Capital Square Acquires Georgia BTR Community

Capital Square has acquired Valley Ridge, a built-to-rent development consisting of 129 single-family houses. The community, developed by homebuilding giant D.R. Horton, is located at 10 Draught St. in the Chattanooga, Tenn., suburb of Rossville, Ga.

The BTR housing project, completed in 2023, is currently 89 percent occupied, according to Yardi Matrix data. Most of the units are townhouses, offering three-, four- and five-bedroom floor plans. Residences range from 1,749 to 2,362 square feet.

Homes feature stainless steel appliances, full-sized washers and dryers, walk-in closets, smart home integration and attached two-car garages. Common amenities include landscaping, on-site management, 24-hour emergency maintenance, community irrigation and fenced backyards. The community is pet friendly.

A BTR strategy

The Valley Ridge acquisition was made on behalf of CS1031 Valley Ridge BFR Housing, DST, a newly launched Delaware statutory trust private placement offering. The structure seeks to raise $20.25 million in equity from accredited investors, with an investment minimum of $50,000.

Capital Square is no stranger to this kind of deal. The Valley Ridge acquisition is the sixth BTR for its Section 1031/DST program and the ninth BTR for its private equity group. Overseeing the deal were Co-Chief Investment Officers Dave Platter and Jon Trott, who head Capital Square’s private equity group, which was formed to profit from the housing market, including a BTR strategy in high-growth Sun Belt markets.

The BTR strategy has become very popular with Capital Square’s investors and their financial advisors, explained Louis Rogers, founder and co-chief executive officer of Capital Square, in prepared remarks. This particular acquisition is also the first one that has benefited from the recent decline in interest rates, increasing leverage and cash flow.

Low supply, high demand

Capital Square’s footprint in Chattanooga is about 1,300 units, making it one of the largest institutional owners of multifamily properties in the area, noted Whitson Huffman, co-chief executive officer.

The Rossville rental housing submarket as a whole is tight, with only 409 multifamily units added since 2014 and zero units currently under construction or proposed, according to Yardi Matrix data. Valley Ridge was the only asset delivered in the submarket in the past 12 months.

Moreover, the Chattanooga-area is in growth mode, seeing double-digit population increases between 1990 and 2000 and again by 2010, according to Census Bureau data. Its population grew 6.5 percent between 2010 and 2020, with additional estimated growth since then. The healthcare sector is a major employer in metro Chattanooga, supporting over 40,000 jobs. Higher education is also a major local employer.

BTR’s growth takes a backseat

Built-to-rent continues to be a strong residential subsector, though not at the frenetic pace seen just after the pandemic, when demand was particularly strong. A strong economy, including job growth, sizable immigration and rising incomes, has been supporting the market.

In a recent Parcl Labs report, BTR was found to outperform scattered site rental communities in just one of the seven core markets it studied. Overall, scattered site properties had a 7.3 percent rental premium over BTR.