ATLANTA—It's a joint venture partnership with over half a billion dollars—and it targets class B properties. One of Atlanta's biggest multifamily players is at the center of the deal.
Cortland Partners, Canada Pension Plan Investment Board (CPPIB) and GIC formed a joint venture partnership with a targeted equity amount of $550 million to acquire and renovate 8,000 to 10,000 class B multifamily units in the US. CPPIB and GIC will each own a 45% interest in the joint venture and Cortland Partners will own the remaining 10% interest.
“Partnering with these first-class organizations solidifies our business model and proves that a class B multifamily investment strategy reflects smart money,” says Mike Altman, Chief Investment Officer of Cortland Partners. Cortland has long been an advocate of class B multifamily investment.
Class B multifamily properties are generally well-maintained older assets with opportunities for improvements to the buildings for the benefit of tenants, ongoing maintenance and long-term appreciation. The joint venture has initially acquired three value-add, class B garden-style communities located in high-growth markets of major U.S. metropolitan areas: Lakecrest at Gateway Park, a 440-unit rental complex located in Denver; Aurum Falls River, a 284-unit rental complex in Raleigh; and Waterstone Apartments, a 308-unit rental complex in Austin.
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“The US multifamily real estate sector continues to offer compelling risk-adjusted returns for the CPP Fund, driven by favorable population growth and employment trends,” says Hilary Spann, managing director, head of Americas, Real Estate Investments, CPPIB. “By focusing on class B asset opportunities, this joint venture enables us to add diversification to our US multifamily portfolio, which is concentrated in prime urban locations.”
The joint venture will pursue additional opportunities to acquire multifamily properties that are candidates for value-add strategies. The strategy targets primarily major markets throughout the Southern and Southeastern US. Lee Kok Sun, Chief Investment Officer, GIC Real Estate, says
“This venture will pursue a value-add strategy to capture the strong demand and resilient return profile of the US multifamily sector.”
Doug Bibby, president of the National Multifamily Housing Council, tells GlobeSt.com the long-term outlook for multifamily still looks very good. Strong demand for apartment living stretches out until at least 2030.
“Research shows that the industry will need to build 4.6 million new apartments between now and then to meet that demand,” he says. “That's an average of 328,000 new apartments annually—a pace well about the 225,000 completions a year the industry has averaged over the past five years. While completions picked up in 2017, contributing to some rent growth moderation, starts also slipped, suggesting that the balance between demand and new supply will be something to continue to watch in the year ahead.”
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