As the competition for workforce housing properties heats up, Class B investors are adjusting their strategies to better navigate market conditions.
“During recessions, more affordable apartments perform much better. I think we’re seeing that now,” said Stuart Boesky, CEO of Pembrook Capital Management.
Henry Manoucheri, chairman & CEO of Universe Holdings, said in recent months his multifamily investment company has been bidding in Phoenix―a new market for his Los Angeles-based firm―and experiencing a “tremendous feeding frenzy” for large well-stabilized multifamily properties.
Castle Lanterra Properties has completed two acquisitions totaling 893 units since March, including a 364-unit workforce property near Atlanta. CEO Elie Rieder finds owners beginning to value in-place cash flow versus potential value due to market volatility and future uncertainty.
Jacob Reiter, CEO of investment manager Verde Capital Corp., said buyers paying pre-pandemic prices have been approaching his firm to acquire Class B properties from its portfolio.
TruAmerica Co-CIO Matt Ferrari said the company played defense until May to make sure the portfolio would perform on rent collections. By October, the company made five acquisitions totaling 1,480 units in Atlanta, Las Vegas, Orlando and Tampa, Fla., and Southern California and expected more before year-end.
Ferrari said TruAmerica is underwriting longer holds, slowing down renovations and keeping some rents at lower price points.
Anticipating some renters will take advantage of remote working and seek less congested locations, CLP will continue focusing on strong suburban markets in Florida, Atlanta, Denver, Dallas, Austin, Texas, Birmingham, Ala., and the Carolinas in 2021. Concerned about a potential wave of evictions after moratoriums expire, CLP is maintaining a conservative approach through 2022.
New York-based TOPAZ Capital Group LLC is a newer investor in workforce housing. CEO and Managing Partner Marc Hershberg said most of the growth is centered on places like Jacksonville, Fla., where TOPAZ owns about 1,200 units and expects to add another 800 units by early 2021.
While two of the three assets were value-add, Hershberg said TOPAZ is considering lighter value-add and turnkey plays throughout the Southeast until the economy and political environment stabilizes.
Sector Insights rotates among market rate/luxury housing, workforce housing, low-income housing, student housing, senior housing and mixed-use.