Buchanan Street Partners have purchased a bank-owned multifamily project from Key Bank and Bank of the West. Cushman & Wakefield represented the sellers of the property, which is a partially completed, 298-unit, age-restricted apartment community in Herriman, Utah. Buchanan Street plans to carry out a $25m construction project on the property, bringing the total value to about $50m once completed.
“Capital is largely being raised right now by very large investment managers in multi-billion dollar funds to buy the largest assets in gateway cities,” said Timothy Ballard, co-founder and president of Buchanan Street. “Secondary markets, whether Salt Lake City, Dallas, or Austin, have a better quality of life and employers and employees are moving to these cities because of it.”
As Baby Boomers retire in greater numbers, Ballard believes that the demand for apartments with condo-like qualities in active communities will intensify. “In addition, developers are building smaller units rapidly in urban areas because they say the thesis is that millennials will always live in these apartments, but we don’t believe that to be true – there’s a softening demand for apartments in really expensive cities, and construction financing is harder to get,” said Ballard. “Millennials are getting married, having kids, moving to the suburbs and buying homes; they’re just doing it later.”
Buchanan Street launched its multifamily investment platform in March 2017 to diversify the company’s investment business, and plans to invest $500m in the sector over the next three years. “The sector is very expensive right now – it is flush with capital and the marketplace is competitive,” continued Ballard. “Today is not a good time to go out and acquire a large multifamily portfolio, as the low-hanging fruit is largely gone.”
The company also recently hired executive v.p. Kevin Hampton to complete its multifamily investment portfolio. “Multifamily complements our existing portfolio—a majority of which is currently invested in office assets, Ballard said. “Much of the office portfolio is of a transitional nature, where we stabilize the asset and sell. We look at multifamily as a cash-flow driven play, and buy to hold for the long term.”
The firm’s plan to increase its return on these investments includes making amenity upgrades to the properties, such as installing improved finishes and appliances, and creating resort like amenities, in order to attract the renter by choice, Ballard noted. “There are also opportunities on the operating side as energy efficient technologies have improved – this even results in interest rate savings as agency lenders incentivize borrowers to make these upgrades.”
Buchanan Street plans to finish construction on its new Utah acquisition by early 2018. The project is located near Daybreak, which is Utah’s largest master-planned community.
###