At $94M, Stoneweg US Closes Largest Portfolio Sale to Date

Investment firm Stoneweg US has sold the Cambridge portfolio, a 10-property, 1,207-unit garden-style apartment portfolio in central and north Florida, to a joint venture between Harbor Group International and BRG. The sale was valued at $94.3 million, and it is the firm’s largest disposition to date.

Stoneweg purchased the portfolio in 2017 and implemented a value-add business plan, improving both the management and operations as well as executing capital expenditures. The property was updated with modern amenities, new landscaping and remodeled units, which the firm said helped to drive occupancy. As a result of the capital improvements, the property was elevated from a class-C property to a class-B property. The business plan ultimately generated 20% IRR for investors, an impressive feat considering the market challenges in 2020 due to the pandemic.

The deal is especially impressive in the context of the greater Florida market. Rents in the Orlando market decreased .4% by the half-year mark, according to research from Yardi Matrix, as tourism and the entertainment industry were both severely impacted by the pandemic, and 1,200 new units came to the market, a total of $994 million in new product. This set the stage for further rent declines in the fall.

The pandemic reversed a strong stretch of growth for the Orlando market. According to Yardi Matrix, Orlando has had the strongest rent growth in the country over the last several years. Rents contracted in both the lifestyle market-rate segment as well as in the renter-by-necessity segment, which contracted by .2%. The report predicts rents in the market will contract by .9% in 2020.

Nationally, the decrease in Orlando rents is minor compared to other markets. Top-tier markets have experienced dramatic decreases in apartment rents. San Francisco, New York and Seattle have seen the steepest decline in rental rates, with 17.8%, 11.6% and 9.9% drops in average rent, respectively, according to research from Apartment List. This has offset all rent growth from the last year in each of these markets. On the other hand, apartment rents have increased in select markets, particularly in secondary markets. Boise, Idaho; Toledo, Ohio; and Greensboro, North Carolina all posted rent growth this year, at 9.7%, 8.9% and 7.6% respectively. In these markets, rent growth surpassed growth in 2019. This data puts Central Florida somewhere in the middle in terms of apartment rents trends this year.