CapitaLand acquires U.S. 16-property multifamily portfolio for $835m
CapitaLand, through its wholly owned international business unit CapitaLand International, has acquired a portfolio of 16 freehold multifamily properties for $835 million throughout the United States. It marks the group’s foray into the country’s multifamily asset class to ride on the growing demand for long-term rental housing. The portfolio comprises 3,787 apartment units, all located in suburban communities of the metropolitan areas of Seattle, Portland, greater Los Angeles and Denver. The price per unit of the portfolio is $220,000, which is consistent with market transactions.
These class B properties in the suburban regions are operating at more than 90 percent average occupancy, with average length of stay of about two years. They are well connected via highways or commuter rail systems and enjoy easy access to neighborhood amenities like supermarkets, malls, schools and nature reserves. They see strong demand from a diverse mix of middle-income and skilled professionals working in the surrounding employment hubs. These suburban regions have experienced growing employment rates and are home to government agencies, companies in the technology, energy, healthcare and life sciences industries, as well as multinational corporations such as Boeing, Microsoft, Starbucks, Amazon and Nike.
Lee Chee Koon, president & group CEO of CapitaLand Group, said, “This latest acquisition in the United States, the world’s biggest economy, would expand CapitaLand’s global investment portfolio, diversify our business outside of our two core markets of Singapore and China, and allow us to grow new businesses. It also enables us to diversify our investment property portfolio into developed markets as we continue to scale up our presence in our core emerging markets of China and Vietnam. As a leading global real estate player, it is important for CapitaLand to create value for our stakeholders with an optimal portfolio mix which is efficient and high returning, through a balanced and meaningful allocation between developed and emerging markets.”
“The multifamily sector in the United States is broad, scalable and a growth sector marked with long-term secular trends. Widely regarded as one of the most resilient and liquid institutional real estate asset classes in the United States, this multifamily portfolio offers attractive risk-adjusted returns for CapitaLand. While we value add [?? add value?]to this portfolio of freehold operating assets through asset enhancement post acquisition, we will also be looking out for more opportunities to build up a sizeable platform and strengthen our expertise in this asset class. As the portfolio grows, we will have the option to spin off these assets into investment vehicles and partnerships. Beyond expanding the long-term rental housing platform in the United States, a market which we have ventured into since 2015, we also see potential to build this business in other fast-growing markets such as China.”
The multifamily sector in the United States has the highest average returns in the commercial real estate asset class, offering close to 10 percent annually in the last three decades. Healthy economic fundamentals, job growth, net in-migration trends, low–home ownership rates, and the booming millennial generation’s preferences for geographic mobility and community living in the suburban markets have driven strong demand for rental apartments.
Gerald Yong, CEO of CapitaLand International, said, “We are acquiring a well-diversified portfolio of multifamily assets across several suburban markets in a single transaction, each regional market with a critical mass of over 1,000 units. With leases that are generally renewed annually, we can expect to gain from the rental uplifts after the refurbishment of the portfolio that will take place in phases over the next few years. The stable, reliable cash flows of these class B multifamily properties make this suburban portfolio more attractive than the higher-priced urban core segment. Situated in well-established, well-connected rental communities, this portfolio of low-rise and garden-style properties continue to be a strong draw for middle-income and skilled professionals working in surrounding employment hubs."
CapitaLand first entered the U.S. market in August 2015. CapitaLand has set up an office in New York to oversee the group’s investments and to build up its market expertise and capabilities in the country. Through Ascott and its real estate investment trust, Ascott Residence Trust (Ascott REIT), the group has acquired five properties with more than 1,260 units in Manhattan and Silicon Valley. On top of its portfolio of hotels in the United States, Ascott also owns a majority stake in Synergy Global Housing (Synergy), an accommodation provider in the market, which offers apartments for corporate lease. Synergy has close to 1,500 units in the United States with a strong presence in the West Coast, including Los Angeles, Orange County, Calif., San Diego, Seattle, as well as New York.
This latest multifamily portfolio acquisition will more than double CapitaLand Group’s investment in the United States to more than $1.5 billion, as well as its presence in the market to more than 6,500 units.
