratio of 76%. It is approximately a four-year commitment for investors, but we hope to reward those investors with a projected annual rate of return of around 20%.
Gregory: Your enthusiasm is infectious (maybe a bad word to use in these days of COVID!). So this project is really for sophisticated investors who have some background in private real estate development in the US markets.
Elliot: And for investors who can be patient for approximately four years to recover what we anticipate to be a nice projected return. This is a relatively long term investment. If an investor needs their investment dollars in the short term, this is not the right project for them.
Gregory: Elliot, we’re happy to host Thunderbird on our platform. For folks who want to learn more about the project, they are welcome to sign up on the platform and learn more. As we always caution our investors, though you may qualify to buy, let us help you figure out if it is the right investment for you. Thank you Elliot for your time!
The Village at Thunderbird Renderings