Morgan Properties, an apartment heavyweight that pushed pause on buying in the past year, has jumped back in the game in a big way in a sign that confidence is returning to the multifamily sales market.
Morgan, based in King of Prussia, Pennsylvania, agreed to buy 18 properties with 3,256 units in North and South Carolina. The firm, which valued the deal at $323 million, plans to pump another $20 million into the properties as part of its traditional value-add strategy of buying, improving, boosting rents, then selling at a profit.
While the strategy is part of its typical approach, the deal itself is unusual in that it’s the first purchase Morgan has made in a year. In that time, the pandemic has turned the apartment market on its head.
“Whereas most multifamily owners are playing defense and just trying to get through the crisis, Morgan Properties is playing offense and well positioned for growth given our strong balance sheet, talented team of professionals and exceptional track record. We spent a considerable amount of time meeting regularly with our executive team to ensure our house was in order before pursuing any acquisition opportunities,” Jonathan Morgan, the company’s president, said in an email to CoStar.
Earlier this year, Greystar Real Estate Partners charged against the tide, spending over $285 million on apartments. But most of the big owners in the country have held their fire during the pandemic, buying nothing, according to CoStar data.
The Radco Companies, one of the top sellers, keeps finding select buyers for pieces of its $1 billion nationwide rental portfolio. Those deals indicate a cautious response in that choosy buyers have been taking their pick of properties only in the local area they like and not paying top dollar for large packages.
Morgan is bullish on the fundamentals of the multifamily industry and indicated his firm will take advantage of low interest rates.
According to the National Multifamily Housing Council’s annual rankings, Morgan is the fifth-largest apartment owner in the country with about 70,000 units, mainly in the South and Southeast. MAA, of Germantown, Tennessee, is listed by the trade group as the biggest U.S. owner with more than 100,000 apartments.
Morgan likes older, suburban properties that can be upgraded to achieve higher rents while still offering a bargain compared with newer, downtown properties. Until the break that has included the pandemic, the firm had been on a tear, picking up more than $7 billion in rentals since 2012, according to CoStar data, and $4 billion in the past five years, not counting the latest trade.
In February 2019, it paid $900 million for a 4,100-unit, 10-property portfolio of rentals in suburban Washington, D.C., Philadelphia and Baltimore. And last September it spent almost $2 billion for an 80-property, 18,000-apartment package in New York, Ohio, Illinois, South Carolina and Pennsylvania.
The big spender then pressed pause as COVID-19 upended the economy and threw apartment values in doubt.
The new portfolio is mostly in North Carolina. There, 13 properties totaling 2,243 garden-style apartments are located in or near Charlotte. “The Carolinas are fast-growing markets that offer great access to major employment hubs,” Jonathan Morgan said in a statement.
The communities include Village at Brierfield, Wexford and Sharon Pointe in Charlotte; Parkway Station, Trinity Station and Waters Edge in Concord; Kannon Station and McClain Heights in Kannapolis; Woodbrook in Monroe; Alexander Station, Ashton Woods and Lakewood in Salisbury; and Huntersville in Huntersville. There are three additional communities encompassing 562 units that are located in Winston-Salem: Highland Ridge in High Point; Clemmons Station in Clemmons; and Enclave at North Point.
The South Carolina portion of the portfolio consists of three communities with 583 units in Rock Hill, Gaffney, and Anderson: Gable Oaks, with immediate access to retail and Interstate 77, 1022 West, located near U.S. Highway 29 and Interstate 85, and Station 153, situated close to Anderson’s largest park and minutes away from shopping, restaurants and entertainment.