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Tuesday, May 18, 2021

Global investor pools money for apartment construction

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Several large Chicago-area real estate investment funds have raised funds together to spend on apartment buildings from 95% rental-rate areas in northern New Jersey to largely unoccupied apartments in Chicago’s Loop.

The funds are now among the most active apartment fund managers in the country, with nearly $25 billion in assets under management.

“We believe that central New Jersey has many of the same characteristics that Illinois has in terms of rents being above market and occupancies being below market,” said Steve Caso, chief investment officer of West Town Residential, which oversees almost $3 billion in real estate.

Mr. Caso and his partners have bought more than 2,000 apartments in such areas as Jackson Township and Trenton, NJ, Hackensack and Chatham, NJ and Lake Township, IL.

Mr. Caso said their goal is to capture long-term returns of 10% and he is encouraged by the increasing rents across those areas and other areas of the market.

“For $3 billion, it’s more than satisfactory,” he said.

Such sales have received great interest from buyers, attracted by properties priced at least 10% lower than what the funds are buying for.

Gary Hoffman, CEO of Denfeld Realty Partners, said multiple funds or buyers in one transaction has become increasingly common as they seek to own all the real estate they can.

“Banks, less so as a purchasing source, are retreating as their role is being subsumed by institutional players,” Mr. Hoffman said.

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