$500M Fund to Focus on Suburban Multifamily

Greg Ward, CIO at Atlantic|Pacific Real Estate Cos., revealed the company’s plans for its second multifamily investment fund with Blue Arch Advisors and the challenges they face in the multifamily market.
Greg Ward, Chief Investment Officer of Atlantic | Pacific Real Estate Group

Greg Ward, Chief Investment Officer of Atlantic | Pacific Real Estate Group

Atlantic | Pacific Cos. (A|P) and Blue Arch Advisors closed their second co-sponsored investment fund, Blue Atlantic Partners II, last month. Just like the first, the focus is on purchasing existing multifamily communities in the Southeast and Southwest U.S. The properties will be managed by A | P and included in the company’s value-add/renovation program.

The fund’s buying power is expected to reach $500 million, with $110 million in initial equity capital commitments and more from anticipated leverage. Blue Atlantic Partners II investors include high net worth individuals, domestic and international institutions. Atlantic | Pacific Real Estate Group CIO Greg Ward discussed with Multi-Housing News the timeliness of the new fund in today’s multifamily sector.  

MHN: What are your goals for Blue Atlantic Partners II?

Greg Ward: Our midterm goals are to identify investments in good locations within our target markets that meet our yield requirements but can still be purchased at a basis that is a discount to replacement cost.

MHN: What can you tell us about the investment activity of the first Blue Atlantic fund?

Ward: In the first Blue Atlantic Fund, we were fortunate to identify a couple of small portfolios with assets that met our investment criteria. This allowed us to completely invest the fund within 9 months.

MHN: How do you see the multifamily market in terms of supply and demand?

Ward: I think there has been a general sentiment that the amount of new construction in the urban core of most of the major markets in the Southeast and Southwest may create some supply issues, at least in the short term. We are primarily focused in the suburban markets and the fundamentals within those markets still feel very good.

MHN: What are the main challenges in multifamily investment right now?

Ward: The biggest challenge this year has been the lack of product available in the market to purchase. This combined with the increase in capital looking to purchase multifamily assets, has created a pretty challenging investment climate.

MHN: How do you see the multifamily sector going forward? 

Ward: I think there has certainly been a slowdown in new development activity recently. Both debt and equity sources seem to be concerned about the amount of new supply and will be cautious going forward. In general, I think the demand from tenants will continue to be strong for the foreseeable future. We may not see the extreme rent increases we’ve enjoyed over the past few years, but we should continue to see moderate rent growth.

MHN: Do you think lenders will remain conservative in the future?

Ward: It feels like lenders will remain generally diligent in their underwriting. I think the impacts of the recession still linger in the memory of most groups and while there is pressure to be competitive, the banks that we have dealt with still focus on debt service coverage levels based on existing asset performance.

Image courtesy of A | P