Niche dweller

Fred Cochran admires the apartment developers and investors who have been taking advantage of market conditions the past few years to swell their portfolios with new communities and thousands of units.

Likewise, his partner Jeff Talbot looks upon the gleaming rental towers sprouting in urban areas along the Gulf Coast with a sort of awe.

But neither Insula Cos. principal wants to follow that doctrine.

Instead, Cochran and Talbot are content to maintain a fairly narrow focus on a niche of well-located, suburban multifamily communities that offer steady income streams and the opportunity for appreciation that comes with sound property management.

“We want to stay within a narrow focus,” says Cochran, 46, who founded Insula in 2009, despite the crippling economic recession at the time. “Our goal is to do good, solid deals, and we like to be very hands on, we like to be able to see the properties we're buying frequently. I think if you grow too quickly, as is possible in this market, you can easily lose track.”

Not that Insula hasn't expanded significantly throughout its seven-year history, however, or dealt complexes that would generate solid returns. In 2016 alone, the company invested roughly $100 million to acquire three apartment projects, and over the past three years, it has either bought or sold more than $600 million worth of rental properties.

Most recently, the firm in October spent $29 million to acquire the 212-unit Calibre Bend Apartments, in Winter Park.

In all, Insula has invested more than $450 million since 2009 to buy more than two dozen rental communities containing some 5,000 apartments. Today, its portfolio contains 18 multifamily projects with roughly 3,000 units, and the company employs more than 100.

In 2015, Insula generated gross revenue of $34.35 million, a 27% increase from the year before, in large part by sticking to its playbook, its partners say.

“The properties we're targeting are middle-of-the-road, market rate, workforce housing,” says Talbot, 37, who left a South Florida multifamily investment firm to join Insula. “And we like 1980s vintage properties. Usually they're in good locations, and in a lot of cases, they're just properties that have been neglected.”

Erasing neglect has been another Insula hallmark. Cochran says effective property management and strategic capital infusions have been major factors that have driven Insula's success.

Recessionary start
Insula's success didn't happen overnight, though. The company went through a years' long process of figuring out what worked and what didn't, Cochran says.

Cochran became involved with apartment ownership while in college in Ohio, putting the down payment for his 10-unit building on his credit card.

Through trial and error — and more error — he learned the value of effective property management.

Post college, he moved to Florida in 2000 and went to work for a multifamily company that controlled 3,000 units. Seven years later, despite having two children under the age of five at the time, Cochran quit his job to pursue his own apartment-buying opportunities.

In 2009, he acquired the 82-unit Banyan Trail Apartments in Sarasota from Fifth Third Bank, which had taken over the complex after a failed condo conversion.

Properties like Banyan Trail were abundant, capital to buy them, however, was not.

Cochran talked to 100 potential investors to scrape together the $1 million in equity he needed to obtain a $3.5 million loan to buy the complex; 99 said no, until a retired neighbor, Larry Fox, took a chance. Fox has been a part of every Insula deal since, Cochran says.

“When Fred pointed out the apartment business to me, I looked at it and thought it was a good time to get into it,” says Larry Fox, a retired computer software company owner who was an early Insula investor, in 2009. “Actually, it probably was a bad time to get in, given the economy at the time, but I thought there
was potential for it to be better and that it would make for an opportune investment.”

In the years since, the multifamily market along the Gulf Coast has skyrocketed. As renting has become a more popular lifestyle choice, some renters can't afford to buy thanks to recession-era foreclosures, and population has increased and the regional economy has rebounded.

With it has come many more investors hunting for apartments eager to take advantage of the trend lines.

“There's a lot more competition now, and a lot of available capital,” Cochran says. “When we started, that was flipped. When we saw a good deal, it was crystal clear, but there was no money available to buy it.”

And while Talbot and Cochran say they are somewhat concerned with the plethora of new construction and the astronomical rise in property values over the past five years, the pair adds that the industry's fundamentals remain extremely strong.

Case in point: In 2010, Insula bought a 1980s-vintage apartment complex in Orlando for $16,000 per unit. Earlier this year, a rental community of similar age and quality hit the market for $136,000 per unit.

That reality has caused Insula's principals to alter its business plan somewhat, by selling some of its holdings and pulling back on other acquisitions.
In 2015, for instance, Insula bought nine properties. This year, the acquisitions have been limited to three.

The company also has sold five communities in the past two years. It's also brought property management in-house, because “nobody cares about your property like you do,” Cochran says.

“Over the next 12 months or so, I see our focus more on selling and buying selectively,” Talbot says. “And we'll spend a lot more time rehabilitating projects and improving operations, because our focus is more long-term now.”

Regardless of market conditions, though, don't expect Insula to depart from its primary strategy over the next five years. Cochran says the company's portfolio won't likely exceed 10,000 units. Conversely, neither Talbot nor Cochran say they have plans to shed assets in a bulk portfolio sale.
“We're having too much fun,” Talbot says. “And we really like what we're doing.”