Mill Creek, QuadReal Form $421M JV
- Apr 21, 2020
Mill Creek Residential and QuadReal Property Group have formed a $421 million joint venture aimed at developing and operating multifamily communities in targeted U.S. markets over the next two to three years. The JV recently closed on its first land acquisition and is planning Modera Six Pines, a 429-unit, Class A apartment community in The Woodlands, Texas.
Hodes Weill Securities acted as financial advisor and global placement agent for Mill Creek in connection with the formation and capitalization of the investment joint venture.
Modera Six Pines will take approximately two years to complete once construction begins. A construction date was not released but Mill Creek officials said they will work with QuadReal to determine the best time to start construction.
“The disruption caused by COVID-19 has created an opportunistic time to be investing in the development of multifamily real estate given the dearth of available capital for all but the most experienced developers, a lower cost environment, and the greater availability of skilled labor,” David Reynolds, executive managing director-investment management for Mill Creek Residential, told Multi-Housing News. “Given the current environment and the fact that it takes on average around 29 months to complete construction, we expect to be in the enviable position of delivering our apartment homes in a recovered market with limited new competition.”
Asked whether the JV was signaling to others in the commercial real estate industry that multifamily will continue to be one of the strongest asset classes after the crisis, Reynolds said yes. “Historically, returns in multifamily have exceeded other real estate types, especially on a risk-adjusted basis. Market fundamentals point to continued strength in the sector due to favorable demographics and stronger demand for rental apartments.”
Reynolds said Mill Creek and QuadReal are looking at development opportunities in the “smile” of the United States—states on both coasts as well as Phoenix, Denver and in Texas.
William MacDonald, CEO, president & CIO for Mill Creek, said in a prepared statement the joint venture would be an important step in further developing the firm’s investment management business. He cited QuadReal’s depth of experience in the multifamily sector and said the company looked forward to growing its portfolio of high-quality, award-winning communities in some of the country’s most desirable markets.
Tim Works, managing director, Americas for QuadReal, noted teaming with Mill Creek was a new relationship for the company. He said the two companies share a deep conviction in the asset class and said QuadReal was keen to grow its portfolio of Class A apartment properties throughout the U.S.
QuadReal manages the real estate and mortgage programs of British Columbia Investment Management Corp. (BCI), one of Canada’s largest asset managers with a $153.4 billion portfolio. QuadReal manages a $37.6 billion portfolio spanning 23 global cities across 17 countries.
In February, QuadReal and longtime joint venture partner Realstar acquired a 294-unit apartment rental community in London from Kennedy Wilson for approximately £110 million, or $273 million. The JV has acquired more than £400 million ($496 million) of assets and intends to purchase more than £1 billion ($1.24 billion) within the next two years.
Mill Creek Developments
Mill Creek has a portfolio with about 80 communities and more than 21,300 apartment homes either operating or under construction across the U.S. Mill Creek Residential Trust has raised more than $10.6 billion in capital since 2011 and has a development pipeline valued at about $5 billion.
In March, Mill Creek began construction on Modera Flagler Village, a 350-unit, 24-story apartment community in the Flagler Village neighborhood of Fort Lauderdale, Fla. Residents should begin moving in by fall 2021. It will be the company’s second development in Fort Lauderdale along with the 555-unit Modera Port Royale.
In Florida, Mill Creek also developed 16 other communities under the Modera brand including in Miami, Tampa and Orlando. In September, Mill Creek broke ground on the 353-unit Modera Tampa that is also expected to open in fall 2021.