An Investcorp fund has acquired five multifamily properties totaling 2,228 units in Arizona, Texas and Georgia for approximately $420 million.
Investcorp, a global provider and manager of alternative investment properties, has completed more than $1 billion in U.S. multifamily purchases in the last 10 months, including the acquisition in December of five properties totaling 1,854 units in Georgia, Florida and Maryland for $370 million.
Investcorp, which narrowed its strategic focus to the residential and industrial sectors in 2014, also sold $1.3 billion in multifamily properties including about $300 million in student housing assets within the past year. Of Investcorp’s more than $7 billion in global real estate assets under management, more than $3 billion is U.S. residential assets.
Michael O’Brien, New York-based managing director, co-head of North America real estate & head of residential at Investcorp, said the firm has capitalized on growing markets with favorable economic trends, particularly in the Sunbelt markets.
“We still like the markets a lot. We like the dynamics. If anything, during the pandemic they got stronger,” O’Brien told Multi-Housing News. “We saw more in-migration into the Sunbelt states, particularly the markets we just bought in.”
O’Brien said during the pandemic the firm focused on occupancy, which remained about 97 percent, and rent collections, which held up stronger than the Northeast or Northwest markets.
“We weren’t that far off from where we were pre-pandemic. And today we’re back to where we were pre-pandemic in terms of collections and starting to see rental increases in the portfolio,” he said.
Investcorp did not identify the sellers of its newest acquisitions. Four of the five assets were acquired in off-market transactions. Two properties were acquired in the Atlanta area. Rosemont Dunwoody, a 608-unit property in Sandy Springs, Ga., is located within 5 miles of five major hospitals and 3.5 miles from the Perimeter Center with more than 36 million square feet of office space.
Rosemont Brookhollow, a 380-unit property in Norcross, Ga., is located along the I-85 industrial corridor with about 150 million square feet of industrial space, a strong driver of demand for multifamily properties. They both have fitness centers, swimming pools, resident clubhouses, business centers, children’s playgrounds and outdoor recreation spaces.
Two properties are located in Phoenix. Tides at Deer Valley, a 436-unit property, is situated near the Metro Center Mall and several educational institutions including Arizona State University – West Campus, Paradise Valley Community College and Midwestern University.
Tides at Paradise Valley, a 380-unit community, is located near four of metro Phoenix’s largest retail/entertainment districts. Amenities include fitness centers, swimming pools, BBQ areas, resident clubhouses, billiards recreation rooms and pet parks. Tides at Deer Valley also has a basketball court.
Tides on Harwood is located in North Richland Hills, Texas, which is near employment centers in the Dallas-Fort Worth area. The 424-unit property has fitness centers, swimming pools, children’s playgrounds, resident clubhouse, business center and a sand volleyball court.
Acquisition, Disposition Strategies
All of the markets have experienced high job and population growth. Investcorp also noted Dallas and Phoenix have seen in-migration from coastal communities, particularly during the pandemic, of people taking advantage of lower taxes and more affordable cost of living.
O’Brien said Investcorp is in the process of closing on an Orlando, Fla., property, noting that the firm’s internal research and “boots on the ground” showed fundamentals were strong despite the pandemic-related closings of the major theme parks.
“We have a sizable portfolio in Orlando. We saw during the pandemic despite what was going on with the parks …that occupancy remained strong and collections remained strong,” he said.
In addition to Sunbelt markets, O’Brien said Investcorp is looking to expand in state capitals with large universities and other secondary markets. Some of those markets include Columbus, Ohio, and suburban Philadelphia.
Asked about the $1.3 billion in dispositions in the past year, O’Brien said the hold time is generally three to five years. Investcorp routinely evaluates its holdings in year three to decide whether to consider marketing a property for sale or holding it. During the pandemic, he said they decided to sell more assets to take advantage of the low supply and high demand for multifamily properties, particularly those in the Sunbelt. O’Brien said due to the limited availability of properties, interest in their portfolios was high.
“It was the who’s who of buyers. It was public pension funds. It was high net worth individuals. It was regional players. It was a little bit of everything and I think that had to do with there was nothing available. We believed we could get premium pricing,” O’Brien told MHN.
While they are evaluating the next wave of dispositions, he said the firm is probably not going to be as active this year.
“We want to take advantage of the increase in rental rates that we’re seeing right now,” O’Brien said. “We think we can achieve a 10 percent rent increase over the next year as these apartment leases roll from pandemic rent to today.”