ArborCrowd, the first crowdfunding platform launched by a real estate institution, announced a new offering that allows investors to acquire equity interests in the Sioux Falls Multifamily Portfolio, a collection of class-B apartment communities located in Sioux Falls, S.D. The properties exhibit strong upside potential due to Sioux Falls’ sound multifamily real estate fundamentals and notable lack of professionally managed workforce housing product.
Affiliates of Tzadik Management acquired the 18-property, 707-unit portfolio, which represents 4 percent of the Sioux Falls multifamily market, in four simultaneous transactions in October 2018.
An ArborCrowd affiliate invested in the portfolio in January and ArborCrowd now is seeking to raise $3.2 million from investors. The transaction’s total capitalization is approximately $50.06 million, and Tzadik’s equity group has invested more than 75 percent of the total equity in the deal.
The Sioux Falls metro area is supported by a strong job market and sustained population growth — both key drivers of demand for quality multifamily housing. Its unemployment rate is currently 2.5 percent, well below the national rate of 4 percent. Moreover, the city’s diverse employment base ensures that its economy is not reliant on one industry, with the healthcare, retail, manufacturing and finance industries making up the majority of the job market. Throughout the Great Recession, Sioux Falls’ economy demonstrated resilience as multifamily rents and vacancies remained steady. Additionally, when the national unemployment rate peaked at 10 percent in October 2009, Sioux Falls’ unemployment was just 4.7 percent.
“Sioux Falls is a particularly attractive market for us, because it is a city with very strong fundamentals and was uniquely insulated against the global financial crisis, yet there are investment opportunities available that are not overpriced,” said ArborCrowd co-founder and managing director Adam Kaufman. “The Sioux Falls multifamily market has seen a number of class-A developments come online in recent years, but there is a shortage of quality, professionally run workforce housing. Significant renovations coupled with institutional property management are expected to propel the portfolio’s rent growth, while it is still anticipated to present a significant discount compared to class-A rents in the area.”