Doug Faron, founder and managing partner of Westlight Capital, a real estate investment firm based in West Palm Beach, Florida, specialising in multifamily properties, has achieved US$750 million in assets under management with his firm in just ten months. A significant portion of these assets is in the multifamily sector and in so-called 'Special Situations'.
At the beginning of the decade, Faron headed Shoreham Capital, an entrepreneurial project that allowed him to establish himself in the build-to-rent property sector. However, he refined his capital markets expertise during his ten years at CIM Group, where, as Managing Director, he was responsible for the firm's East Coast equity investments. Over the last 15 years, Faron has overseen US$10 billion in real estate transactions and developments, building numerous relationships with general and limited partners.
From Investment Banking to Real Estate Entrepreneur
Faron developed an interest in real estate while studying at Brown University, where he founded a real estate club. He began his career in investment banking at Deutsche Bank on Wall Street, working on M&A transactions across various asset classes. Although he handled some interesting real estate deals there, he later moved to a consumer-focused private equity fund called LNK Partners. Alongside this, Faron privately invested in real estate, for example, buying a small multifamily property in New York out of bankruptcy and converting a commercial building into a hotel.
These experiences reinforced his desire to focus professionally on real estate. While studying at Northwestern University, he completed an internship at CIM Group in Los Angeles, a large institutional private equity firm with a strong entrepreneurial spirit. He spent the next ten years there, overseeing the East Coast equity investment platforms. CIM distinguished itself by investing across all asset classes, in both debt and equity, from US$1 billion office buildings to retail, industrial, and multifamily properties in diverse markets such as Boston, California, or New York. This broad focus provided Faron with a comprehensive foundation and learning curve.
The Move to Independence with Shoreham Capital
After ten years at CIM, Faron felt the urge to build something of his own. He realised that the real estate industry required less capital outlay for a start-up compared to consumer funds. At the end of 2021, he left CIM and founded Shoreham Capital. The funding initially came through a GP fund, with Faron leveraging relationships with family offices that he had built over the years.
When Shoreham Capital started at the end of 2021/beginning of 2022, the multifamily market was characterised by cap rates between 2.5 per cent and 3.5 per cent. Faron questioned the long-term sustainability of these values unless there was incredible rent growth or negative interest rates. He sought out niches that seemed sensible. At that time, the build-to-rent (BTR) sector was booming. This area made it possible to develop BTR projects at a cap rate of 6.5 per cent, even when the traditional multifamily market was at 3 per cent, and represented the lowest risk within the development spectrum. Shoreham Capital was thus founded with a focus on residential properties and a strong orientation towards BTR projects.
The company successfully completed several transactions, including BTR projects and traditional multifamily properties. However, as the market changed, interest rates rose while construction costs remained high. This meant that development projects might yield returns of 6 per cent. With rising interest rates, acquiring existing multifamily properties at cap rates in the high 5 per cent or low 6 per cent became more attractive, as it offered a better risk-adjusted return profile.
