Inland Targets Multifamily—Again

Inland’s 2015 apartment purchases neared $600 million, says Cosenza. “This year, we plan to expand that.”

OAK BROOK, IL— Mark Cosenza is a man of his word. The SVP of Inland Real Estate Acquisitions told GlobeSt.com late last year that multifamily would once again be a major push for his group, the sourcing entity for Inland Private Capital and Inland’s residential REIT, Inland Residential Properties Trust . To judge by January activity alone, he’s sticking to the plan. Whether or not residential delivers the banner year that retail did in 2015 remains to be seen. One thing’s for sure. It won’t be for want of trying. “Last year we finished with 15 apartment deals,” he tells GlobeSt.com. “Our total purchase price was just under $600 million. This year, we plan to expand that—and outdo ourselves.” They’re off to a good start, IREA has recently purchased the off-market Circa de Fishhawk Ranch , a multi-building residential community of 260 units in Lithia, FL, just outside of Tampa; and Avalon Charles Pond (to be renamed Enclave at Charles Pond), a 200-unit complex in Coram, NY. Both properties were part of a flurry of activity for IREA, in a reported spate of eight acquisitions totaling $385 million. Not included in that bundle was another hot-off-the-press Tampa-area buy, Sawgrass Cove Apartments in Bradenton, FL. The Florida purchase alone brings to more than 1150 the total of Sunshine State units for Inland. But the SVP says that the 2016 multifamily push won’t overshadow Inland’s retail activity. “We’ll stay with our grocery-anchored retail strategy but increase our multifamily focus, purchasing for our private capital corporation and our REIT,” he tells GlobeSt.com.

Circa de Fishhawk Ranch and Enclave at Charles Pond were both part of a recent spate of eight acquisitions totaling $385 million.

What are the buying parameters of that strategy? “We have a pretty wide scope of properties we’re targeting,” Cosenza explains. “Since we purchase for two separate entities, the private capital group and the REIT, which have different criteria, we run the entire gamut of class A and class B properties in the top 100 US markets.” He adds that this basic target outline might go through a bit more refinement for the REIT, “but we haven’t narrowed that yet.” There are certainly some patterns evident in the recent acquisitions. All are upscale apartments in similarly upscale neighborhoods. All boast occupancies solidly in the 90s and with little value-add necessary. Sawgrass is among the oldest and the one needing the most TLC. Built in 1991, it was rehabbed by the former owner, who never finished the job. “The prior owner completed about two-thirds of the modernization, and we’ll finish those units and achieve added value for that,” says the SVP. But Cosenza says that value-add is not a core part of the criteria. “I’m ok with doing some value add in a new market if I have enough units to start with,” he explains. “In a market where we don’t have any units, we need to start at around 200 units or more. If we’re already there, we’ll go a lot lower—to 100 units,” and with a solid local-market core of units, the heavy-lifting of renovation becomes viable.

Sawgrass Cove Apartments. “We have a pretty wide scope of properties we’re targeting,” Cosenza explains.

So the new year brings a solid start to the strategy, but it also brings a new interest rate environment. How does the latter inform the former? “I don’t think the fed rate hike impacted anyone,” he responds. “We all had it factored in. On the backside though, after the first of the year, with the global economic struggles we’re seeing, I think it’s caused the Fed to rethink how they’ll work interest rates for the rest of the year, even though they just gave an outline in December after they made their raise. And even though they’ve alluded to a possible March raise, I firmly believe they won’t unless they can show GDP growth. And we’ll need more job and income growth to get that.” He says he’s also seeing some “flattening in apartment cap rates. We think it’s a great time to get into apartments, because as interest rates go up, cap rates will go up and inflation will be there at the same time.”