Photo courtesy of Arrowpoint Properties
David Lamattina
President and CEO, Arrowpoint Properties
Industry experience: 22 years
Age: 46
After graduating from Fairfield University, David Lamattina entered his family’s restaurant business, Boston Chowda Company, while he considered long-term career options. Extended family in the real estate business offered him advice and guidance that eventually prompted him to found Arrowpoint Properties, a Lawrence-based multifamily investor that’s active in the Merrimack Valley, in 2011. Arrowpoint has acquired more than 20 properties, primarily in the Merrimack Valley, and currently owns a portfolio of 750 apartments with another 100 units under contract. With the looming threat of rent control and softness in the Massachusetts rental market, Lamattina is looking at acquisitions in southern New Hampshire for better investment opportunities.
Q: What movement have you seen in rents over the past 12 months in communities where you’re active?
A: There really hasn’t been much growth. It’s kind of plateaued in the last six months. We really saw things change this past fall. And then we hit the holidays, and typically winter is just a terrible time for leasing, but we’ve seen a softening in rents. People have definitely become more sensitive to rent increases. We’ve experienced in our own portfolio where, in the past, people would absorb a $100 to $200 increase, and if you hit them with that now, they’re going to move and you’re going to have vacancy. And the vacancies aren’t filling as fast as they used to, so we’re just being cognizant of that. Our focus this year is not so much on pushing rent and growing rent, but more focus on occupancy. I think that’s the name of the game. And we’ll see how things go, but we can get into the geopolitical and how that’s affecting things, just adding another layer on top of the rent control issue. It’s been a tough start to this year.
Q: What was your first investment?
A: I founded Arrowpoint in 2011, but my career really goes back to 2004. I was 24 years old, and my mother’s whole side of the family are all in real estate. My great-uncle Jimmy had 17 kids, and he started the empire for his family with multifamily, and some small commercial investments like motels and inns. One of the sons was a broker, and got my wife and I our first apartment in Malden when we were dating. At the time he said, “I think you should consider buying a small multifamily property as an investment.” I hadn’t thought about it before, and it really piqued my interest. I ended up buying a four-family in 2004, and I purchased this property in Lawrence, where our corporate office is now. I essentially taught myself the business on my own, trial and error, but I got my feet wet with that first purchase. I got my real estate license in 2007 and I joined a multifamily brokerage in 2008 called United Multifamily out of Quincy. I discovered the world of syndications and how to structure private equity deals. And bringing private investors and family members, we ended up buying our first deal.
Our model was to buy older multifamily buildings, like ’60s and ’70s vintage, that were pretty rough and neglected by their current ownership. We’d go in and do a lot of construction and renovations, and turn the asset around and stabilize it. We were able to produce some really good returns for our investors, and they started referring us to their friends and family, and it was really organic growth. After 22 years, we’ve done about 26 properties, and sold probably half of those. We don’t focus as much on the older vintage, because they’ve gotten very expensive to purchase and costly to operate. We’ve shifted a little bit and started looking at newer assets, built in the last 20 years, that still have a value-add component. The difference is these properties are more stabilized. They’re well located. They have a stable tenant base and cash flow right away, versus the deals that we’ve done in the past where it could take a year or two to stabilize, and investors are kind of waiting for distributions. The newer deals are also perceived as lower risk, and investor appetite right now is for lower risk-profile deals going to cash flow right away.
Q: You mentioned that older properties have become more very expensive to operate. Is that because of energy costs and inefficient building systems?
A: That’s part of it. Energy costs have spiked, big-time. Cost of gas and electric, but electric mainly. Even water and sewer rates have gone up. The insurance on the older buildings has gotten more expensive, and then when you have the older buildings, you’re doing more construction and renovation work, so now you’re talking supplies, you’re talking labor, and all that has gone up astronomically. So yes, rents have come up, but the cost to operate has kind of outpaced that a little bit.
Q: What’s Arrowpoint’s typical investment timeline?
A: Our typical hold is probably five to seven years, just because we are bringing in investors, and at some point they do want their money back, so we have to have some kind of exit.
Q: What are your latest acquisitions?
A: We just closed on one to start the year in Bedford, New Hampshire [the 85-unit Meridian at 66 Hawthorne Drive]. We really like New Hampshire and the fundamentals there. Bedford’s got a lot of growth potential. The asset itself is definitely a bit of a departure from most of the deals we’ve done in the past. It was originally an assisted living facility and a developer bought it and renovated the whole building, leased it up, so we bought it occupied. We basically bought a stabilized asset that was going to have in-place cash flow and attractive amenities in a great location. We did our biggest equity raise to date on that deal. We raised over $8 million, all from high-net-worth individuals. We didn’t take any institutional capital. We’re pretty proud of that. The one before was a smaller deal in Methuen. This building had a major fire in 2018 and a developer gutted it. Again, we bought something that was well-stabilized, but it was not being managed well at all. So, we saw some inefficiencies there. And his rents were definitely below market.
Q: Are you still looking to acquire properties in Massachusetts this year with the threat of the rent control ballot question?
A: It’s causing some serious heartburn. Right now is probably the worst time to be a seller. Deals are not hitting their valuations given by the brokers, and the number one reason is rent control, right? We can go down a rabbit hole on that. It also could be a good buying opportunity if somebody has to sell, and if rent control ends up not passing, which I’m optimistic that it won’t, then you could be in a really good position.
Q: What’s the upside in New Hampshire?
A: Population is driven into New Hampshire. It’s easy for people to go right over the border. There’s no income tax, no sales tax and I think the quality of life for people who are looking for space. We’ve definitely seen the institutional money move into New Hampshire as well. So definitely keep an eye on New Hampshire, especially now with rent control.
Lamattina’s Five Favorite Fishing Spots:
- Big Island Pond
- Merrimack River
- Lake Winnipesaukee
- Bare Hill Pond
- Newfound Lake
