Ground Up Development In Florida Submarkets, With Ray Mazzie

Ground up development, particularly in popular markets like those in Florida, offers significant return opportunities for investors. Choosing the right plots of land, and right submarkets is still critical.

Ray Mazzie, Co-Founder and Managing Director at Southern Waters Capital, joins the show to discuss what a successful land acquisition and multifamily development strategy entails.

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Episode Highlights

  • The step-by-step process Southern Waters Capital uses to identify, acquire, and develop multifamily housing on available land.
  • The investment thesis for ground up development in Florida, particularly in tertiary markets.
  • How to identify sub markets that present unique growth opportunities with undeveloped land.
  • What factors make a piece of land not optimal for ground up development.
  • How rising interest rates and economic uncertainty are impacting ground up development projects and strategy.

Featured On This Episode

Today’s Guest: Ray Mazzie, Southern Waters Capital

About The Multifamily Investor Podcast

The Multifamily Investor Podcast covers trends and opportunities in the multifamily real estate universe. Host Scott Hawksworth discusses passive investment offerings in the space, including direct investments, DSTs, opportunity zones, REITs, and more.

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Show Transcript

Scott: Hello and welcome to the “Multifamily Investor Podcast.” I’m your host, Scott Hawksworth. And today we’re going to be talking once again about ground-up development. We’re also going to be talking about Florida, which is such a huge market when it comes to multifamily real estate and multifamily development.

And joining me on the show to offer his insights and perspective is Ray Mazzie, and he is the co-founder and managing director at Southern Waters Capital. Ray, welcome to the show.

Ray: Thank you very much, Scott. It’s good to be here, and I appreciate it.

Scott: Thank you for being here. A lot to cover when we’re talking about multifamily and certainly in Florida multifamily and ground-up development. But to kick things off, to really frame the discussion, you know, you really oversee a lot of ground-up development at Southern Waters Capital.

That’s part of your strategy. What’s your thesis for ground-up multifamily development as opposed to maybe value add?

Ray: Yeah, Well, first off, the reason I don’t do value add or any type of acquisition in the beginning is because I really don’t have those types of skills where I can walk through a property and, kind of, get a line item budget for my walkthrough if you will and, you know, figure out how to fix somebody else’s broken toy or to restore somebody else’s, you know, vintage asset, however, you want to describe it.

So, for me, I knew that I understood price and I understood good locations, and those are the two things that we run our entire business on when it comes to the real estate development side. That is pretty much it. It sounds crazy simple and it’s supposed to be, but it’s extremely difficult. So those two things, price and location, can never be changed.

You know, once you transact, you transact. You’re there, you’re not moving your dirt, and as you know, your prices are going to change. You can try and increase your density or decrease your basis with sales of something, but what you bought, and where you bought it, and how much it costs isn’t going to change. So that’s really important to us. And, really, you know, for us, ground-up development just made more sense because I knew I could see value and I could tap that value a lot easier than other people could because, I mean, I’m technically an attorney by education.

I’ve been working in the state both for the governor here as a real estate attorney, as a tax advisor in that capacity as well, and just, kind of, had already made my way around the real estate world in regard to my personal network. So really quickly, I knew I could originate deals, I could find good locations, and then from there, you know, it’s not hard to negotiate a good contract when you went to school for it and when you’ve practiced doing it.

So with that, we knew with a small amount of money, to be quite frank with you, we could tie up a lot of land. It’s essentially free-leverage. A contract, a down payment. You know, I like to put down $25 grand, I get a $2.5 million property. That’s an insane amount of leverage. And, you know, so that’s kind of how I look at it and I was able to take that and then use that leverage to my advantage to the entitlement process and all that kind of fun stuff.

And so here we are today, and essentially the short thesis was like I said, we could identify the good spots, we knew we could tap the value, and then from there it’s just playing quarterback and bringing a good team together.

Scott: Right, and I guess from your perspective, you said, you know, you’re less familiar with, you know, being able to walk through a property and, kind of, identify, you know, potential issues and things there. So you’re saying we started from the land, and that’s really what we know. And I…

Go ahead.

Ray: No, sorry to cut you up. I was just going to… You just reminded me, like, I can read a future land use map a lot better than I can do a walkthrough or a punch list. When I look at a corner lot, I can tell if it should be a Wawa, or a multifamily, or an assisted living facility, or a storage facility. And it’s really almost an inherent… You could probably do it pretty much just as well as I can.

You could kind of tell what fits in a infill location. It might be a little bit different if we’re on the tertiary of growth and looking for all that kind of stuff but, like, if it’s an infill location, you know, it’s pretty apparent what probably would work best there. And then you could tell pretty easily too, after kind of just taking a little bit more time to pay attention when you drive around, you know, what does a good ingress and egress look like? Like, what does a bad or good traffic situation look like?

It’s not hard to find where the utilities go. You literally call the county, you know? So all these things are, like, very attainable type of identifiers. And basically, we could tell very clearly what could fit in a particular site or on a particular site.

Scott: In a way, is there more freedom that just allows you to, you know, face those returns and that growth?

Ray: Yeah, but I’m not buying cashflow. So, you know, everybody forgets…you know, everybody says a lot of the time, “You know, developers, they’re greedy, they get paid so much,” blah, blah, blah. It’s like, you know, you tell me the last time you just poured a million plus dollars into something and you don’t know if you’re going to get any cash flow out of it.

Scott: Right, you didn’t have the cash flow guarantee at all.

Ray: Yeah, and it’s five random people who get to decide whether or not you get your zoning and they’re influenced by God knows what. So, I mean, it’s the most risky situation ever. And honestly, I’ve become very comfortable with it. To me, it doesn’t feel risky at all at this point. It’s a lot of capital to get to that point, and it’s a lot, especially when there’s not any capital coming back in.

So it’s different to add CapEx to a cash-flowing asset. It’s a little bit different to add CapEx to a spec build asset. So that’s why, you know, we get what we get.

Scott: Right, and I think that’s one of the things that passive investors are considering. You know, there’s so many opportunities out there in multifamily, you have these great value add projects, but then you have these ground-up development projects where, yeah, there’s a little more risk. You don’t have existing cash flow. You know, the building’s not built just yet. But then it depends on, you know, what their goals are.

And what you’re saying is you’re quite comfortable with that risk, right?

Ray: Most definitely. That’s where all my money is made. That’s where I create all the value. That’s where I deserve to be paid. Honestly, past that, I think a lot of people can do my job. But what’s really interesting is, you know, it’s very nuanced, the word entitlement. It’s thrown around.

You know, whenever somebody’s like, “Yeah, it’s fully entitled.” I’m like, “What do you mean by entitled? I mean, are we talking about you have your land use, you have your zoning? Do you have your annexation? Do you have your utilities approved? You know, do you have your site plan approved? Do you have your building permits?” You know, there’s a lot that goes into… Full entitlement means to me I buy it and I can put a shovel in the ground. And if that’s not what can happen, like, if I still have to go file a construction permit or anything, it’s not fully entitled.

So really it’s just interesting out there how that word gets tossed around. And in regard to risk, really, for me, I think the biggest risk, in my opinion, is making sure that I’m right on the market. And once I convince myself of the market, the rest, I’m not going to say it takes care of itself, but the rest is pretty clear to me.

So once I can convince myself… Like, for instance, I got to love the Ocala market. Once I was able to bet on Ocala because of the fundamental things I saw in it, I was like, “Okay, now I know what a good location’s going to look like.” And once you’re past the market risk, now you’re just saying, “All right, what’s my entitlement risk here? What’s my future land?” So for a guy like me, if I’m in the right future land use, I’m not even scared.

I literally just got something approved that got pushed back from over 50 people at P&Z, was denied at P&Z, and then got a 50 approval at City Commission because I knew I’m in this future land use. Literally, the city told me as a developer, “Hey, developer, here’s where we want urban density within our city limits right next to our utility hookups. Like, this is what we want.”

So for me, if I see future land use, I’m bullish as can be. And then after that, once I get past my zoning, I’m like, I’m not really nervous at all.

Scott: Right, that’s fulfilling, hopefully.

Ray: I’m nervous that it’s closing. Yeah, no, exactly. Like, the only thing I get nervous about after that is, you know, hyper-technical things. So it’s a super interesting process, but it’s funny, you make all these incremental moves the entire time and it feels like you’re not going anywhere, but then all of a sudden you look back, and be like, “Oh, wow, we have gotten a lot accomplished.”

So it’s kind of how I see it.

Scott: Yeah, I mean, I think that’s such an interesting process. And you were kind of alluding to some of it, but could you walk us through maybe a typical process? I know obviously, there’s always wrinkles. But in terms of when you’re identifying, you know, your market, your land, and you’re going through this development process, you start with unentitled land sometimes, you know, what…

Ray: Most times.

Scott: If you could walk us through that.

Ray: Yeah, we prefer unentitled land. It’s where I get my best value. So for me, first off, we all know how to do a market analysis, right? If the rents are there, if the economic diversity is there, if the economic growth is there, if you have a lack of supply, a lack of newly delivered units, but you have high growth in population and that population has the proper demographic, all that fun stuff.

Scott: That’s just checking boxes.

Ray: Yeah, “Check, check, check, check, check. All right, good. I like the market.” And then from there, I go, “Okay, let me look at the future land use map. Okay, now let me look at the current zoning map and let me see where there’s opportunity to rezone something or bring something into what its future designation is.” And then past that, I basically say, “You know, is that site somewhere where I think the path of growth is going? Does it have those local amenities? Like, is it close to the job hub? Is it close to the public? Is it close to the Lennar and VR communities for-sale product that’s going to make sure that my community has, you know, a strong renting demographic?”

You know, you could see, if the homes are really expensive around there, you’re probably going to be able to get some better rent and have a higher-quality tenant, all that kind of fun stuff. So it basically goes from market analysis, land use analysis, that gives me kind of like my areas, and then I kind of put the overlay of where’s the growth, where’s the local amenities, where’s all that fun stuff.

And then I, kind of, look at it, triangulate the data, and I’m like, “Okay, I see a little…” And then honestly, it sounds crazy. Then I get on Google Maps and I’m like, “All right, let me go down the major thoroughfares and see where there’s great opportunity.”

Scott: You’re literally like doing okay, high level, then just kind of let’s bring it in.

Ray: Yeah, that’s it. And that’s it. And then once you get to the actual site, you’re like, all right, now is there a flood zone? Are there any environmental issues? Where’s my utilities? You know what I mean? All that kind of fun stuff.

And what’s the concurrency and capacity on those? And so it goes from very, very macro on the market level to very, very micro on the entitlement and actual viability of the site from a utility standpoint and all that kind of traffic, environmental, all that kind of fun stuff, so it’s…

Scott: As part of this process…are you, kind of, looking at areas where, oh, this could be a problem for us? You know, when you mentioned, like, environmental or I know this particular municipality, you know, has some wrinkles that are more challenging, is it that, kind of, sort of, granular you’re going for?

Ray: I try not to pick on a municipality for any particular reason, say I wouldn’t do business there because of this, that, or the other thing. Although I will make one comment, if there’s rent control, you will never find me and you’ll never find my company. But putting that aside, that’s a fair warning to everybody out there who runs the city or county, don’t think about it. And then past that, really what I care most about is those fundamental market drivers that I was talking about.

I mean, when it comes to entitlement and big things that I’m looking for, after I decide I like the location, the biggest issues are more so actual buildable acreage, actual utility capacity, and concurrency. What’s my traffic situation? What’s my environmental situation from an endangered species, protected species, both animal and tree? That kind of stuff, that’s what worries me the most.

That’s what keeps me up at night because once I figure those things out, I go and talk to the leaders in the area and the neighbors, and I ask them, “Hey, I’m thinking about putting this parcel on your contract. What do you think?” And if they tell me right away, like, “Listen, that’s a terrible idea.” I’m like, “All right, tell me why.” And if they tell me why, and it’s something I kind of believe, I’m like, “Okay, well, see you later.”

I just don’t walk uphill. And that’s why I have such great success in the entitlement process. It’s because I just don’t pick spots where it either doesn’t make sense legally or doesn’t make sense for some other, you know, political reason or whatever. Just stay away from it. And if you work hard and look in tertiary markets like we do in secondary markets where you get great relative value and strong entry basis, all that kind of stuff, then you’re going to be all right.

Scott: Yeah, so I guess that’s a great segue to talking about markets. I teased at the top we were going to talk about Florida, and that’s where you’re located. Let’s start larger. You know, a lot of folks out there, there’s a lot of great markets in different states and even across the Sunbelt, why Florida specifically?

What about Florida is attractive from a multifamily development standpoint?

Ray: Yeah, I mean, first off, you’ll hear the same answer out of me whenever we’re talking about markets. It’s the fundamental drivers of it. We’re certainly a huge benefactor of the migratory patterns that are coming down here. And people talk about migration and everything. Nobody really talks about the people who used to spend 6 months in a day here that now spend 11 months here, so they’re not counted as new residents and stuff like that.

Like, that happened too. So there’s a lot not being measured. There’s not a lot of people who did that in Texas, or there’s some people who did it in Arizona for sure. I don’t think there’s as many people who did in Tennessee. There might be some who did it in North Carolina. But my point is, I think the migration alone is why I want to be in Florida. We can stop right there.

Even if we were at equilibrium of supply and demand, the demand has increased such that I would be bullish on Florida for the next five years. So that’s how I see it from an economic standpoint in regard to supply and demand. And then, past that, I mean, what a great business environment. I mean, I can’t believe I’m hearing stuff out of these cities and counties that are talking about doing any type of rent control around in Florida.

But I bet my bottom dollar if something started to look anything like real, real rent control, not just what I call, like, increased notice requirements but real rent control, DeSantis and his administration would quickly stop that. It’s just something that we don’t stand for here in Florida.

And if I end up being wrong, then, listen, I’m putting my foot in my mouth now and you bet I’m looking in Texas or I’m leaving Florida.

Scott: It’s a good point. I think we had a episode a few months back where I know, and I’m forgetting the name of the county, but where Orlando’s located.

Ray: It’s Orange County.

Scott: There it is. And they were talking about that and there was, you know, some discussion about we should maybe consider this but then…

Ray: And, like, you know, it doesn’t even… The amount of historical data that you can look back on in regard to areas where they put in rent control of what happens afterwards is so clear and so convincing that I don’t think we have to spend the time to convince these places that they shouldn’t be doing this.

It is stupid. I’m not going to spend any time making an intelligent argument. It’s stupid. Just go read what’s already happened. It is so dumb. If you really think that the one time it doesn’t happen, you’re going to be the outlier…

Scott: We’re going to make it work for everybody.

Ray: Yeah, because you’re the smartest county in the history of mankind, and that’s why you’re going to make it happen. So whatever. I mean, it is dumb and it’s not good for our state.

Scott: Well, and I think, you point out correctly that there is going to be a lot of pushback for anything like that resembling, you know, true rent control. And, you know, fortunately, there’s a lot of folks out there. We had a episode that we did even earlier where we talked about rent control in New York City and another law, a good cause eviction bill that they were going to try to pass.

And, again, you look at it and it’s just that if you have a housing shortage, which we do in so many markets across the country, if you have a shortage, you want to incentivize folks like yourself to develop and to add to that housing supply. And if you’re going to be passing rent controls, well, you’re kind of breaking the business case for a developer like yourself, right?

Ray: Yeah, especially in a highly inflationary environment with interest rates rising and labor costs rising and supply chain issues. Like, are you trying to stop building completely? Are you trying to…

Scott: Why would you mess with that? You’d be like, “Nope, I’ll find somewhere else. I’ll go to Texas.”

Ray: I mean, seriously, I mean, we could spend a long time talking about this, but the fact of the matter is, if I see it anywhere, I will not build there. I will not buy there. I will not do anything. Rent control equals deferred maintenance, and poor management, and usually, people who don’t want to stick around for a long time. I mean, nobody wants to…

I’m talking about it from an owner standpoint. You don’t want to own that asset a long time, so you’re building it to a different type of quality. I mean, when you’re not worried about the insurance payments over time and you’re not worried about the maintenance costs over time, you’re building a different type of problem. End of story. So anyway, let’s move on from that terrible, terrible topic.

Scott: Yeah, So bottom line, a lot of great signs for Florida itself. You mentioned you guys focus on, you know, secondary, tertiary markets. Can you speak a bit about maybe some of the specific markets you really like and really your whole strategy there, you know, not just focusing on those primary markets?

Ray: Yeah, so I mean, we like Ocala, Wildwood, Cocoa, St. Cloud, Davenport, Lakeland, essentially, if you draw a line from Cocoa, go all the way west and then draw a line from… I’m in Seminole, so I’ll cut out Gainesville.

But if you go to Ocala and that kind of middle bar, and it’s not the I-4 corner and it’s technically more encompassing than the Florida Golden Triangle if you will. But that swath of the middle of the state, I just find to be extremely… There’s extreme value in there through the secondary and tertiary markets of the Tampa MSA, the Orlando MSA, and then the “newly dubbed”, you know, Golden Triangle here in Florida, which is essentially…

I have to include Gainesville. So, like, Gainesville, to Tampa, to Orlando, and that kind of triangle. So I love all that area. It’s just a place where there’s tons of job diversity, tons of growth, tons of actual migration, and then, again, just a shortage of affordable supply.

Scott: Right, right. And it’s those primary MSAs that are all just, they’re pushing out, you know, slowly but surely.

Ray: I’m not going to overpay for land. I mean, it’s such a bad business model to overpay for land. And people do it all the time. And it works for people who have vertical integration or it works for people who have some type of unique financing or maybe people who just don’t require as high a threshold for returns as I do. But whatever it is, it’s something that we stay away from as best we can.

Especially being such a young firm, we can’t afford to overpay for anything. One mistake can sink your ship, so that’s how we approach it.

Scott: So do you find as part of that process, there’s just lots of, you know, deals where you just simply bow out and you say no…

Ray: Oh, my God, yeah.

Scott: …to more than you say yes to?

Ray: Oh, my God. Yeah, I tell people all the time, like, my average basis, this is going to sound crazy to you, is less than $10,000 a unit because I buy raw, unentitled land. Some of your viewers are going to be, “Ah, he’s lying,” blah, blah, blah. Personally don’t care. It’s what I do. It’s how I make my living. So anyway, I have brokers send me stuff every single day from $45k a door to $20k a door, not fully entitled or whatever it is.

And some MSA that I’m honestly… I have a location much better in it that are already under contract. So, long story short, I was already telling people, “Yo, I’m not paying over $15k a door ever pretty much for unentitled land.” Let me be very clear, for untitled land.

Scott: Right, we’re talking untitled. Yeah.

Ray: Yeah, and then they continue to, yeah, send me stuff that’s semi-entitled or entitled and over that $15k threshold. I’m like, “Guys, you’re literally selling me the parcel that I would’ve created. Stop.” So you know what I mean? So basically the short answer is, yeah, 99% of the stuff I say no to. But the 1,500 units I have under contract, I mean, you know, one, I hired a VA and had him hammer a text message campaign.

The other one came through driving for dollars, driving around looking for a site, and I happened to find something that I actually wasn’t in town for. Another one came through a personal connection through an economic development corporation. And then the last one came through Crexi, believe it or not. I found one parcel, and then I noticed I could buy the four around it. So I was able to get the bases that I want.

So never got a deal directly from a broker yet that’s worked actually.

Scott: Wow, so really just coming from all different kinds of areas there. When you’re looking at parcels, you know, are there specific sizes that you’re like, “This is really attractive. This is my wheelhouse,” or are you really open to…is it all just about price?

Ray: It’s density in product. It’s definitely price and location. So it’s, can I get 125 units of build-to-rent product on that parcel, or can I get 200 units or more for multifamily? So we’ll stick to the multifamily conversation today, but that’s how I look at it. So usually that involves a site.

If it’s urban, it could be an acre. If it’s suburban, it could be 20 acres of low-rise, garden-style surface park, so you’re getting a strong yield. But really, for us, we don’t try and put a square peg in a round hole. We build a product that fits the community and the site best so long as we can reach those thresholds on density and, of course, our investment thresholds or our return thresholds I should say.

Scott: Sure, sure. We were talking a bit earlier about, you know, sort of the macro environment. We’ve got this, you know, runaway inflation that we’ve been dealing with, now, interest rates, you know, going up, all of this. How has this larger economic environment been impacting your deal flow, even, you know, your development, you know, timelines, materials, all of that?

What are some of the impacts you’ve seen and how have you navigated them?

Ray: Yeah, so it’s been wholly beneficial if you… as a whole beneficial, not wholly beneficial. There’s definitely been some detriment to it. But short answers are deal flows increased immensely. Immensely. Timelines have certainly been delayed and profit margins have shrunk. But I always say the good developers will make less, the bad developers will lose money.

We’re still in the first camp and every unit… And, I mean, this is hats off to my team. Every single unit we’ve put under contract back in the rosy times of 6 to 12, 18 months back is still under contract. Still pencils out.

I’m just not getting as fat a margin as I wish I were. But, you know, it is what it is and I’m super excited about what’s happening. In fact, we’re launching a new scattered site strategy to take advantage of all the lots that are being sold and all the finished product that’s being sold. I’m waiting and watching pipelines be brought to me, entire pipelines be brought to me by other land developers who are like, “Hey, you know, we don’t have any dry powder. Can you help us out?”

And honestly, I look at all these pipelines, like thousands and thousands and thousands of units or lots I should say, and 80% to 90% are way, way out of price. Like, way out of price. And maybe it’s not for the big institutions, you know, but for a guy like me, they are so overpriced.

Scott: Overpriced. I was going to ask you so just way completely…

Ray: Yeah, just way over… I’m talking, like, $10,000 to $15,000 a lot more expensive than I’d pay. That’s an insane delta between what I’m looking for and what they’re trying to get out at. And it’s because they’re all under contract from six or seven months ago, and they’re just not going to be able to perform.

And the guys and gals who aren’t going out there and renegotiating their contracts before they come out to market are just making a mistake because, by the time they come to a person like me, I say no so quickly. I’m like, “No, I mean, I’m not even going to waste your time.” Like, I’m like, whoa, $20,000 in today’s market per lot on something that’s not fully entitled and in a tertiary or secondary market, and it’s not well designed either. I’m like, “Why would I waste my money on that?”

So it’s not even my money. Why would I waste my investor’s money on that? So anyway, yeah, deal flow is ticked up. Ninety percent of it’s terrible, 10% of it’s interesting, 2% of it will probably ever close. And what else were we talking about basically? Yeah, some construction delays for sure.

Just waiting for pricing to stabilize. I don’t think it’s going to come down drastically. I think we might just get some stabilization in regard to inflation on the construction costs. And then, you know, interest rates are high right now, obviously, but if you’re in at the right basis, you can support heavy interest rates, just got to be a little bit more creative on the capital stack.

So I’m not saying things are pushing forward at the pace I wish they were, but they’re not slowing down to a pace I’m afraid of. And we’re still closing on all our properties. So our value’s in the dirt, so we’re happy to close on it. And if we got to wait six months or a year, I got to do what I got to do.

Scott: Right. So, yeah, so you’re saying, “Hey, our value’s in the dirt.” And so even , you know, when it comes to underwriting or any of the finance side of things, you guys have levers that you’re confident you can pull and, kind of, keep where you want to be?

Ray: Yeah, exactly. And really it just comes down to taking a haircut. I mean, it’s sad to say and, you know, I hate to admit it, but, yeah, not getting as much as I was contracted for six, eight months ago. You know, I had a contract fall through on me 30 days before closing, but I have such a great basis and such good team.

We went out to market and got it funded in 14 days. So, you know, we’re not worried based on the parcels we put under contract. It’s something where if you have confidence in your project, your system, and your thesis, you should be able to close.

Scott: So I mean, considering that and maybe with an eye of looking forward, where do you see, you know, Florida, a lot of these markets you’re playing in and you have land in, where do you see it all going, maybe the trends? You know, are you going to see continued development? Are you going to see more folks that maybe their finances weren’t so solid and so you’re going to see, you know, some price declines and maybe people asking, you know, those prices that you were just pointing out there, right, that you’re like, “I’m just going to say no that they’re going to have to come back”? What’s your perspective there?

Ray: Well, my crystal ball’s broken, so, you know, take this for what it’s worth.

Scott: Sure, sure. Grain of salt, of course.

Ray: Yeah, exactly. Seriously, people. You know, to just really quickly, like, not to be a jerk, but, like, I don’t really care if the guys and gals who are bringing me lots ever do come back. If I close on my 1,500 and develop them over the next 2 or 3 years, like, my firm will be okay. You know, it’s not going to be the expansive and explosive growth we’ve been experiencing the past 24 months, but I can live with that and I can live with paying my people and waiting until rosier times.

But we don’t think it’s going to get to that place. I actually think that the people who are well-capitalized and are good operators are about to go pick up some sweet deals over the next year’s worth of time. I intend on trying to be one of those people, still to be determined, but if we do, what I plan on doing, we’re going to take advantage and continue to grow our pipeline.

We want to get it to 1,000 units a year. But overall market trends for Florida, sure, things are for sure going to slow down. They already have, right? And when it comes to price declines on the single-family side, I don’t study it enough to say for sure we’re going to have a steep decline.

I want to be really careful about what I’m saying here because it matters. Like, I think you just might not see the crazy, like, you know, take it or leave it attitude, cash off for only kind of stuff and you might…

Scott: Right, no inspection and all that. Yeah.

Ray: Yeah, you know who’s going to get smacked? It’s your value builders and people like that. The people who are selling luxury condos, like, “Oh, no, you didn’t sell it for your highest bidding asking price and you didn’t get five or six offers and bid it up past asking. Like, you got $20 grand under asking, which is a great price and good retail value.” Like, whatever.

So you know, this isn’t… I wish I had more, like, empirical data that I could share with you. But my feeling is and I talked to a lot of realtors, just both my friends and people in the business that I run into, is that things are slowing down, but people aren’t worried about not being able to sell unless you’re selling those homes to those first-time home buyers who just got priced at…you know, the tens of millions of people who got priced out on the market by interest rate hikes.

So if you’re trying to sell those, you’re in trouble or at least you should be concerned. Other than that though, I think Florida’s extremely insulated thanks to the migration. And if you look at it from a landmass standpoint and how our populations are concentrated, you know, I think you’re in a really awesome spot if you buy in the right spot.

For the next 5 to 10 years, it is never a question of if we need units. It’s a question of, “Are you building them in the right place? Did you build them at the right price?” That’s really what we’re talking about here.

Scott: So in terms of, you know, because there’s always that discussion, across multifamily we talk about the Sunbelt and all of these MSAs that are seeing all of this growth and population migration, for you, it’s not, “Oh, are we overbuild,” it goes down to this very specific market.

Ray: That’s the only right spot.

Scott: Are you building in the right place?

Ray: Yeah, it has to be the right product in the right spot at the right price. That is what the equation is in Florida. I can’t speak to everywhere else, but that’s the equation in Florida when you look at the fundamental imbalance and supply and demand from a housing standpoint. I mean, that’s just a migration. That’s just what we’re dealing with here. You know, show me where I’m wrong because I’d love to see it and know ahead of time.

But it seems like that’s the simple equation. I don’t like to complicate things. I went to state school, I’m not that smart. So I just like to keep it really simple. And if you keep it simple, it’s pretty apparent Florida’s going to win if we’re talking about on a relative basis. I mean, people always talk to me like, “What are you going to do, you know, if interest rates keep going up or construction prices keep going up?”

I’m like, “Well, I’m going to keep buying sites in good locations at great prices, and I’m not going to quit.” Not just going to, “Oh,” you know?

Scott: Oh, it’s a little more expensive to develop this, I guess I’m done.

Ray: Yeah, even though I’m not building, I’m still looking. I’m always looking. So that’s what I mean by I’m just going to focus on finishing up my 1,500 units here and just weathering the storm, being strong, but never taking my eye off the course and sailing as hard as we can.

Scott: So you have such a focus and real clear strategy that you follow, and obviously, that has been great for your investors. Could you speak a bit more about your capital base? You know, who are your investors? What are their goals and why do they ride with you and keep rolling along with you?

Ray: Yeah, no, I think it’s really, really simple for us. We’re just buying really great assets. I mean, I wish I could say, “Hey, yeah, I’m the best operator in the world. I know what I’m doing,” this and that. But it’s almost like I’m buying such great assets, they don’t care. I had an investor say this to me.

He goes, “If Southern Waters Capital does well, I do well, but if Southern Waters Capital fails, I do even better because they end up with my asset at my bases and they get to move forward in the way in which they would if I weren’t around.” And these are, you know, high net worth, ultra-high net worth family offices, stuff like that. They don’t need me.

When they invested in me, they knew if I got hit by a bus that they’d be okay. So it’s not like I’m saying I don’t matter, I certainly matter. But really I think it comes down to the investment thesis, the assets we’re purchasing, and I certainly like to think that our transparent nature, our candor, our hard work, our loyalty, our ethics, those things go a long way in making the relationship.

But what consummates the deal is certainly the investment.

Scott: Right, right, and with your investors, you approach the communication aspect and have, kind of, a whole team behind you that really, really keeps everything moving along and keeps your investors in the loop, of course?

Ray: Yeah, you know, we don’t have a really big team. I think there’s, like, eight of us now. But really when it comes to investor relations, it’s a combination of me and Zack who handles it. Zack Toyota’s our director of investor relations. He handles the initial outreach for sure and certainly, you know, keeping everybody in touch and everything. But we really like to keep a focused investor base.

I’m not out there, like, syndicating hundreds of people or anything like that. I don’t send a weekly newsletter or a monthly newsletter or anything like that. I’m doing deals with large family offices or private family offices that have certain strategic advantages, and it’s really kind of almost dealing with one or two groups per deal.

It’s nothing really crazy. I think the relationships that are the hardest to keep up with are all the brokers both in the equity, the debt, the deal flow, all that kind of stuff, and the vendors. I mean, from construction vendors, architects, engineers, landscape architects, all that kind of fun stuff, those are the people you want to keep happy because those are the ones that, you know, you’re going to have to push on when you want things done quickly and when, you know, things are tough.

Scott: To that point, you know, I’ve talked to many people across the multifamily world and I keep hearing challenges with labor that have come up over the past year or so. How has your experience been with that? Is that a factor that’s made some development more challenging or have you been able to navigate it?

Ray: Well, let me ask you this, Are you asking me about the labor in my firm or are you asking me about the labor at the GC’s firm?

Scott: Both.

Ray: So my firm and my team are extremely strong, and I could not be more proud of them. I think people’s biggest issue with finding good labor is that they hope to hire someone that can already fill the position and satisfy everything that they need to do. And I think that that’s like just… If you’re doing that, you better be hiring for an executive position. Let me put it that way.

That should be the way you hire for an executive position. And I am not an HR specialist, so, again, take it with a grain of salt, but the way I see it is I hire pretty much on two things. And this is, of course, after understanding the assumption that the only reason you’re in the interview is because I believe you checked all the boxes to satisfy the requirements of the scope of the employment. So after that, it’s loyalty and work ethic.

And I’m not saying you have to do everything I say if it’s against the law or immoral. I’m saying be loyal to the company, treat it as if it were your money, you know, treat these investors that we’re dealing with as if they were your family and your team and all that. And when it comes to work ethic, work as absolutely hard as you can and work until the point to where you either can demand a raise, demand more money from me, or start your own shop because the way I run a team is I want us all to be able…

Your dreams, and accomplishments, and what you want for your life need to be able to fit within my strategy, and within my goals, and within my big vision. And if it doesn’t fit there and you’re outgrowing us, I want that for you. In fact, I’d probably invest in you.

In fact, if I could roll up into your dream and vision, I’d do it. So for me, to answer the question technically, like, how do I handle the labor pool for my firm? I have extremely good relationships with all the universities. I mean, it’s that simple. And then second to that…

Scott: TIP UF or no?

Ray: Yeah, right? Actually, it’s funny, everywhere but UF. But, no, Florida State, I’ve actually hired like 90% of my people from Florida State, but then some other people from Nova down here in South Florida. So anyway, university connection’s extremely important. Thankfully I’m only a couple years out of college, so I have an easy road back, and I got three degrees from my school, so I can go back there and talk to tons of teachers.

I basically emailed the director of the business program and I say, “Hey, Dr. Christiansen, do you have any great candidates for this scope of work?” Boom. And he is like, “Yeah, here’s three people.”

Scott: Here it is. Yeah.

Ray: Yeah, no, it’s great. So that’s how I handle that and that’s free. And, like, you know what I mean? That’s just tapping on the things you’ve already invested in. So that’s the technical answer on how to handle labor. But past that, I mean, you have to be able to train your people. You have to be able to teach them.

And I’ve found that to be the hardest thing to do as a young leader. And not because my people are bad, it’s because I’m a new leader and I haven’t had to develop other people to a point to where they can start to take things off my plate before. And it’s been super fun. We’re actually going to put together, like, the little development curriculum for new employees and everything like a six to eight-week program for, like, the interns you bring on and stuff like that.

And, yeah, I think people’s biggest problem is poor training. And then when it comes to the GC side, man, I can’t even speak to that. They have a whole other world they live in. They’re subcontractors, GCs, labor coming in from all over. I mean, listen, I don’t envy those people when it comes to that.

So I wish I could give you an answer, but I’m going to humbly defer that question to a real GC. I know this. My architects and engineers are hiring people like crazy too, so nobody could seem to find enough people.

Scott: Right, right, and you haven’t seen any kind of impact that’s too significant on any of your projects. It’s been a side of just continuing to roll along and folks just sorting it out and just trying to hire what they can.

Ray: Yes, I mean, it’s just cost increases all the way down the chain. And I mean, look, I graduated with a JD-MBA, granted not from the top university, but I made way less than what I hired people at now [inaudible]. So that was a stark realization when I first started my own company. I was like, “Wow, was I an idiot?”

I was like, “Maybe I was an idiot.” But I am where I am, so that’s how I see that.

Scott: Excellent, excellent. Ray, thank you so much for joining me on the show today, really sharing your strategies and the great things going on at Southern Waters Capital. And if folks want to connect with you guys, find out a bit more about what you have going on, where can they do that?

Where should they go?

Ray: Yeah, just go to That’s my cellphone up there in the corner. I always tell people, I’m like, once I get successful enough to take my cellphone off my website, I will. And if you abuse my number, I can block you in two seconds, so I don’t mind. But one thing I would love to shamelessly plug in here is a charity that we’re always supporting…

Scott: Oh, absolutely.

Ray: …and I was included on the board if you wouldn’t mind.

Scott: Yeah, go for it.

Ray: The Friendship Circle is a national organization that helps those with special needs and developmental disabilities reach their highest potential in the workforce. And basically, you could think of it as, like, on-the-job training and training programs for those with special needs and those developmental disabilities, and also gives them an opportunity to earn a wage while doing that as well.

We started, or I shouldn’t say we, my business partner Dean Myerow started the Friendship Café here in Fort Lauderdale. It’s really cool. I can’t believe it survived through COVID but it’s a café.

Scott: That’s amazing.

Ray: Yeah, a café run by Our Friends who… We call the programees Our Friends, the Friendship Circle. So there, we’re having a Friendship Circle Charity Classic coming up in November 17th. I know everybody here listening probably doesn’t live in Fort Lauderdale. So I don’t expect you to attend. But if you do want to get in touch with me, go to

But if you want to make a bigger difference in the world and actually do something, you know, good for other people, go to the and just donate whatever you can, sponsor whatever you can, or maybe send in something for us to put in goody bags, whatever it is.

We would really appreciate any type of support. So, again, happy to meet with anybody, but what I really care about right now is helping raise money for my charity.

Scott: I love it. I love it. And we will, of course, include links to that on our show notes at So, folks, if you want to go and make a difference and connect with Ray and all of that good stuff, you can do that there. Thank you again so much. And you have a good one.

Ray: Yeah, yeah, thank you.