Soaking Up Opportunities in the Sun Belt
American Landmark Apartments CEO Joe Lubeck reveals his company's investment strategy and what he sees stoking the hot Southern secondary markets.
American Landmark Apartments specializes in the acquisition, repositioning and management of multifamily communities, mostly in the Sun Belt region, where there’s strong population and job growth.
As CEO of the company, Joe Lubeck has led ALA to approximately $1.1 billion in multifamily asset acquisitions over the last year and the company will add another $1.3 billion or so in assets to its portfolio by the end of 2018. That will up its portfolio to approximately 28,000 units.
In September, the company acquired Haven at Liberty Hills, a Class A community in Houston. Also in September, American Landmark and its debt and equity partner, Electra America, acquired Hilltops Apartments, a 208-unit asset located 40 miles north of downtown Houston, in the city of Conroe.
With the first three quarters of 2018 behind us, what are the trends you’ve seen in the multifamily investor market?
Lubeck: In many ways, it’s a continuation of trends we’ve seen unfold over the past several years. First, on the demand side, there’s been a real shift away from traditional homeownership. More people are renting today than ever before, and as a result, rents are rising. With this dynamic, we’re continuing to see more players entering the value-add multifamily space in secondary market locations. Our country’s strong job growth supports the value-add proposition, so the field has become even more crowded. Still, we believe there are opportunities out there. Core-plus is becoming as attractive—if not more attractive—than value-add opportunities at this stage in the cycle.
What’s happening in the sectors you follow? What’s on your radar and why?
Lubeck: We continue to look at job growth in and around those Southern secondary market areas like Houston and Orlando. Rising interest rates are obviously on our radar, but it’s not impacting our deals so much because rates are still relatively low and there are a lot of different sources of capital. One thing we are seeing right now is that builders are overextended, which obviously has an impact on value-add players who, like us, complete in-place renovations in a compressed period of time.
What are the locations you are most interested in?
Lubeck: We’re investing heavily in metro areas such as Charlotte, N.C.; Orlando, Fla.; Atlanta; Houston and San Antonio. Last year, we were probably one of the largest buyers in the country.
What is the most important thing that investors need to be aware of in today’s multifamily environment?
Lubeck: I think investors need to be cautious of overpaying for a property in today’s “auction” environment. We’ve been able to dodge that a bit because our 30-year track record gives us a competitive edge and access to a lot of off-market deals. It’s extremely important to stay disciplined when buying.
What’s your key to planning a successful strategy?
Lubeck: There’s product, process and service. On the product side, we focus on well-located, nicely built properties in high job growth areas. All of our properties have to meet certain criteria. On the process side, we have a very fine-tuned repositioning approach to meet the demands of today’s renters. This usually entails adding new flooring, stainless steel kitchen appliances and, sometimes, washers and dryers—but we also invest a lot in amenities. Our communities have 24-hour state-of-the-art fitness centers, WiFi cafes, dog parks, package delivery rooms, and tennis or volleyball courts, for example. Lastly, we deliver exceptional customer service. Our management professionals are hands-down the most well-trained in the industry, and that’s critical in today’s market to attract and retain residents.