July 21, 2022 |
Updated August 1, 2022
Addison Partners outlines its investment strategy in smaller growth markets they have dubbed “mini Austins.”
When was Addison Partners founded and what is the investment strategy of the company?
Brian Schneider: Addison was founded in 2018 by Mary Stewart Malone and myself.
We’re focused on acquiring value-add Class B and C apartment communities in primary and secondary markets in the Southeast.
We focus on markets and submarkets we believe will grow faster relative to other markets and submarkets. We purchase communities that are underperforming in terms of operations, amenity packages or finish levels in the units.
By implementing changes to address these issues, Addison improves the living environment and provides a strong value proposition for our residents. At the same time, we can drive rent growth and deliver attractive returns for our investment partners.
Tell us about the size and scope of your current portfolio.
Schneider: We currently own a total of 620 units over four apartment communities. We have been net sellers in 2022, as we believe it is a better time to be a seller rather than a buyer. Our properties are in the Birmingham, Ala., Charlotte, N.C., and Des Moines, Iowa, metros, and we also have a community in Hickory, N.C.
What are your investment and growth plans for 2022?
Schneider: We are exploring expansion opportunities throughout the Southeast. We particularly like the kinds of smaller growth markets that we refer to as “mini-Austins,” as in Austin, Texas. These are cities like Greenville, S.C., Myrtle Beach, S.C., and Fayetteville, Ark., vibrant, up-and-coming cities that feature growing job markets and emerging shopping, dining and entertainment scenes.
We hope to acquire three communities over the course of this year while also increasing our connections and partnerships with family office and institutional investors.
Tell us a little bit about your due diligence approach - what are you looking for in a property and submarket before you acquire a community?
Schneider: We seek opportunities that are undervalued and that, for various reasons, have low rents relative to their comps. The rates at these communities can be pushed relatively easily by simply bringing them in line with their comp set. When you add in various operational and amenity improvements, they can be pushed even further.
We like submarkets that have a high average income relative to the overall metro average, a diversified and growing employment base, and a rock-solid job market that will support long-term demand and rent growth.
Broadly speaking, what are the long-term strengths of the apartment market in the Southeastern U.S.? Are there any causes for concern?
Schneider: A supply-demand imbalance has created outsized rent growth in the Southeast.
On the supply side, the region has experienced an ongoing delivery shortage of new housing units – both for-sale and rental—that has been exacerbated during the pandemic. The high cost of construction requires developers to target high rents for the numbers to work, which is why we focus our attention on workforce housing. We believe there is a strong need for quality workforce housing.
On the demand side, people want to live in this region, and the population in the Southeast is growing accordingly. People are attracted to the warmer climate, the lower cost of living, the lower taxation rates and the overall quality of life. This migration has prompted more companies to expand or relocate to these areas, which in turn leads to more migration, creating a virtuous circle.
Furthermore, the increased ability of people to work remotely, a trend that COVID certainly accelerated, has shown people that they can work from anywhere, be that a large city or a smaller town. So, we believe that not only are places like Atlanta and Charlotte poised to experience strong apartment demand, but so are smaller cities like Greenville, S.C., and Greensboro, N.C.
As for causes for concern, the apartment industry has certainly shown in the past that it can get overbuilt, but I think we’re a long way from that, especially after the past two years. And professionally managed, institutionally owned single-family rentals could emerge as competition for multifamily properties, but as of right now, there’s more than enough demand to go around.
Stephen Ursery is Senior Account Manager at LinnellTaylor Marketing.