ST. PAUL—As reported last week in GlobeSt.com, the competition among investors for properties in the hot multifamily market has intensified, and an increasing number of investors are going outside of their own markets when they want to make an acquisition. And getting loans to finance those acquisitions frequently means finding a provider that has a broad reach but can also tap into local knowledge.
“The mid-sized owners of real estate have had to go to secondary markets,” Jeff Patton, managing director at St. Paul-based Oak Grove Capital, tells GlobeSt.com. And many of their clients take a regional approach and choose to concentrate acquisitions in the Midwest or perhaps the East.
Oak Grove, for example, just originated a $42.5 million fixed-rate Fannie Mae loan for a joint venture between White Oak Partners, an investor in Westerville, OH, a suburb of Columbus, and a fund managed by Los Angeles-based Ares Management to acquire Southview Gables, a 425-unit garden-style apartment complex in Inver Grove Heights, MN, a suburb of St. Paul.
Columbus is an attractive market with a lot of good fundamentals, says Paul Smith, vice president in Oak Grove's Columbus office, but many local investors find it tough to compete. “Being able to find good deals means going into new markets.”
And having offices in both Columbus and the Twin Cities meant that Oak Grove could assist White Oak “with local knowledge and experience,” says Patton. “On the Southview Gables acquisition, we had an Oak Grove loan officer and a borrower client, both located in Columbus, OH, and were able to leverage our significant presence in the Twin Cities market to our borrower's benefit.”
The Twin Cities region has one of the healthiest economies in the US, including the lowest unemployment rate of any large metro area. This has brought in many investors like White Oak that see opportunities to boost the cash flow from multifamily properties that did not get needed renovations during the recession.
Patton says that Oak Grove is seeing a lot of acquisitions where the buyer wants to come in, put in capital and drive rents upward. Currently, Southview Gables is a solid class B property, and the goal for White Oak is to transform it into an A-minus. Smith expects the new owners will renovate units as they turn over and complete the transformation in about 12 to 18 months.
Renovations similar to this are happening all over the Twin Cities, and Fannie Mae is playing a strong role, Patton adds. “They are very aggressive in pursuing business in markets like that.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
