Mission: Success—Elie Rieder, Castle Lanterra Properties
How the executive developed his value-add strategy and built the investment firm from the ground up.
Elie Rieder founded his Suffern, N.Y.-based real estate investment company in 2009, but he has been in the business his entire life. “I grew up seeing blueprints on the dinner table and hearing about the various ways of stressing a deal,” the Castle Lanterra Properties CEO recalled of his upbringing on Manhattan’s Upper West Side.
“My father was able to look at dirt and see a built building,” Rieder said. “He figured out very quickly — when he looked at an opportunity — what he could create and how he would create it. He always pushed me to approach things on my own. He would give me a fresh white piece of paper and ask: ‘How would you handle this? What do you see as the potential here?’”
Rieder’s grandfather was a Holocaust survivor who emigrated to the U.S. in the mid-1940s and built a multifamily portfolio as a developer of middle-income rental buildings. “My grandfather had a profound influence on me,” Rieder said. “What I learned from him was an appreciation for long-term vision and controlled growth and an annuity-quality strategy in business.”
In order to ensure that the rental income on his properties would provide for his family for generations, Rieder’s grandfather insisted that the architectural plans for his projects include high-quality materials and carefully chosen labor. “I learned from his meticulous attention to detail that sometimes the shortcut winds up becoming a much longer route and not the best choice after all,” Rieder explained.
Rieder’s father opted to go out on his own rather than become part of his father’s empire. He bought apartments and reimagined them from the ground up with a hardcore gut renovation strategy that elevated assets in the marketplace.
“My father built a very big business as a developer from the bottom up,” Rieder said. “I’ve done the same, leveraging the lessons I learned and the reputation of the family. My father used to say that to make money is hard but to lose money is very easy. If a deal makes sense, it naturally would make money. What I tried to do when I started, at age 18, was to combine the creativity of my father and the discipline of my grandfather with a value-add strategy.”
That formula for success has been working for Rieder. During the past two decades, he has been directly involved in the acquisition of more than 20 multifamily assets and has invested across multiple real estate sectors. He is an equity partner in the portfolio of Fieldstone Properties, the family-owned entity that owns and manages a substantial portfolio of multifamily properties with no outside partners, and in Lanterra Developments, a developer of more than 10,000 luxury condominium units in Toronto. Additionally, he is the manager of several insurance company funds with more than $400 million of assets under management and has invested in multiple high-yielding real estate investments through these vehicles.
CLP, Rieder’s privately held real estate investment company, focuses on the acquisition and management of quality income-producing multifamily properties in strategic growth markets throughout the United States. “Over the course of my career, I have acquired in excess of 15,000 units,” he said. “Under the CLP platform, we currently own and manage 7,000 units across 20 properties with a value in excess of $1.5 billion. Additionally, we have three properties currently under contract, which will add another 700 units to our portfolio.”
Through a rigorous value-enhancement program that includes thoughtful renovations, operational improvements and ancillary-income development, CLP aims to reposition each asset with the goal of maximizing its NOI, raising its competitive position in the market and generating attractive risk-adjusted returns for investment partners.
“As an operator, Elie faces all challenges head-on and takes his fiduciary responsibility very seriously,” said Outerstuff LLC CEO Sol Werdiger, who has invested with Rieder. “He takes great pride in elevating the standard of living at all of his properties through capital improvements. He is one of the most results-driven people I know and that trickles down to all of his team members.
“I know that Elie is just a phone call away. That personalized touch sets him apart from other sponsors. Elie’s transactional style is rooted in tradition, but his investment/management approach is very forward-looking. He embraces technology and tries to incorporate it to every facet of real estate investment and management.”
Technology is a smart investment
CLP has tried to be on the forefront of multifamily technology, installing smart home features at the property level, such as package lockers that text the resident when they have a delivery and allow pick up 24/7. Smart lighting and HVAC control systems also improve the quality of life for residents.
“Within apartment homes, CLP has been installing smart locks, thermostats and light switches at select properties where you can control all of these features with your iPhone or even, at times, using voice-activated systems or devices like Amazon ECHO or Google Home,” Rieder said.
Smart locks allow residents to give one-time key codes to people that they would like to have temporary access to their apartments — like the dog walker or housekeeper. They also provide the owner with a record of who has access to the units. Smart controls and monitors for heating, air-conditioning and lighting help residents save money on utilities.
“Elie totally familiarizes himself with each project, so he understands what needs to be done to realize full value after he acquires it,” said Steven Goldman, a partner at Kramer & Levin. “He knows what upgrades and amenities are going to be particularly attractive in a given market and makes value determinations that are based on a [view of] what the market is likely to look like one, two, three, four and five years out.”
In fact, some years CLP does no deals. “We’re in no rush to deploy capital. We are disciplined and measured,” Rieder explained. “Some years we’ll do one deal and others we’ll do 10. We are very confident in our due diligence, so when we come up with a number to make an offer, we are comfortable putting our wallet where our mouth is.”
Goldman concurred on Rieder’s discipline as well as his tenacity and understanding of fair value: “Sometimes people who want to pay more than fair value are successful. He has the discipline to not chase it.”
To ensure alignment of interests with partners, CLP invests meaningful money in every deal. “I’m not afraid of risk,” Rieder added. “We just want to understand it. I say that in the investment community a lot.”
Attention to detail is also key. Rieder prides himself on his ability to look at a deal from multiple angles and to debate a case. “When negotiating, I’ve learned to be very careful not to say something unless I mean it, and generally to under-promise and overperform when dealing with people. In contracts of any sort, or any written communication, words are very important and need to be thought about,” he said.
In fact, Rieder considered a legal career at one point. But real estate always resonated with him because appreciation happens when you sleep. “A good, well-located asset usually becomes more valuable over time,” he said. “After I looked into office, industrial and retail, I was excited about multifamily because people always need a roof over their heads. And in the middle class, workforce housing — which is what we focus on — is somewhat recession proof.”
During the last few years, CLP has expanded its focus to include Millennial-oriented opportunities. Still, from Rieder’s perspective, the case for investing in workforce housing — for teachers, firemen, bus drivers, ambulance drivers and others who serve the community — remains. Most of these people are renting by necessity rather than by choice since the new construction that’s being built is not typically affordable to this group. In fact, 80 percent of the new units coming online in the larger metropolitan areas are aimed at the luxury market, as reported by Costar Group. Rieder notes that those developers can’t justify the cost of construction, labor and material without demanding a lot of rent, thereby shutting out the workforce.
“According to the Harvard Joint Center for Housing Studies, there are over 43 million people renting in the U.S. and nearly half of those are paying more than 30 percent of their income towards housing costs, so I would categorize them as cost-burdened,” Rieder said. “The need for workforce housing is greater than ever. These renters are people I care a lot about and I think we all do.”
Images courtesy of Castle Lanterra
You’ll find more on Rieder in the November 2018 issue of MHN.