Major CRE Investor Set to Exit Hot Southeast Multifamily Market

Coloney Group 26/02/2018

Decision by AVR Realty to Sell 13-Property Multifamily Portfolio Driven by Investor Demand, Not Weakness in Market, Say Execs

AVR Realty’s latest apartment offering is a massive portfolio including the SkyHouse Channelside in Tampa.

A big apartment owner with a number of multifamily holdings throughout the Southeast is exiting the region’s hot rental market with the listing of its latest portfolio.

AVR Realty, a national real estate investment and development firm based in Yonkers, NY, is shopping a 13-property, 3,760-unit portfolio of rentals in North and South Carolina, Georgia and Florida. Cushman & Wakefield is marketing the package, which is estimated to attract bids of about $850 million, or an average of $226,000 per unit.

The properties represent the last of AVR’s holdings of existing apartments in the Southeast region.

What’s more, in somewhat of a contrarian play, AVR isn’t planning to plow the proceeds of the sale into new apartment acquisitions in the region, but instead plans to target hotels and other asset classes that comprise its diverse portfolio.

AVR officials say the move is largely driven by investor demand and current pricing for apartments in the region, and that its decision to sell shouldn’t be read as a sign it feels the Southeast rental market has peaked, they say.

“Apartments are hot as a pistol right now, and there is still tremendous growth in the Southeast,” said Don Hegermiller, AVR’s director of multifamily properties. “Apartments are in demand and we put together a portfolio that’s effectively a core portfolio. You don’t often see a portfolio like this coming to market.”

AVR has already cashed out several of its positions in the apartment sector. Last year, the company sold over $800 million worth of apartments, including a $510 million deal to sell 11 properties in South Carolina, Tennessee, Louisiana and Georgia to Carlton Associates and investor David Werner last August.

It sold another nine-property, 2,079-unit portfolio of apartments in Louisiana a month earlier for $250 million.

But the firm, founded 45 years ago by Allan V. Rose, has a diverse portfolio, with sizable investments in shopping centers, office buildings and hotels in addition to apartments. Rose thinks AVR can realize better returns in some other asset classes right now.

“Mr. Rose is very good with his gut, he has a good one,” says Hegermiller. “He continues to invest in the southeast, but our focus is elsewhere. He has other places he feels he can get returns.”

The Southeast region continues to include several markets with strong apartment fundamentals, according to CoStar research. In the CoStar 2018 Multifamily forecast, Orlando, Richmond, Jacksonville, Tampa, and Fort Lauderdale are listed among the top-20 apartment markets for projected rent growth (Orlando leads the way with a projected 7% annual rent increase.)

As elsewhere, job and income growth is key to rental fundamentals in the Southeast.

Galina Alexeenko, CoStar’s regional economist based in Atlanta, said some of the region’s markets have economic momentum that rivals the technology and media-heavy West Coast markets, and are growing both in population and income.

“The South’s growing economy has attracted in-migration. The region’s population growth has exceeded the national rate in recent years, and is significantly above population growth rates in the Northeast and Midwest, and about on par with the West,” she says. “Similarly, job gains in the South have been robust, leading to income growth that has surpassed the national rate.”

All of that should be continued good news for apartment investors in the region.

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