High Point Holdings Real Estate Firm Banks on Record

HighPoint Holdings is proving just because you’re a boutique firm doesn’t mean you have to be dainty in your approach.

The private real estate equity firm has bought up half a billion dollars in top-tier apartment properties since forming in 2002. More than $175 million in properties in Georgia, South Carolina, Virginia and Texas using $40 million in equity have been purchased since May 2010.

HighPoint Holdings is scheduled to close on $65 million in new deals by the end of October.

The company now has more than $300 million in assets under management, consisting of more than 3,000 units in five states.

Those numbers are anything but dainty, and yet, HighPoint has managed to do those deals while staying under the radar. Operating from its offices tucked away near Greystone off U.S. 280, chief executive and HighPoint founder Jeff Brooks said word-of-mouth and a track record have been all the publicity the firm has needed to add new business and investors.

“There was an evolution of how we got here today,” Brooks said. “We don’t just do a deal to do a deal.”

Brooks said HighPoint is a boutique real estate equity firm in that it focuses only on high-end, elite apartment properties in emerging markets. It relies on research and information from Atlanta’s JMG Realty, one of the region’s leading apartment development companies.

Brooks’ history with JMG predates HighPoint. He worked with the company after it formed in 1989 while he was with Birmingham’s Metropolitan Properties and fostered that relationship after he went out on his own. He maintains it with HighPoint.

Russ Taylor, president of HighPoint, said HighPoint is able to combine JMG’s analysis of markets and properties with its own team’s expertise to find the best properties to buy in markets that are about to become hot growth spots. But because HighPoint is small and nimble, it can get into those markets before the larger apartment companies and real estate investment trusts catch on and show up, Taylor said.

“We try to capture all of the up side without taking on much of the down side,” Taylor said.

But Taylor said the firm is very selective.

“We have probably looked at JMG’s data on 1,700 deals only to do around half a dozen of them,” he said.

Part of what makes HighPoint able to be so selective and act so quickly is its list of high-net-worth private investors. Now at 150 and growing, those investors have built up a trust in HighPoint based on the returns and successes of the firm.

Taylor said around 20 to 30 percent if its investments come from those individual investors. The remainder comes from institutional investors. Even in today’s environment HighPoint’s track record has allowed it to keep money flowing from institutional investors on new deals.

In fact, some of those banks and financial institutions have come to HighPoint to buy financially distressed properties from owners. In the cases where those properties and markets met HighPoint’s criteria, they acted on those deals.

But Brooks said the highs and lows require discipline. After nearly three decades in the business, he has seen the good and bad times and knows the importance of keeping an even keel.

“If you sell your soul to the cycle and you’re not prepared for the next one, you’re on your way to going out of business,” Brooks said. The length of the current cycle, however, has kept a lot of money out of play. More and more high-net-worth investors are itching to put their money into something that has a rate of return and HighPoint has had investors and others steer them their way.

HighPoint’s discipline was tested during the real-estate boom that peaked in 2006 and 2007. When money was flowing into real estate deals and the condominium boom was taking place along the beaches and other markets, Brooks wondered if they were missing out.

“We felt like the kid looking through the window with our face pressed to the glass watching the party going on inside,” he said. The real estate bust, however, ended the party for many and left distressed properties, some of which are now among HighPoint’s investments – at a deep discount.

Taylor said the business is all about buying the best properties without overpaying for them and following cycles and trends.

“We don’t dictate time frames, we just have to abide by them,” he said.

Much of what HighPoint applies to its apartment investing coupled with its relationships with its investors led to the company’s latest venture, HighPoint Energy.

Pat Sullivan, director of finance and administration for HighPoint, said HighPoint uses similar criteria – looking for emerging markets, capitalizing on trends and partnering with proven investors – in making its energy investments as it does its apartment buys.

“We closed on our first investment in March with two other partners,” Sullivan said. “One of those partners was KKR.”

New York investment giant Kohlberg Kravis Roberts & Co. has made investments in the Eagle Ford Shel in Southeast Texas and HighPoint Energy is part of the 77,000 acre investment.

Brooks said private investors that are putting their money in HighPoint Energy and not speculators, but investors expecting the same prudence and returns they have come to expect from the apartment side.

“We’re not out there picking holes in the ground like Jed Clampett,” Brooks said. “It’s much more reasoned and deliberate.”

Brooks anticipates that will be a growing segment of HighPoint’s portfolio.

“We are actively looking at other opportunities in the energy sector,” he said.

But Sullivan said the real growth is expected on the apartment side of HighPoint’s investments. The lack of building in single-family homes and new apartments coupled with the growth of people opting or being forced into renting apartments is creating a huge demand and decreased supply.

“Our partners are starting to see 7-8 percent rent growth after years of rents being flat,” he said.