Sioux Falls, South Dakota – A Sioux Falls-based real estate investment firm, Ernst Capital Group, is reporting success in its expansion beyond the Midwest, specifically citing a recently completed development in downtown Des Moines, Iowa. The firm, which focuses on connecting accredited investors with local real estate projects, has seen strong performance in its portfolio, even during the winter months, according to partner Chris Daugaard.
Ernst Capital’s involvement in Des Moines is part of a broader strategy of financing multifamily developments across several states. The firm’s Signature Fund VI, recently closed, facilitated financing for projects totaling just under $50 million in real estate across Sioux Falls, Des Moines, Rapid City, Omaha, and other locations. This expansion reflects a growing trend of regional investment firms capitalizing on opportunities in secondary markets.
The Des Moines project, while details remain limited in publicly available information, is indicative of a larger pattern of investment in multifamily housing. The demand for rental properties, particularly in growing cities like Des Moines and Sioux Falls, is being driven by a combination of factors including economic growth, job creation, and demographic shifts. Sioux Falls, in particular, is experiencing a period of rapid growth, with a diverse economy fueled by healthcare, finance, and manufacturing, as highlighted by recent reports on the city’s real estate market.
Locally, Ernst Capital is also involved in innovative housing projects in Sioux Falls. Willowbrook Village, a build-to-rent community featuring single-family homes, is already occupied. This development, a collaboration with Signature Cos. And managed by Lloyd Cos., offers a unique housing option for the Sioux Falls market. The community consists of 57 two- and three-bedroom homes, each with an attached two-stall garage, and includes property maintenance as part of the rental agreement. Daugaard emphasized that the development was structured to provide value and affordability, with high-quality finishes but without the extensive amenity packages often found in luxury rentals.
The build-to-rent model, as exemplified by Willowbrook Village, is gaining traction as a response to changing housing preferences and affordability challenges. It offers renters the experience of single-family living without the responsibilities of homeownership. This approach is particularly appealing to individuals and families who desire more space and privacy than traditional apartment living provides, but are not yet ready or able to commit to purchasing a home.
The success of Ernst Capital’s strategy appears to be rooted in a focus on identifying and financing projects that address specific market needs. The firm’s emphasis on affordability and value, combined with its partnerships with experienced developers like Signature Cos. And Lloyd Cos., positions it to capitalize on the growing demand for quality rental housing in the Midwest. The firm’s model relies on attracting accredited investors, offering them access to private real estate investments that are typically unavailable to the general public.
The broader real estate landscape in Sioux Falls is also showing positive signs. Rentastic.io, a real estate investment resource, notes that the city’s median home price is $271,400 with a median rent of $1,059. The city’s business-friendly environment and lack of state income tax are cited as key factors attracting investors. Key neighborhoods for investment include downtown Sioux Falls, McKennan Park, Southwest Sioux Falls, and East Sioux Falls, each offering unique opportunities for different investment strategies.
The current market conditions also highlight the importance of careful underwriting and risk management in real estate investment. A recent webinar hosted by American IRA, featuring John Hamrick Jr., focused on the critical role of insurance and underwriting for rental and investment properties. This underscores the growing awareness among investors of the need to thoroughly assess and mitigate potential risks in a dynamic real estate market.
Ernst Capital’s success in Des Moines and Sioux Falls, coupled with its expansion into other regional markets, demonstrates the potential for private equity real estate firms to play a significant role in addressing the growing demand for housing. The firm’s focus on local markets and its commitment to providing value and affordability position it for continued growth in the years to come. The firm, founded in 2007, has evolved from a regional player focused on commercial real estate development to a prominent private equity firm with a diversified portfolio of multifamily projects.
The firm’s approach, as described by Daugaard, centers on creating “win-win” scenarios for both residents and investors. This involves carefully structuring deals to provide affordable rents while still delivering attractive returns for investors. The emphasis on quality construction and property maintenance, without the added cost of extensive amenities, allows Ernst Capital to offer competitive rental rates and attract a broad range of tenants.
While the specific details of Ernst Capital’s future projects remain undisclosed, the firm’s recent successes suggest that it will continue to focus on multifamily developments in growing regional markets. The demand for rental housing is expected to remain strong in the coming years, driven by demographic trends and economic factors. Ernst Capital’s ability to identify and capitalize on these opportunities will be key to its continued success.
