Andres Gonzalez has a knack for finding untapped niches in the US real estate market and turning them into steady returns for his investors. This talent, perhaps, stems from having an outside perspective—he grew up in Colombia and built a career as a banker throughout Latin America.
Whatever his secret sauce, it is working: with a portfolio currently valued at nearly half a billion dollars, Ascentis, an investment group and property management company Gonzalez cofounded in 2002, is on track to grow tenfold in the coming six years to $3 billion.
Ascentis, based in Washington, DC, has expanded its holdings far beyond the capital region, and moved into other asset classes as well, stretching from DC to Chicago, Seattle to Houston.
But within the workforce housing niche, Ascentis has pioneered an even more specialized area of real estate: investing in Hispanic neighborhoods.
It happened almost by accident. At first, the team invested in any type of workforce housing that met its investment criteria. But over the years, they noticed an interesting trend. The highest returns were consistently from apartment buildings where Latinos were the primary tenants.
Gonzalez believes the reason is that immigrant communities tend to stick together, creating a sense of community where they live, and becoming stable and responsible tenants. “The most profitable renter is the one who stays the longest,” he says.
Upon realizing this trend, in 2012, the team decided to divest their other multifamily properties and concentrate on learning how to best manage Latino-occupied buildings.
Ascentis often initiates inexpensive renovations and retrofits to improve energy efficiency and reduce water use, both of which save the tenants money and make the building more sustainable and profitable in the long run. The company has recently started installing community gardens, which Gonzalez says is a low-cost amenity that has been extremely well received by tenants. Another popular move was creating storage areas.
“Many of our renters are landscapers, construction workers, roofers, and other types of tradespeople, which means that they have equipment,” Gonzalez says. Tenants would tell him that when they came home from work, they would pull their tools out of their trucks and put them in the middle of the living room. This didn’t sit well with their living partners. “So, by providing storage, we are offering a better environment in which to grow their families.”
Another popular perk that builds community and leads to high tenant retention rates is a program that enables friends and relatives to live in adjacent units. By ensuring a high degree of attentiveness to tenant needs, Ascentis units turn over at a rate of under 26 percent per year, versus an industry average of 54 percent.
“Seeing a low turnover rate is a testament that we’re doing something that our residents are valuing.”
“It’s huge for us financially. Seeing a low turnover rate is a testament that we’re doing something that our residents are valuing,” Gonzalez says. “The biggest hardship for immigrants is leaving our family and friends behind.” It turns out that easing the transition is a good investment in more ways than one.
Forged by Friendship
Like many great start-ups, Ascentis was born out of shared passion between two old friends. After working in the banking industry through the better part of the nineties, Gonzalez decided to pursue his MBA at Virginia’s Darden School of Business, where he took the opportunity to explore an idea that had long intrigued him: how best to invest Latin American capital in North America.
His initial thought was to invest the capital directly in companies here in the United States, rather than simply buying stocks and bonds in the capital markets. But he quickly learned that the high net-worth families and individuals he had gotten to know as a banker were most comfortable with real estate.
To his clients, real estate was a familiar and trustworthy asset. “The idea of owning commercial-grade real estate in the United States was appealing. So real estate it was.”
While Gonzalez was vetting his idea in graduate school, he became reacquainted with Diego Sanint, an old friend and former banking client, which proved fortuitous. Sanint, it turned out, had been mulling over similar ideas. “He had connections and relationships in Latin America, and we paired up and started the company,” Gonzalez says. “Initially he was a cornerstone investor, and he brought in some of his friends. That’s how we got started.”
When they started out more than fourteen years ago, the most important priority for Ascentis’s investors was that the money they entrusted outside the country was kept in a low-risk vehicle. They also liked the idea of receiving recurring dividends throughout the year. The partners found that those priorities were a good fit with low- and middle-income multifamily apartment properties, which became their initial focus and remain a major part of their portfolio today.
“Throughout my career as a banker, I often heard from my clients that they were dissatisfied with the way in which they were investing their hard-earned money outside of the country,” Gonzalez says. “I sought to find a good opportunity to provide them with something better.”
Ascentis Real Estate Partners By the Numbers:
states with Ascentis properties
sq. ft. of industrial warehouse space
sq. ft. of office space
sq. ft. of retail space
or lower resident turnover in 2016 (as opposed to a 54% industry average)