“We are still buying a lot of homes in the US for 60 to 70 percent of construction costs, and getting the land for free,” Delavaco Residential Properties Corp. CEO Andy DeFrancesco told me by phone Friday from his Florida office.
The ex Canaccord equity trader, 43, has assembled a portfolio of roughly 850 single family homes, and 630 multi-family residential units in the US, in markets like Florida, Georgia and Texas.
“I bought the first portfolio of 14 houses in late 2010, but today the single family housing market is a true asset class.”
Delavaco’s model has been to buy portfolios of distressed single family homes in the US from banks, asset managers or wholesalers. The company then rents these homes out to tenants receiving federal assistance under HUD (Housing and Urban Development) programs.
“There’s no amount of money I could raise over next 36 months to provide the demand for these programs,” DeFrancesco said during our call.
Delavaco is not alone in going after the single family housing market in the US, with private equity giants like Blackstone, KKR and others launching funds targeting this asset class.
“Not only does it verify our business model, they assist us in verifying the housing values, and the gains that are occurring. We’re leaving the South Florida market where the big guys are still buying, because they are willing to pay more than us.”
DeFrancesco says the company intends to pay a dividend in the future, but he’s not yet sure when. For now, he’s reinvesting all capital received from rents back into the business.
“We’re definitely going to raise more money,” DeFrancesco says, still seeing value in markets like Charlotte, North Carolina, Austin, Texas, and areas just outside of New York City.
“There are other jurisdictions where the big guys have not gone in and there hasn’t been big appreciation in housing prices yet.”
Delavaco has been able to attract some influential Canadian backers. Pat DiCapo, founder and Managing Director of PowerOne Capital Markets Ltd, was the first to back DeFrancesco and co-founder Dallas Wharton in 2011.
Toronto’s Muzzo and De Gasperis families are also large shareholders.
“These families practically built the GTA [Greater Toronto Area] and it’s great to have their guidance,” DeFrancesco said.
The Serruya family, with interests in the food, franchise and refrigeration sectors, are also closely involved with the company.
DeFrancesco says the Muzzo, Serruya, De Gasperis and DiCapo families each own 3-14% of the firm, and that a number of prominent Canadian financial institutions are also involved.
“Housing prices have skyrocketed. We’re having an appraisal done on our properties as we speak, with results to come in late February. I am confident on us seeing a big gain for not only Florida but Georgia.”
Delavaco Residential Properties Corp trades on the TSX Venture Exchange under the symbol DVO.U. The company has 52.4 million shares out and last traded in the $1.30 range, for a market capitalization of roughly $65.5 million.