Soft Market Conditions are Providing Favorable Pricing for Units with Long-Term Rent Growth Potential
- Jun 18, 2009
Newport Beach, Calif.–Stoneridge Capital Partners has acquired the 498-unit Avila Apartment Homes community in Rancho Santa Margarita, Calif. from The Northwestern Mutual Life Insurance Co. for $70 million. The private investor now plans to put in several hundred million dollars of discretionary capital in attractively priced assets over the next two to three years. Greg Merage (pictured), CEO of Stoneridge Capital Partners, believes in the long-term fundamentals for multifamily in Orange County, especially in south Orange County where demographics are strong. He talks to MHN Online News Editor Anuradha Kher about Stoneridge’s investment strategy for multi-housing.MHN: Can you explain the thinking behind Stoneridge’s multi-housing investment strategy? Greg Merage: From 2002 to 2006, Stoneridge Capital Partners’ real estate investments consisted primarily of capital placed with development partners or fund managers along with joint ventures. During that timeframe we also made some direct investments in commercial properties, operated the assets and then, by 2006, liquidated most of the portfolio. By 2007 we determined the best direction for Stoneridge was as a direct buyer of real estate. However, at that point in the economic cycle, we felt price levels for all product types had climbed to unsustainable levels. We remained patient as prices declined. Recently, we bought a multifamily property at, what we believe to be, a very attractive price. The purchase marks the first of many acquisitions we plan to make over the next few years. MHN: Why is now a good time for investing in multifamily housing? Greg Merage: Presently, we are experiencing soft market conditions, which are providing a window of favorable pricing for units with good, long-term rent growth potential.MHN: Will the company only invest in Orange County? Greg Merage: We are focused on making real estate investments in Southern and Northern California because we have broad experience and in-depth knowledge of these markets. We also plan to invest in Phoenix and Las Vegas. In these markets, we will pursue opportunities selectively. MHN: Do you have private funders? Can you describe their profile? Greg Merage: Currently, we are investing only family capital. MHN: Is there a cap on the amount that Stoneridge plans to invest in properties? Greg Merage: There is no cap on the amount invested, but we are seeking to invest several hundred million dollars of our discretionary capital in attractively priced assets over the next two to three years. Our appetite is subject to availability of properties that satisfy our underwriting criteria. MHN: What kind of multihousing properties will Stoneridge look at for investing? Greg Merage: We are looking for Class A and B multifamily properties that are post 1985 construction in close proximity to employment centers.MHN: Does Stoneridge plan to invest in them, rehabilitate and turn them around, or do something else with the properties? Greg Merage: Our strategy will be dependent upon the location and the profile of each individual investment. For example, those in “supply constrained” markets may be held for long-term growth. Other properties may be renovated, leased, re-tenanted or re-merchandised, and sold based on our team’s assessment.