Gulf Coast apartment buyers find advantages in acquiring multiple properties.
While investors overall continue to find the Gulf Coast multifamily rental market attractive — for a third consecutive year — several companies are taking a “more is better” approach.
Northland Investment Corp., Federal Capital Partners and Radco Cos., among others, each have acquired at least a half dozen apartment properties in Tampa and elsewhere over the past three years.
Each maintains owning multiple complexes within a submarket allows for greater knowledge of market nuances, operating efficiencies, greater leverage with vendors and the ability to capture higher caliber employees.
Tampa, in particular, also is considered attractive because of its pro-business governments, job and population growth and infrastructure and other improvements.
“You can definitely obtain a better negotiating position with contractors and vendors by owning multiple properties in any given market,” says Matthew Gottesdiener, Boston-based Northland's chief investment officer.
“But perhaps more importantly, owning several properties allows you to develop a more keen understanding of a local market.”
In October, Northland spent $112 million to buy the 35-story Element apartment tower in downtown Tampa, its fifth acquisition in the region in as many months.
The company, which in all owns 32 properties containing more than 9,000 units statewide, followed that 395-unit purchase up by buying the 360-unit Echo Lake community in Lakewood Ranch for $76.1 million, records show.
“There are a lot of good reasons to own multiple properties, as we do in the Tampa area,” says Norman Radow, founder and CEO of Radco Cos. “First of all, when you're in the value-add business, as we are, you can't just buy a property, send a construction crew down to fix it and be done.
“Care requires people, on-site,” he adds. “And that requires local relationships. And you can just do things more efficiently and get better pricing on materials and alike spread over a wider platform.”
Radow describes Tampa, where the company owns roughly 2,000 apartments, as a “model of success” for its job and population growth and commitment to infrastructure improvements in the wake of last decade's recession.
He agrees with Gottesdiener that owning more than one complex can provide intimate market knowledge that a single holding cannot.
“If you have five properties in a market and you have problems with one, you can better determine what the issues are,” Radow says.
In June, Radco paid $41.7 million for the 536-unit Cordova Apartment Homes in Tampa, its sixth purchase in the city. The Atlanta-based company, as part of a $7.7 million rehabilitation, rebranded the community Sunstone Palms.
Part of the decision to cluster properties may also stem from a corporate strategy to focus on a limited number of markets nationwide.
That's what drew Federal Capital Partners (FCP), a Chevy Chase, Md.-based firm, to Tampa.
FCP has acquired four area rental properties and financed two others over the past 18 months -- including the 326-unit Belara Lakes and the 200-unit The Commons, both in Tampa, which were purchased for a combined $46.4 million.
“Those deals speak to our view of the Tampa market,” says Jason Ward, a FCP vice president. “We're only focused on 10 markets nationwide, and Tampa is one of them. It's one of the markets where there's an older housing market and it's a fast-growing job market.
“Our philosophy is that instead of being spread out too far, we'd rather focus on select geographic areas,” Ward adds.
In all, FCP now controls more than 800 apartments in Central Florida, a significant chunk of a portfolio of acquisitions or financing arrangements topping $5 billion.
“When you buy multiple properties in a region, as FCP does, they go in and clean them up, improve them, and then they can provide residents with a more affordable option and a better product than the competition,” says Matt Mitchell, a managing director in commercial brokerage firm HFF's Tampa office, who represented the seller in FCP's Commons' purchase.
Gottesdiener, too, says the decision to cluster properties in Florida remains part of broader strategy.
“A big part of Northland's DNA is that the company has a long-term focus,” he says. “We typically look at things through a 10-, 15- or even 25-year horizon. We believe there's a direct economic benefit to developing a sense of scale in a market, because that leads to higher quality — and we think renters know quality when they see it.”
Both Gottesdiener and Radow say there's another but equally practical reason to focus ownership: employees.
“People want to be part of a growing company, because they know there's a chance for advancement,” Radow says. “That allows us to get a more professional staff.”