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Cohen-Esrey Apartment Investors LLC, the apartment acquisition unit of Kansas City-based Cohen-Esrey LLC, has announced property acquisitions and sales totaling $107 million.
CEAI most recently closed the purchase of the 612-unit Fairways at Lincoln Apartments community in Lincoln, Neb., on Jan. 31. Built around a nine-hole golf course, it consists of 51 two-story brick and wood-sided buildings.
In October, CEAI bought the 312-unit Appling Lakes at Cordova Club Apartments in Cordova, Tenn., a Memphis suburb. Built in 1997, the complex includes apartments with 9-foot ceilings and an average size of 1,135 square feet. It includes 17 two- and three-story buildings situated around a resort-style swimming pool, 24-hour fitness center, playground and lighted tennis courts. CEAI previously acquired the Grove at Trinity Pointe, a 464-apartment community in Cordova.
With both acquisitions, CEAI intends to upgrade certain interior features, as well as freshen and add to the amenities packages.
CEAI also announced the sale of three assets during the fourth quarter, including the 125-unit Richmond Commons Apartments in Lexington, Ky.; the 72-unit Sycamore Estates Apartments in Muscatine, Iowa; and the 54-unit Rolling Meadows Apartments in Waverly, Iowa. Those assets had been acquired in 2012 and 2013 and no longer aligned with the investment thesis of CEAI.
The total value of all five transactions was $106.8 million, including funds to be invested in physical improvements.
Lee Harris, CEO of Cohen-Esry LLC, said CEAI was launched in 2006, put on the shelf during the recession and relaunched in 2011.
“We’re still in acquisition mode,” Harris said, explaining why now is good time to invest in Class B apartment properties. “I’ve been doing this for 43 years, and I’ve never seen the demographics line up (in support of the apartment market) like this. We have two monstrous cohorts in the baby boomers and the millennial generation that are converging on the apartment sector. Eighty percent of the boomers have traditionally owned homes, but now we’re seeing the number come down as the boomer population retires, and they’re becoming more renters by choice. Millennials are also more renters by choice and for a longer time because they are waiting longer to get married and paying off student loan debt.”
According to Harris, 425,000 new apartment units will be needed each year through 2024 to fulfill demand, “but as an industry, we’re not even hitting 400,000.”
CEAI’s focus is on addressing the demand by buying Class B properties built between the mid-1980s and 2010 in the nation’s top 150 metropolitan areas.
By making improvements and programmatic changes to such properties, Harris said, CEAI is able to create “best B” apartment communities and raise rents.
Harris said the Class B market is strong because of a current rent differential of $400 to $500 a month between Class A and Class B properties.
And even though overbuilding has the Class A market verging on a rent rollback, he said, “the differential between A and B is so great that even when the rents come down in Class A, it’s still going to be too expensive for a Class B renter to move up.”
CEAI, which generally keeps its acquisitions for five to seven years, has acquired more than 5,000 Class B units in Atlanta; Dallas; Memphis; San Antonio; Columbus, Ohio; Oklahoma City; Lincoln; Louisville; Lexington, Ky.; St. Louis; and a number of smaller communities nationwide.
Cohen-Esrey Communities LLC, is the property management unit for Cohen-Esrey and operates about 10,000 multifamily units. The Cohen-Esrey Development Group LLC is another production unit for Cohen-Esrey and develops affordable properties in multiple states, including ground-up construction as well as the redevelopment of existing apartment communities and the repurposing of historic buildings into affordable apartments.