A pair of global investment firms plan to focus on buying multifamily properties across the United States as larger, institutional players beef up their buying capabilities in a surging apartment market.
Kennedy Wilson, an investment company based in Beverly Hills, California, is launching with an undisclosed institutional investor a $1.5 billion multifamily investment platform. The joint venture was announced hours before Ivanhoé Cambridge, a Canadian firm that invests in commercial real estate around the world, announced its own partnership with Los Angeles-based Mount Auburn Multifamily to acquire ground-up multifamily developments throughout the United States.
The amount of investors pouring into the apartment industry is “unheard of,” said David Kahn, director of market analytics with CoStar Group. “Everyone’s rushing in, trying to get into these generally stronger demographics.”
The efforts are the latest in a slew of major institutional investors announcing fundraising, partnerships or plans to buy apartments around the country. One of the most significant efforts in recent months came from Washington Real Estate Investment Trust, which is selling almost all its office properties as it accelerates its plan to transform itself into a firm that focuses exclusively on multifamily real estate.
“That signals multifamily really being the darling asset class of commercial real estate,” Kahn said of the WashREIT deal.
In February, Chicago-based Waterton raised $1.5 billion in equity commitments, creating one of the largest dedicated multifamily funds in the nation focused on buying properties with an eye toward investing. And in January, Bridge Investment Group reported raising $3.7 billion of new capital in 2019 and said it plans to spend $4.5 billion on apartments, specifically focusing on multifamily properties that could benefit from renovations and subsequent rent increases.
With the Kennedy Wilson partnership, “they’re following suit,” said Taylor Sims, senior director with Cushman & Wakefield’s multifamily advisory group. “These big fundraising efforts [aren’t] becoming standard, by any means, but we’re getting used to seeing it.”
A handful of socioeconomic trends are intersecting and creating a ripe apartment investment environment, Kahn said. During the pandemic, many Americans flocked to the suburbs of fast-growing cities such as Atlanta and Phoenix, ramping up demand for apartments in those markets. Many white-collar workers kept their jobs during the pandemic, saved money by staying indoors all year and can now afford higher rent rates. The national housing market is seeing record-high sale prices, with many houses selling the same day they’re listed, so more would-be homebuyers are remaining renters for the foreseeable future.
“These white-collar workers who are renting in the suburbs are looking at single-family prices that are up 15 to 20%,” Kahn said.
Investment activity is also up in Las Vegas, where Sims is based. In 2019, his team closed roughly $3.7 billion in multifamily transactions, Sims said. Deal flow was obviously down in 2020, because of the pandemic. But so far in 2021, there is already more than $3.7 billion in properties that have either sold, are under contract or just hit the market, Sims said.
“I think it’ll come at the cost of a slower year next year, maybe,” he said. “But for now, it’s exciting.”
The Ivanhoé Cambridge partnership seeks to focus on secondary cities where millennials are migrating; those cities include the in-demand investment markets of Phoenix; Atlanta; Denver; Nashville, Tennessee; and Raleigh and Charlotte in North Carolina.
To seed the partnership, Kennedy Wilson sold a 49% stake in an $800 million portfolio to the undisclosed institutional partner, according to the statement, and maintains a 51% interest in the portfolio.
The partnership plans to direct another $700 million toward apartment acquisition opportunities.
Details on the portfolio, as well as the institutional partner, were not disclosed. Kennedy Wilson did not return a request for a comment.
In June, Kennedy Wilson bought about 880 apartment units and a multifamily development site in Boise, Idaho — a city that’s increasingly attracting residents from pricier West Coast cities.
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