TruAmerica on Investing in West Coast Markets
- Jun 25, 2019
TruAmerica Multifamily’s $8.7 billion portfolio consists of approximately 40,000 units in prime locations throughout Northern and Southern California, Washington, Oregon, Colorado, Arizona, Nevada, Utah, Maryland, Georgia and Florida.
In an interview with Multi-Housing News, Co-Chief Investment Officer Matthew Ferrari reveals how close the company is to hitting $1 billion worth of acquisitions for this year, what secondary markets is the company investing in, as well as his predictions for top West Coast markets. Zach Rivas, director of acquisitions for the company, shares the ways in which investors can best maximize their returns in markets like Denver.
What challenges are most prevalent in Denver’s multifamily market compared to other metros?
Rivas: The biggest challenges in a market like Denver are identifying assets insulated from the robust development pipeline, as well as pursuing assets with a measurable discount to replacement cost.
How does TruAmerica stay competitive in the tight value-add space?
Ferrari: We are a relationship-driven firm and we do our very best to leverage those relationships to acquire properties in markets that we believe will exhibit positive supply/demand fundamentals over the next three to five years. Additionally, because of our vertically integrated platform, we are able to minimize construction costs and maximize each property’s operational performance through our talented construction and asset management teams.
TruAmerica owns 2,000 units in Denver. What role does this market play in the company’s overall investment strategy?
Ferrari: Denver is a market that we’re very focused on and have been bullish on for several years and we consider it one of our top target markets for acquiring Class B suburban apartments. Denver continues to attract residents from all over the country due to its diverse employment and lifestyle.
Describe how investors can best maximize their returns in markets like Denver.
Rivas: Investors can best maximize their returns in value by not overspending on interior renovations and maintaining a healthy gap between newly constructed product and fully renovated older vintage assets. There is some ground that cannot be made up and it becomes detrimental at times overspending to try to close too much of the gap.
TruAmerica aims to hit $1 billion worth of acquisitions this year. How close is the company on hitting this goal and what markets is it focusing on?
Ferrari: We’re currently 70 percent of the way to our goal having acquired communities in Orlando, Tampa, Atlanta, Las Vegas, and Denver, with several potential transactions in the pipeline. We continue to focus on these markets along with other markets that we’ve invested in including California, Salt Lake City, Maryland, Northern Virginia and Seattle.
This year, the company deployed $500 million in secondary markets including Colorado. What other secondary markets does TruAmerica target? What makes secondary markets attractive in the long run?
Ferrari: We continue to look for suburban Class B assets in both primary and secondary markets. Secondary markets that we’re focused on in 2019 are Las Vegas, Phoenix, Denver, Salt Lake City, Atlanta, Orlando, Tampa, Raleigh and Charlotte. We think all of these markets exhibit strong multifamily fundamentals in both the short and long term.
What are your predictions for the future of the West Coast markets? Which ones are emerging? Which will be strongest and why?
Ferrari: We continue to be bullish on markets with strong job growth, a business-friendly climate and low tax burden. West Coast secondary markets with this dynamic include Las Vegas, Phoenix, Denver and Salt Lake City.
What are TruAmerica’s goals for 2020 and beyond?
Ferrari: While we have not set specific targets for 2020, our investment thesis remains the same as it was when Bob Hart formed the firm with The Guardian Life Insurance Company of America in 2013. We will continue to expand our assets under management by acquiring properties with renovation and management upside in high growth markets, strategically dispose of assets when we’ve achieved our business plan, continue to grow our existing investor relationships and finally, continue to develop a company culture that promotes the development of our people enabling them to impact our organization and investors in a meaningful way.