As the pandemic pushed residents to leave major coastal markets and consider smaller, less dense U.S. cities, multifamily investors were compelled to recalibrate their strategies and target suburbs and secondary or tertiary markets.
Jacksonville, Fla., was one of the nonmajor markets that benefited from these pandemic-driven trends. The metro saw $1.7 billion in closed multifamily deals in 2020, up 22 percent year-over-year, Newmark noted.
RAS Property Group recently invested nearly $56 million in The Lofts at Wildlight—a Class A, 279-unit, garden-style property—in Jacksonville, and the company plans to continue to expand its portfolio across the metro. Michael Heller, managing partner with RAS Property Group, explains why Jacksonville’s multifamily market has potential and unveils his company’s business strategy going forward.
What does Jacksonville have to offer to investors nowadays?
Heller: Jacksonville is an excellent market for multifamily investment, with strong demographics and job growth. The city is home to several Fortune 500 headquarters and it has invested billions of dollars to expand the Port of Jacksonville, which has an annual impact of $19 billion and provides 65,000 jobs. It is the largest city by area in the contiguous U.S., but we believe it has not yet reached its full potential and there will continue to be strong demand for new multifamily as the city keeps growing and attracting new residents.
How does your recent acquisition of The Lofts at Wildlight fit your investment strategy?
Heller: RAS focuses on buying Class A properties in markets throughout the Southeast. The Lofts at Wildlight is located in Nassau County, which is about 20 minutes north of downtown Jacksonville and also only 20 minutes away from the beautiful beaches of Amelia Island.
South Jacksonville, where we’ve owned for four years, has been a rapidly growing market, which has led to some overcrowding, so we wanted to focus on the next up-and-coming suburb. After studying the market, we felt this location in Nassau County had several features which would attract residents to the area—such as a great school district, proximity to downtown and the beaches—and it’s part of a 2,900-acre mixed-use development that will continue to grow over the next 50 years. There is not much competition around us now, but we do believe more new development will be coming soon as the area is poised for growth.
How does the Jacksonville multifamily investment environment compare to other markets in Florida?
Heller: Although our portfolio is spread across the Southeast, we are mostly focused on Florida since it’s our backyard. Pretty much every market in Florida is doing well right now as they all provide an attractive lifestyle for their residents.
Jacksonville is more of a suburban market as most of its residents live outside the downtown area. There are several pockets that have flourished over the last five years, but as those areas become overcrowded many residents want to seek out something new.
What are some of the positive trends you’ve seen in the metro’s multifamily sector in the past few months?
Heller: We have all read about the large migration to Florida throughout the pandemic. However, from our view, that trend had already started several years ago. The pandemic only escalated this trend as people now had the opportunity to sample new living arrangements with the flexibility of working remotely, or they lost their job and were forced to seek new employment elsewhere. Florida has been open for business since last summer and has provided many job opportunities for those coming from cities that have been shut down for nearly a year, so the demand for multifamily has been stronger than ever.
Do you plan to expand your Jacksonville multifamily portfolio? What types of properties are you looking for?
Heller: Absolutely. We believe Jacksonville has not yet reached its full potential and still has a ways to go. Although we are still looking at deals throughout the Southeast, one of our main directives is to build a sizable portfolio in Jacksonville, and we will continue to focus on newer, Class A properties.
What types of properties would you consider risky investments in upcoming quarters?
Heller: We are solely focused on multifamily, so I can’t really speak to other asset classes, but anything outside of the Class A market is not on our radar right now. Our business plan has proven successful as we’ve weathered the pandemic well, with 99 percent collections and mid-90 percent occupancy throughout our portfolio, so we plan to stick with it. We have done some value-add in the past but, lately, the pricing seems to be an inverted curve, with sellers baking a lot of the future value into their pricing, which means you need to execute perfectly in order to hit the same returns we’re seeing on our brand-new properties.
How do you expect the multifamily market in Jacksonville/Florida to perform in 2021?
Heller: We expect the market will continue to grow. The pandemic seems to be coming to an end, which means the overall economy can get back to normal. Jacksonville has established itself as a great place to live and work, so we expect the demand for high-quality housing will remain strong.