Jacock Property Management
Jacock Property Management – Late last year, San Antonio-based Lind Living flipped the apartment building for $15.5 million more than it paid in eight months.
The firm saw a more than 20 percent increase in rents after spending $4 million on renovations and upgrades at Aqua Villas, a 280-unit park in Margate, Fla., which it bought in March 2021 for $51 million.
Jacock Property Management
“After eight months, we had five years of net income for our investors and partners,” Lind said. “We always keep our investors’ goals in mind in every deal.”
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Atlanta-based CARROLL has acquired 34 properties with a total acquisition value of $3.35 billion in 2021, successfully exiting 32 properties for a total value of $2.4 billion.
CARROLL immediately rebranded the community ARIUM Coconut Creek to align with its national portfolio brand, and plans to continue to enhance the property through interior and public space improvements.
The deal is a prime example of a quick profit and ongoing opportunity in the value-added multifamily market, where operators are looking to improve properties, increase rents, and then sell.
Just look at Irvine, which announced the sale of its two-property, 365-unit portfolio in Phoenix for $96.4 million, five quarters after buying California-based SB Real Estate Partners (SBREP) in January. That’s $41.1 million from the price paid at the end of 2020.
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“While we remain bullish as active buyers in the Phoenix multifamily market, we have been willing to adapt to the capital market and develop a short-term business plan to deliver great results for our investors,” said Srijin Bandyopadhyay. Founder and Managing Director of SBREP, which has purchased over 3,000 units since 2019.
“On a scale of 100, demand for value-added real estate acquisitions is close to 100 in my career,” said Matt Jones, managing director of Norfolk, Virginia-based Harbor Group International, which operates 59. 000 units and is currently undergoing value-added renovations for around 100 properties in its portfolio. “As a result, we’re seeing unprecedentedly low rates.”
According to Dallas-based real estate services firm CBRE, only three overcrowded markets — Philadelphia, Oklahoma City and Portland, Oregon — saw cap increases that moved in the opposite direction of property sales prices in the first half of 2021. At the same time, the cap has not been increased in any of the suburbs across the country.
“Strong investor demand and strong housing fundamentals are driving aggressive deal volume and price growth in nearly every market across the country,” said Matt Masinter, vice president of acquisitions at Chicago-based Waterton. his portfolio. “The market will remain strong and prices will continue to rise in 2022.”
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Courtesy of Waterton The Shoreham at East Lakeshore (pictured) and The Tides at East Lakeshore comprise 1,156 units in Chicago’s East Lakeshore neighborhood, which Waterton acquired in December 2021.
Masinter is hardly alone when it comes to multifamily value-added activities, but there are those who are showing signs of overheating.
Nitin Cheksal, managing director of Austin, Texas-based real estate investment firm Palladius Capital Management, noted a clear shift in the nature of investors looking for returns in the tertiary market.
“We’re seeing new entrants aggressively approaching the capital market to enter markets like Austin or Nashville, Tennessee,” Cheksal said. “They will pay any price and guarantee unreasonable rent increases.”
Iola St, Brownsville, Tn 38012
In some markets, the frenzy to add value and the competition to buy prime properties already seems to be eating itself.
Take South Florida, where the influx of people during the pandemic increased the need for all kinds of housing.
“I’m seeing a lot of demand for value-add. There’s not enough product for ‘real’ value-add,” said Matthew Jacox, director of commercial real estate brokerage for Miami-based Lee & Associates South Florida. “The current lack of supply means growth isn’t what it used to be. You don’t have enough product to renew and raise rents.”
This dynamic and the ever-increasing supply of good candidate buildings in many markets means that some properties are bought and sold several times, with each new buyer adding their own improvements. Once they’ve done that, they’ll still have plenty of options to get out again.
Hess St, Brownsville, Tn 38012
“Now is a great time to sell because the cap is low and there’s a lot of equity and debt,” HGI’s Jones said. “There’s a lot of liquidity in the market, and it’s never a bad idea to sell when there’s a lot of liquidity.”
Of course, the pace of activity in the space could be a reason for the pause, and some forecasts suggest that prices will decrease slightly in 2022 due to the expected increase in interest rates later this year.
Again, demand has been so strong that sellers who made some gains last year with quick turnover question whether a holding strategy would have been more profitable.
“People who sold six months ago may feel like they’re selling at the top end of the market, but to see valuations continue to rise significantly,” said Casey Barber, senior vice president of investments at CARROLL. “Any deal that sold six months ago will sell for more today.”
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Observers believe that the frenetic pace of the value-added market is the result of a confluence of events. During the Great Depression, migration out of major cities created demand for housing in secondary, tertiary, and even distant markets.
For example, Lind’s initial acquisition of Aqua Via in South Florida came just as it turned to crowdsourcing funding after canceling its first institutional equity partner early in the pandemic.
The most notable example was the brief push and rally in GameStop shares in early 2021, echoing how consumer-focused investment platforms like Robinhood helped retail investors dislodge a market once the sole domain of institutions. Over the last decade, crowdsourced funding has continued to emerge for many families, making it even more visible in the marketplace.
“Crowdfunding sites and registered investment advisors are becoming more sophisticated and investing directly with operators is becoming meaningfully successful,” says Cheksal at Palladius Capital, adding that retail investors often have lower return thresholds and less handshakes. “Hundreds of billions of dollars in demand from retail investors willing to take on single-asset risk has waned.”
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High demand is fueling competition for the best value-added candidates – the increasingly rare shaggy dogs in A, B and even C-class areas can be turned into show dogs with some exterior and public area improvements. improvement of parts before sale.
“Most of the low-hanging fruit has been picked,” said John Sebree, senior vice president and national director of commercial brokerage Marcus & Millichap’s multifamily residential division.
Castle Lanterra Properties Castle Lanterra Properties acquired Overlook at Stonemill in 2019, a 216-unit park complex in Lynchburg, Virginia.
This competition has created a “second city” effect for some multifamily professionals. For example, as competition for capital increases almost everywhere across the country, vice presidents of acquisitions are looking for connecting routes with two flights to find the next promising locations.
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Hear the strategy adopted today by Eli Reeder, CEO of Suffern, New York-based Castle Lanterra Properties, which operates 6,660 units.
“I believe in long-term stability, growth, job creation, and a coordinated effort between local education and government to ensure that the tax and business environment is favorable, but in geographies that are only two flights away. . from gateway cities,” Reeder said. “If you don’t have easy access to institutional players, you might limit their competition.”
And she likes to schedule her shopping trips against the seasons. “Look for your assets in states that are colder in the winter and hotter in the summer,” Reeder advises.
For many tenants, the combination of geographic displacement caused by COVID has meant that the traditional metrics for finding key value-added areas, which for most of this century have focused on high-barrier-to-access coastal markets, have shifted rapidly inward. .
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“It’s important for buyers to find new locations. We’ve seen competitive groups enter new markets, particularly in the Midwest,” said Christine Espenshade, vice president of multifamily capital markets at New York-based commercial real estate firm Newmark. “Value-added players should consider converting offices or hotels into multifamily to generate revenue.”
The added value has also started to appear in the areas that are primarily focused on development. Just look at Phoenix, where real-estate crowdfunding firm Neighborhood Ventures founder John Kobierowski says value-added is now dominating the market.
“Value-adding wasn’t very common here, people just built new,” Kobierowski said. “Now we’re moving from properties that need the first wave of renovations to candidates for the second and third rounds.”
Observers note that by buying multiple value-added deals at a cap, it’s important to keep investors in control of what to do.
Jacocks Rd, Brownsville, Tn 38012
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