Top 5 Midwestern Markets for Multifamily Transactions
- May 05, 2020
The first quarter of 2020 was fairly active for multifamily investors in the Midwest, with a little more than $1.5 billion in deals closing through the end of March, according to Yardi Matrix data. While this shows a notable drop from the $2.4 billion from the same period last year, the number of deals was relatively stable as investors predominantly shifted focus toward value-add acquisitions in metros with lower price points.
While the effects of the COVID-19 pandemic have yet to fully register in the multifamily sector, sales volume substantially declined during the month of March. Overall deals fell to roughly half of January and February’s totals, adding up to $318 million across all markets in the Midwest.
The table below utilizes Yardi Matrix data to highlight the region’s metros with the highest transaction volumes in the first quarter of the year. Combined, the top five markets represent more than two-thirds of the Midwest’s investment activity.
5. Kansas City, Mo.
Transaction volume in the Kansas City metro area totaled $142 million in the first quarter of 2020. While significantly lower than the $217 million that closed during the same time last year, the drop comes as no surprise, given the chilling effect the coronavirus pandemic has had on deals, particularly in March. Nearly two-thirds of the more than 4,200 units that traded in the quarter changed hands in January.
One of the most notable transactions was Aragon Holdings’ disposition of 1,953 units in four communities, as part of a nearly $1.9 billion, 13,243-unit portfolio sale to Harbor Group International. The Kansas City properties included the 807-unit Coach House, 550-unit Mansion, 322-unit Timber Lakes and 274-unit Fairways assets, all located in suburban zones.
4. St. Louis
The Gateway City kicked off the new year with $173 million in multifamily sales, more than triple the $50 million closed in the first quarter of 2019. Nearly 60 percent of the transactions closed in 2020’s first three months involved properties located in the city’s suburbs west of the Mississippi River.
The Villages at Bogey Hills, a 486-unit community at 2200 Lake Court in St. Charles, Mo., was the largest property to change hands in the first quarter. Buyer Beitel Group secured $63.5 million in acquisition financing from Arbor Realty Trust. The seller, Maxus Realty Trust, had purchased the suburban, Class B asset in mid-2011 from DWS for $30.1 million.
Indiana’s capital saw more than $210 million in closed multifamily deals in the first three months of the year, a noteworthy gain of 8.4 percent compared to the beginning of 2019. Investors overwhelmingly targeted assets in suburban submarkets—only one of the 10 properties sold was within Indianapolis city limits.
Hampshire Properties’ $133 million disposition of a 1,024-unit portfolio in the western suburbs marked the largest deal of the quarter. Newmark Knight Frank provided buyer Spruce Capital Partners with $102 million in Fannie Mae acquisition financing. The four garden-style communities—Settlers Run, Saratoga Crossing, Avon Creek and Brownsburg Crossing—last sold as part of a nearly 2,000-unit deal in 2012.
2. Twin Cities
Following $1.2 billion in transactions in 2019, the Twin Cities’ multifamily investment scene started the year on a strong note, with $285 million in volume during the first quarter. Similar to many of the Midwest’s other metros, the highest deal volume was well outside the Minneapolis-St. Paul urban core. Suburban sales totaled $179 million, nearly two-thirds of the quarter’s total investment dollars.
Dominium’s $75 million sale of the fully affordable, 834-unit Huntington Place was the metro’s largest transaction. Nonprofit developer Aeon partnered with the Twin Cities Local Initiatives Support Corp. and the National Equity Fund to close on the property—the second-largest affordable community in the state. The asset is located at 5805 N. 73rd Ave. in Brooklyn Park, Minn.
The Midwest’s largest metro tops our list, with more than $300 million in transactions through the end of March. However, sales have slowed significantly compared to the first quarter of last year, when deals totaled $679 million. As affordability remained an issue in the Windy City’s urban core, renters and investors continued to flock to outlying areas. Suburban transactions totaled $204 million, or more than two-thirds of the metro’s total.
Chicago’s largest multifamily deal of the quarter was Passco Cos.’ $90.4 million acquisition of the 260-unit Atworth at Mellody Farm in Vernon Hills, Ill. The seller, Focus Development, wrapped up construction on the Class A property in March 2019. KeyBank provided a $57.2 million Fannie Mae loan to finance the deal. The community is located at 1111 N. Milwaukee Ave., some 30 miles northwest of the Loop.
Yardi Matrix covers all multifamily properties of 50+ units in size across 133 markets in the United States. This ranking reflects transactions for properties within that sample group.