Alts Wire Q&A with Rockspring Capital CEO Jim McAlister
Alts Wire caught up with Jim McAlister, chief executive officer of Rockspring Capital to learn more about the Texas-based firm and its investment focus and strategy.
Tell me about Rockspring.
Rockspring Capital is a Texas real estate investment firm 40 years in the making. We acquire opportunistic land parcels and residential lots in high growth areas. We also make special situation bridge loans, covered land plays and note purchases on land-related assets. We acquire assets within the Texas Triangle – Houston, Austin, San Antonio and Dallas/Ft. Worth.
What is your background and role as head of the company?
I joined Rockspring in 1993 and became CEO in 2008. I am responsible for overseeing and leading the company and its investment activities, having raised and invested on behalf of premier North American and international investment partners more than $325 million in capital in 12 fund vehicles since 2003.
What is Rockspring’s investment focus?
Our primary investment focus is Texas land within Houston, Austin, San Antonio and Dallas/Ft. Worth. We actively analyze the marketplace and take advantage of motivated sellers and market illiquidity to capitalize on undervalued land. We then entitle the land and do minimal development if necessary. These steps increase the value of the land and then we sell off in parcels to developers and end users at a profit.
Another important component of our strategy is diversification. Whether it’s residential or commercial, from Austin to San Antonio to Houston, we buy different product types in different areas to help minimize risk.
Rockspring utilizes an all-cash acquisition strategy. Why not include some low-cost debt?
Our all-cash strategy allows our team to quickly buy properties and patiently sell the land to the right end user. For the motivated seller who needs to sell in 30 days or less, there are very few buyers like us with cash in hand so we’re able to jump on opportunities quickly.
We do have the ability to use some working capital and low loan-to-value property leverage post acquisition, but only against income producing real estate. Generally speaking, undeveloped land assets do not generate cash flow to service debt payments.
What are your investors seeking in their real estate investments?
Our investment partners often tell us that they are concerned about their typical income producing real estate investments not generating the same returns as they have in the past. Too many dollars are chasing too few deals, resulting in historically low cap rates and intense competition. These properties are simply too efficient on the buy side for opportunistic returns.
What types of real estate assets do you and your investors believe can provide opportunistic returns?
Residential and land are well positioned for opportunistic gains. They are fundamentally under-supplied because of the capital markets as the consumer mortgage industry is still not what it used to be and the Dodd-Frank Act has kept regional and community banks from lending to developers and builders. On the demand side, the Sunbelt states, such as Texas where we invest, have experienced above average population growth and job creation, which keeps the demand for land high.
How is Rockspring unique?
There are lots of folks that work hard everyday to make this a success, but I must say it is our local market expertise that gives us a big advantage. We identify and acquire off-market properties before others as we live right here in our markets and know these parts like the back of our hands. Certainly operating in a high growth market like Texas is important too.
