Matt Rosenthal, president at Eastham Capital, likes to think of his company as an incubator of sorts. But instead of launching tech companies, his Boca Raton, Florida-based private equity firm fuels the growth of what he calls “real estate guys.”

“They own a couple of hundred units,” Rosenthal said. “They manage them. We're the guys that take them from hundreds of units to thousands of units.”

For Rosenthal and his partner Eric Silverman, finding local operators is a guiding principle. He thinks local companies develop on-the-ground relationships that are invaluable. 

“I could be sitting in Boca and trying to buy property all around the country,” Rosenthal said. “But I'm not the local guy. I don't know the broker personally, I don't go to church with him or play golf with him.”

With those relationships, small firms will often get their choice of deals in their home market before they’re widely circulated by brokers, according to Rosenthal. “We want to be the local guy, and the way we can be a local guy is by partnering with a local guy,” Rosenthal said.

Here, Rosenthal talks with Multifamily Dive about when deals will start happening again, what markets are attractive and what he looks for in partners.

This interview has been edited for brevity and clarity.

MULTIFAMILY DIVE: When will the sales market pick back up?

MATT ROSENTHAL: There's a huge disconnect between buyers and sellers. The sellers still think it's 2021 and that's their value. Also, a lot of them bought at those values. Nobody wants to lose money. So there's some of that. 

Does the Fed need to act for things to open up?

Rates have to move down. The Fed just raised rates in record time. They really didn't give anyone a chance to get out of the way. So, I think they need to back off a little on the rates. I don't think it's going to zero either. But if the Fed’s fund rate was at 3% instead of 5.25% or 5.5%, I think we'd be in a much better place. 

It's really all rate-driven at this point. So if rates do at some point move down, whether it's because of a recession or because the Fed is done or whatever it is, that's going to restart our whole industry. 

How are you preparing to take advantage of buying opportunities that could pop up over the next couple of years?

We're investing in a $400 million fund and we're about half invested. But if a deal is not cash-flowing, don't talk to us. Right away, we want cash flow. Our partners know that and are out there looking. 

We have a Houston deal. We have a Des Moines, [Iowa], deal, and we have this Briarcliffe Apartments and Townhomes deal in Lansing, [Michigan], which is our first deal in Michigan. And so we're closing all of those and looking for more.

What markets do you like?

We like the Midwest, from Chicago down. And you could say across the bottom of the country, but everybody wants across the bottom. And places like Atlanta are not great places right now. If we can find something great in Florida, sure, but the pricing is not there right now. 

But we like the Midwest. Compared to other places, it has been a bit sleepy. It didn't have the run-ups that other places did. 

Are new groups coming to you looking to partner on deals?

We get new deals every day. Some months we'll see 100 deals. The questions are: Are they deals that we would do or deals that the groups we would work with would do? But, if a group doesn't self-manage or if they hire a third party to manage, we don't want to do a deal with them.

Why is self-managing so important?

We believe the money is made in the management. We believe and our partners believe that keeping a tenant is better than losing a tenant. So there's more customer service involved. There's more taking care of needs and things like that. 

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