Pure Multi Family -a modern Reit
On September30,2015 Pure Multi Family Reit announced the closing of the sale of their Breckenridge property at Midtown in San Antonio,Texas.It was constructed in 2014 and has 282 brand new luxury residential units.It has a park like setting and a village green.Multi advises that there are several large employers within two miles.
The deal was financed from the proceeds of an earlier sale ,that is, the Oakchase Apartment Homes plus a new first mortgage of $31 million which has a fixed interest rate of 3.72% for 12 years.Apparently it has a going in capitalization rate of 5.60 %.This according to Multi doubles their footprint in the area.More importantly they sold a unit that was built in 1984 which had a capitalization rate of 5.80% for a unit built in 2014 and having a capitalization rate of 5.60%.This rate should be around 6.5% by the end of 2016.
Pure Multi has a portfolio which has a weighted average year of construction of 2002.This includes 15 properties on 253 acres of land with 4701 apartments in 267 buildings.
A Modern Strategy
Pure Multi's strategy is to buy as new and modern buildings in prime locations that they can.Their last sale was of a property that was only twelve years old and in a good location.It is likely that they did the minimum of improvements to this property but felt that most of the increases in market value had already been obtained.So take their capital gain and get a more modern building.They also believe (like Tricon that the luxury residential apartments is a very good market to be in).Future increase are likely to be greater in this market segment than in more modest apartments.This is where both Multi and Tricon see future growth.
This approach is the opposite of a lot of other Reits.Reits like Innvest and Interrent and BTB buy properties that need a lot of renovations.They feel that they can charge a multiple of the money invested in renovations on the resale.They are looking to make money on the value added to their buildings.However the property itself does not increase much in value.And as Pure Multi points out the weighted average year of construction of their portfolio is quite modern. see Blogdaleupsome for financial analysis of reits;see blogdaleupsome for financial and stock market analysis
The deal was financed from the proceeds of an earlier sale ,that is, the Oakchase Apartment Homes plus a new first mortgage of $31 million which has a fixed interest rate of 3.72% for 12 years.Apparently it has a going in capitalization rate of 5.60 %.This according to Multi doubles their footprint in the area.More importantly they sold a unit that was built in 1984 which had a capitalization rate of 5.80% for a unit built in 2014 and having a capitalization rate of 5.60%.This rate should be around 6.5% by the end of 2016.
Pure Multi has a portfolio which has a weighted average year of construction of 2002.This includes 15 properties on 253 acres of land with 4701 apartments in 267 buildings.
A Modern Strategy
Pure Multi's strategy is to buy as new and modern buildings in prime locations that they can.Their last sale was of a property that was only twelve years old and in a good location.It is likely that they did the minimum of improvements to this property but felt that most of the increases in market value had already been obtained.So take their capital gain and get a more modern building.They also believe (like Tricon that the luxury residential apartments is a very good market to be in).Future increase are likely to be greater in this market segment than in more modest apartments.This is where both Multi and Tricon see future growth.
This approach is the opposite of a lot of other Reits.Reits like Innvest and Interrent and BTB buy properties that need a lot of renovations.They feel that they can charge a multiple of the money invested in renovations on the resale.They are looking to make money on the value added to their buildings.However the property itself does not increase much in value.And as Pure Multi points out the weighted average year of construction of their portfolio is quite modern. see Blogdaleupsome for financial analysis of reits;see blogdaleupsome for financial and stock market analysis
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