The Apartment Report
™
CRITTENDEN RESEARCH, INC. • P.O. BOX 1150·NOVATO, CA 94948 • CUSTOMER SERVICE: (800) 421-3483
Vol. 24, No. 13
EQUITY PARTNERS HONOR RELATIONSHIPS
Institutional capital sources’ hesitancy to form JVs with new general partners will make financing 2015
starts increasingly difficult for developers, especially local groups and smaller regionally focused firms.
Large institutional sources will dole out equity for ground-up deals slated for 2015 groundbreaking;
however, the majority of JVs will be with relationship-based developers. As a result, look for more
developers to tap EB-5 equity and proceeds from family offices. The number of equity sources willing to
form a JV with both a developer and another equity partner is likely to increase.
Canada Pension Plan Investment Board (CCPIB) prefers to only grow with existing general partners
and relationship-based equity sources. CCPIB has five deals underway and developers of these projects
include Essex Property Trust, AvalonBay Communities and Golub & Co. Two of these deals feature
additional equity partners — Allianz and MEPT. CCPIB has previously teamed with both firms on
development deals and future joint ventures will be likely in 2015. The equity sources’ average
commitment is around $50M.
Ivanhoe Cambridge rekindles a partnership with Greystar and plans to aid in the financing of at least
four deals likely slated for 2015 commencement. Several of the developments will be in Southern
California, with a lone deal proposed in D.C. The first deal to begin will be a project in Seattle. When it
comes to commitments for ground up, Ivanhoe will primarily focus on retail and office, with multifamily
accounting for roughly 10% of its’ pipeline. The equity source also forms a partnership with Veritas
Investments and plans to assemble a critical mass of smaller, roughly 20-unit, assets in San Francisco.
The JV has already committed $50M of equity for the acquisition of nine properties, and expects to dole
out an additional $100M to $200M. Ivanhoe will provide the majority of needed capital, as the investor
maintains a 90/10 split.
Some developers may look to EB-5 funding as an alternative to institutional equity; however, some
providers of this type of equity will only finance one or two deals per year. Civitas Capital Group
provides $11M to Argyle Residential for a project in San Antonio. All the equity was comprised of
EB-5 proceeds. This deal represents the only ground-up rental project Civitas will close in 2014. In late
2012 and 2013, the group provided equity to Wood Partners and Trammell Crow Residential for deals
that are currently underway or in lease up. Both projects are located in Dallas. The equity source typically
commits $5M to $12M per development. The majority of Civitas’ volume moving forward will be mezz
and senior debt, as equity investments in ground up become a tougher sell to foreign investors.
A number of local developers and smaller regional groups will tap high net worth individuals and family
trusts when raising equity for deals. If a project features less than 50 units these developers may fund the
deal with their own capital. Tucson, Ariz.-based HSL Properties will obtain equity for two upcoming
projects from high net worth individuals. The developments, both located in Tucson, will commence
during Q4 2014 and 2015, respectively. HSL has yet to tap institutional equity for deals during this cycle.
Regionally focused Afton Property Investments utilizes its’ own equity to finance a 24-unit deal in
Pasadena, Calif. The developer is in talks with some equity sources regarding a 110-unit project outside
Seattle, which is slated for first half 2015 commencement. Southern California-focused Decron
Properties raises capital from wealthy individuals and family trusts for a recent acquisition in Chino Hills,
Calif. Equity obtained accounted for 35% of the deal’s capital stack, roughly $28.7M. The firm may
receive some interest from institutional equity sources for a proposed 200-unit project in Huntington Beach,
Calif. However, this deal will not break ground until the second half of 2016.
Quotation not permitted. Material may not be reproduced in whole or in part in any form whatsoever. Copyright © 2014 Crittenden Research, Inc.
Page 2
The Apartment Report™
TOP APARTMENT MANAGEMENT COMPANIES
(NUMBER OF UNITS MANAGED)
COMPANY
APPROXIMATE
UNITS
DETAILS
1. Lincoln Property Company 153,000
Properties in 30 states, including some student
housing
2. WinnResidential
87,000
47,000 conventional units and 40,000 military
homes
3. MAA
84,000
Properties in AL, AZ, AR, FL, GA, KY, MS,
MO, NV, NC, SC, TN, TX and VA
4. Alliance Residential
80,000 (by
end of 2014)
Largest concentrations of properties in CA
(20,000 units), AZ (14,000 units), TX (13,500
units) and CO (5,500 units)
5. Bell Partners
64,000
Properties in TX, AR, MO, TN, AL, GA, SC,
NC, VA, FL, DE, MD, PA, OH and MA
6. Edward Rose & Sons
58,000
Conventional properties in 12 states; some
senior housing
7. Asset Plus Companies
45,000
Properties in 29 states; 100 student housing
communities and 90 conventional assets
8. Balfour Beatty Communities
45,000
Properties in 28 states and D.C.
9. Forest City
45,000
33,000 units of conventional rental and
12,000 units of military housing
10. Interstate Realty Management
Company
45,000
Affordable and mixed-income communities in
27 states
11. American Campus
Communities
44,000
201 student housing properties totaling
129,000 beds
12. Milestone Management
35,000
Properties in AZ, CO, NV, DC, FL, GA, MD,
NJ, PA, TN, TX, UT and VA
13. Cottonwood Residential
34,000
Properties in 20 states; high concentration in
the South and Texas
14. Harbor Group Management
Company
32,000
Properties in CT, FL, GA, IN, MD, NC, NJ,
OH, TN, TX and VA
15. Drucker & Falk
30,000
Properties in VA, MD, NC, SC, GA and FL
Other Management Companies: Pacific Union Property Management, 4,000 units in the San
Francisco Bay Area
Quotation not permitted. Material may not be reproduced in whole or in part in any form whatsoever. Copyright © 2014 Crittenden Research, Inc.
The Apartment Report™
Page 3
DEALMAKER DATABANK
ABI Multifamily
4715 N. 32nd St., Suite 105, Phoenix, AZ 85018
Rue Bax, Senior Managing Partner
(602) 714-1406
[email protected]
ABI completes the sale of a roughly 150-unit, garden-style
asset in Scottsdale, Ariz., for $18.5M (nearly $123K/unit).
Fully renovated in 2006, the Class B asset was purchased by
Wood River Properties from Security Properties.
ARA
901 S. MoPac Expressway, Suite 275, Austin, TX 78746
Pat Jones, Principal
(512) 637-1213
[email protected]
Jones aids in the disposition of a more than 600-unit asset for
Northland Investment Corp. The property, located in Austin,
Texas, was purchased by an affiliate of Heitman.
Institutional Property Advisors
2626 Hanover St., Palo Alto, CA 94304
Phillip Saglimbeni, VP – Investments
(650) 391-1796
[email protected]
Saglimbeni completes the sale of two newly built properties in
the San Francisco Bay Area and will list at least two similar
deals in the coming months.
JBM Institutional Multifamily Advisors
100 N. Tampa St., Suite 1620, Tampa, FL 33602
Jamie May, Chairman/CEO
(813) 812-5000
[email protected]
May lists a three-property, nearly 800-unit portfolio for
Landmark Apartment Trust. All the assets are located within
the Tampa MSA and were built between 1970 and 1973.
Kislak Company
1000 U.S. Highway 9, Woodbridge, NJ 07095
Jeff Squires, VP
(732) 750-3000, Ext. 246
[email protected]
Squires closes the sale of a more than 750-unit property in
New Jersey for $136M. The deal’s sales price represents the
highest in the Garden State since 2011. The offering received
21 offers and sold at $1M above its listing price. The property
features 168 affordable units.
Marcus & Millichap
8310-2 N. Capital of Texas Highway, Austin, TX 78731
Kent Myers, Senior Associate
(512) 338-7800
[email protected]
Myers brokers the sale of a 2012-completed asset in Victoria,
Texas, which lies near the Eagle Ford Shale. He also lines up
the closing of a similar asset in a submarket of San Antonio.
AUGUST TO DECEMBER, $2B IN REIT SALES
Property dispositions by REITs during the remaining months of 2014 will account for several billion in
transaction volume. Three trusts will sell $300M to $350M of product a piece, while a grouping of other
REITs will close $100M to $225M each. Included in these transactions should be select development site
dispositions, as some trusts elect to realize the value of entitlements rather than build out an approved
project. A number of existing assets sold by REITs will be product built in the 1980s and 1990s, often in
secondary markets, suburban locales and submarkets of primary cities. Product that fits this description
will likely net $25M to more than $40M. The Southeast should be one of the more active regions. Some
trusts may exit ownership of infill product in Seattle, Southern California and the San Francisco Bay Area.
With roughly $350M of dispositions slated to close before year’s end, AvalonBay Communities (AVB)
will be the most prominent seller amongst REITs. Aside from selling older product, the trust begins to
evaluate the disposition of newer deals in Northern California and Seattle. In San Francisco, AVB may sell
product to condo groups eyeing conversion opportunities. Proceeds from these sales will partially fund two
upcoming Bay Area project starts along with a development in Brooklyn, N.Y. The latter deal will involve
AVB partnering with a condo group to build a high rise that features a mix of rental and for-sale product.
Camden Property Trust’s $300M of upcoming dispositions will aid in funding several late 2014 project
starts, including a deal in Montgomery County, Md. The seven properties for sale will have an average age
of 29 years and account for a total of 3,000 units. Transactions will be located in North Carolina, Florida,
Georgia and Texas. The trust targets a high 5% yield for each deal.
Continued on Next Page
Quotation not permitted. Material may not be reproduced in whole or in part in any form whatsoever. Copyright © 2014 Crittenden Research, Inc.
Page 4
DEVELOPER
The Apartment Report™
TOP DEVELOPERS 2015 STARTS
(PART 3 OF 3)
UNIT STARTS
DETAILS
1. Crescent Communities 4,900
Houston, Dallas, Atlanta, Charlotte and Raleigh,
N.C., Orlando and Tampa, Fla.; expansion into
Phoenix and Denver
2. Greystar
1,500+
Southern California, Seattle, D.C.
3. Related Group
1,500
Orlando, Tampa and Palm Beach County, Fla.;
expansion into Atlanta
4. Equity Residential
1,200
Five projects; a number of deals slated for early
2015 commencement will now start in Q4 2014
5. ZOM
800+
Orlando, Fla., Baltimore
6. Wangard Partners
350+
Milwaukee, Wisc.
7. HSL Properties
300
Tucson, Ariz.
Other Active Developers: Shooshan Company, 267 units in Arlington, Va.; Kane Realty, 187 units in
Raleigh, N.C.; Afton Property Investments, 110 units in Seattle and 24 units in Pasadena, Calif.
AUGUST TO DECEMBER, $2B IN REIT SALES…
Continued from Page 3
Equity Residential (EQR) will sell older, garden-style assets in suburban D.C., Seattle and Southern
California’s Inland Empire. Expect EQR to unload around $300M of product, as the trust needs to finance
a number of projects that have been fast tracked. These late 2014 starts were initially slated for 2015
commencement. Spanning late 2014 and all of 2015, the trust expects to start nine or 10 projects totaling
more than 2,200 units.
With $125M to $225M of product sales lined up, UDR targets a blended cap rate of more than 6%.
Sales could occur in Florida and D.C., as the trust has been an active seller in these regions. Proceeds from
sales will fund the trust’s three year-end project starts, which are located in San Francisco, Los Angeles and
Orange County, Calif. Essex Property Trust will likely utilize profits from its three upcoming
dispositions to fund a $170M project start in San Jose, Calif. The trust has already obtained a $90M
construction loan for the deal.
Associated Estates Realty lists a Los Angeles County development site, along with properties in
southeastern Michigan and southeastern Florida. The trust initially purchased the land site in 2012 and has
since obtained all necessary approvals. Disposition proceeds are likely to fund projects in Los Angeles and
San Francisco that recently broke ground. MAA will close four sales during Q3, including two assets in
Mobile, Ala. The trust also sells development sites in Orlando, Fla., Birmingham, Ala., and Covington, La.
Several trusts will utilize disposition proceeds to fund redevelopment or acquisition opportunities, rather
than ground-up deals. AIMCO markets a number of conventional rental assets originally slated for 2015
disposition. Based on these executions, the REIT may sell more conventional product early next year.
Profits will be used to finance upcoming redevelopment projects in Philadelphia, Chicago and La Jolla,
Calif. During late 2014, Home Properties will sell three or four existing assets, along with two land sites.
The trust targets southeastern Florida as a market for new expansion, via acquisitions.
Aside from REITs, a host of institutional groups — primarily asset managers, pension fund advisors and
investment banking firms — will actively dispose of product during late 2014. Active sellers will include
J.P. Morgan Asset Management, Cornerstone Real Estate Advisers, Berkshire Property Advisors and
Capri Capital Partners. Invesco Real Estate trades a nearly 450-unit, garden-style asset outside of Los
Angeles to Decron Properties. Despite being built in the ’80s and requiring a comprehensive rehab, the
asset commanded nearly $187K/unit.
Quotation not permitted. Material may not be reproduced in whole or in part in any form whatsoever. Copyright © 2014 Crittenden Research, Inc.
The Apartment Report™
Page 5
OWNERS, DEVELOPERS & EQUITY INVESTORS
Afton Property Investments: 480 S. Orange Grove Blvd., Suite 12, Pasadena, CA 91105. Steve Boss, President,
(818) 968-4612. [email protected]
Argyle Residential: 301 Congress Ave., Suite 1100, Austin, TX 78701. Josh Stringer, Development Associate, (512) 904-2200.
[email protected]
Associated Estates Realty: 1 AEC Parkway, Richmond Heights, OH 44143. Frank Poli, Regional VP of Development,
(703) 216-8955. [email protected]
AvalonBay Communities Inc.: 4440 Von Karman Ave., Suite 300, Newport Beach, CA 92660. Timothy Walters, VP of
Investments, (949) 955-6203. [email protected]
Canyon Capital Realty Advisors: 2000 Avenue of the Stars, 11th Floor, Los Angeles, CA 90067. Jonathan Roth, President,
(310) 272-1500. [email protected]
CCPIB: 1 Queen St. E., Suite 2500, Toronto, ON M5C 2W5 Canada. Peter Ballon, VP/Head of Real Estate
Investments - Americas, (416) 868-8691.
Civitas Capital Group: 1601 Bryan St., Suite M-200, Dallas, TX 75201. Doug Conner, VP, (214) 572-2309
[email protected]
Crescent Communities: 227 W. Trade St., Suite 1000, Charlotte, NC 28202. Darren Pierce, Director – Asset Management,
(980) 321-6000.
Decron Properties: 6222 Wilshire Blvd., Suite 400, Los Angeles, CA 90048. Daniel Nagel, President/CEO, (323) 556-6600.
[email protected]
Greystar: 750 Bering Drive, Suite 200, Houston, TX 77057. Scott Wise, Executive Director, (713) 479-8911.
[email protected]
HSL Properties: 3901 E. Broadway Blvd., Tucson, AZ 85711. Omar Mireles, EVP, (520) 322-6994.
Ivanhoe Cambridge: 1001 Rue du Square-Victoria, Montreal, QC H2Z 2B5 Canada. Sylvain Fortier, EVP – Residential, Hotels
and Real Estate Investment Funds, (514) 841-7600. [email protected]
JBG Companies, The: 4445 Willard Ave., Suite 400, Chevy Chase, MD 20815. Matthew Blocher, SVP, (240) 333-3743.
[email protected]
MAA: 6584 Poplar Ave., Memphis, TN 38138. Jared Schepman, Senior Acquisitions Associate, (901) 435-5371.
[email protected]
NextGen Apartments: 16454 N. 91st St., Suite 103, Scottsdale, AZ 85260. Aaron Sher, VP of Development, (480) 219-3387.
Post Properties: 5040 Addison Circle, Suite 200, Addison, TX 75001. David Ward, EVP, (972) 851-3200.
[email protected]
Related Group, The: 315 S. Biscayne Blvd., Miami, FL 33131. Steve Patterson, CEO, (305) 460-9900.
Sack Properties: 111 Pine St., Suite 1600, San Francisco, CA 94111. Kirby Sack, President/CEO, (415) 981-8320.
TruAmerica Multifamily: 15315 Magnolia Blvd., Suite 301, Sherman Oaks, CA 91403. Robert Hart, President/CEO,
(818) 290-5780.
Veritas Investments: 500 Washington St., San Francisco, CA 94111. Roger Snell, Chief Investment Officer, (415) 578-7612.
[email protected]
ZOM: 2001 Summit Park Drive, Suite 300, Orlando, FL 32810. Greg West, Chief Development Officer, (954) 634-3654.
[email protected]
Quotation not permitted. Material may not be reproduced in whole or in part in any form whatsoever. Copyright © 2014 Crittenden Research, Inc.
Page 6
The Apartment Report™
SALES PRICES PEAK FOR NEWLY BUILT?
The volume of REITs, non-traded REITs, pension funds, investment firms and large joint ventures
acquiring newly built product expands, causing developers to dispose of projects earlier than anticipated.
Recently completed infill developments in gateway markets will trade from $500K/unit to more than
$650K/unit. More local developers that historically would not sell a project immediately following
stabilization are now considering it. Additionally, more merchant builders will sell fresh product on a
prestabilized basis, often with no discount to the sales price.
Prestabilized deals will be targeted by select REITs, pension funds and investment firms.
Equity Residential (EQR) and MAA represent two REITs with an appetite for prestabilized deals.
EQR pays nearly $71M for a property in Glendale, Calif., which was 81% leased at closing. MAA closed
on two prestabilized deals during Q2 and is likely to acquire in a similar fashion during Q4 2014 and early
2015. Recent prestabilized properties acquired were located in Dallas and Charlottesville, Va.
Some trusts will assume the management of a recently completed asset and then purchase that property at
stabilization. Associated Estates Realty will acquire new product via this strategy. The REIT purchases a
property during phase-two lease up and will close on the acquisitions of three additional communities in the
next three to six months. These four assets represent nearly 1,300 units.
A number of investment firms and institutional groups should compete with REITs for prestabilized
product. TIAA-CREF purchases a mixed-use, mid-rise property in Washington, D.C., at completion, with
no leases signed. The asset sold for more than $658K/unit. If the deal did not close prior to leases being
signed, occupants would have had the right of first refusal. The seller, JBG Companies, has a host of
additional D.C. projects underway. The developer may sell other developments upon completion.
Late recovering markets such as Phoenix and Las Vegas, along with Atlanta and San Diego, will start to
see their first prestabilized deals occur. TruAmerica Multifamily buys a 65%-leased property in Phoenix
from locally-based NextGen Apartments for $140K/unit. The sales price would indicate that TruAmerica
received a discount on the purchase price for taking some lease up risk.
The occurrence of prestabilized deals should continue to pick up heading into 2015; however, the pool of
buyers targeting newly completed, stabilized properties will be sizably larger. Several REITs, including
Essex Property Trust and Post Properties appear inclined to purchased fresh product at stabilization.
Essex pays $384K/unit and $369K/unit for two 2013-built assets in Seattle and Fremont, Calif. Post
acquired a similar product in Orlando, Fla. Inland Real Estate Estate Trust, Bascom Group/Oaktree
Partners, J.P. Morgan Asset Management, McCann Realty/DRA Advisors, Landmark Apartment
Trust, Steadfast Apartment REIT, JMG Realty, Abacus Capital Group, Pensam Capital and
Zurich Alternative Asset Management represent other pursuers of fresh, stabilized product.
The Apartment Report Team
Email: [email protected]
Customer Service
Tel: (800) 421-3483 Fax: (619) 923-3518
E-mail: [email protected]
Newsroom Fax: (619) 923-3294
The Apartment Report™ is published by Crittenden Research, Inc., 45 Leveroni Court, Suite 204, Novato, CA 94949. Send address changes to The
Apartment Report, P.O. Box 1150, Novato, CA 94948-1150. Contents copyright © 2014 Crittenden Research, Inc. Sample reports may be
requested online at www.crittendenonline.com.
Crittenden publishes The Apartment Report™, The Crittenden Report on Real Estate Financing™, Crittenden Real Estate Buyers™ and Crittenden
Retail Space™. For more information on our publications go to www.crittendenonline.com.
The Apartment Report™ is protected by copyright. It is illegal under federal law to make and distribute copies of this report in any form without
permission, including without limitation, photocopies, faxes, e-mails, digital scans and postings on an intranet site. Violators risk criminal penalties
and up to $100,000 in damages per offense. Please contact our customer service department at (800) 421-3483 for information regarding site
licenses, to request reprints of articles or to inquire about permission to make copies.
Crittenden makes every effort to ensure the accuracy of the information published in The Apartment Report™. Crittenden uses only those sources it
determines are accurate and reliable, but no guaranty or warranty with regard to the information is made or implied. Information in The Apartment
Report™ is subject to change. Crittenden does not accept fees nor is it a business partner with any companies or firms mentioned in this publication.
Quotation not permitted. Material may not be reproduced in whole or in part in any form whatsoever. Copyright © 2014 Crittenden Research, Inc.