Residential specialist Greystar Real Estate Partners has reached a deal to exit its entire ninth US flagship value-add fund through a single transaction valued at $3.6 billion, PERE has learned.
The South Carolina-based firm will sell all the assets in Greystar Equity Partners IX – 30 properties with nearly 10,000 units – to one institutional investor, according to Kevin Kaberna, leader of Greystar’s North American investment management platform.
Kaberna declined to disclose the buyer of the portfolio, but said the investor emerged victorious from a competitive field of would-be buyers after three rounds of bidding that concluded in August. “We’re seeing tremendous interest in rental housing here in the US from global capital that is driving pricing,” he said.
Sources close to the transaction tell PERE that investor Ivanhoé Cambridge is the buyer. The Canadian pension investor declined to comment on the deal.
Greystar began exploring its exit options in late spring of this year, Kaberna said, weighing a series of one-off sales versus a single, full-portfolio transaction. Ultimately, the rising market demand for quality multifamily assets during the pandemic pushed it toward the latter.
“Given the amount of equity and inexpensive debt seeking rental housing and the market recovery story, it just made a lot of sense for us to go ahead and look at exiting the portfolio at scale,” he said. “As anticipated, the portfolio generated really strong interest from a wide range of institutional buyers.”
The last time Greystar exited a fund with a single sale was in 2015, when it sold the 32-unit portfolio acquired through GEP VII to Blackstone for $2 billion. For GEP VIII, the manager opted to sell assets one at a time.
Greystar launched GEP IX in 2015 and closed it the following year with $1.25 billion of equity. The firm invested that capital into 30 single assets, Kaberna said, half of which were acquired off market. He declined to say how much total capital, including debt, was deployed for the fund.
Geographically, GEP IX’s biggest exposures were to high-growth markets in the Sunbelt and the suburbs of gateway cities on the East and West Coasts. Already in high demand before covid-19, Kaberna said the pandemic has supercharged tenant demand in those regions.
He added that Greystar only executed its value-enhancing strategy on about half the units in the fund, meaning there is still significant growth opportunity for Ivanhoé Cambridge.
Greystar hired New York-based adviser Eastdil Secured to run the sales process.
Shopping spree
Before the market tilted in favor of sellers earlier this year, Kaberna said covid-19 created a bevy of buying opportunities.
From early 2020 through the middle of this year, the firm invested $2.5 billion from its 10th value-add fund, GEP X, which closed on $2 billion of equity in 2019. As of this summer, that vehicle was fully deployed at a value of more than $4 billion, including debt.
Kaberna said Greystar benefitted from ample dry powder heading into the pandemic and enough confidence in the strength of the multifamily space to invest through it. “We maintained the same rigorous investment process but we remained nimble and moved quickly when many were still sitting on the sidelines,” he said.
In total, Greystar has acquired 54 properties with 17,750 units for GEP X. Like GEP IX, roughly half of those assets were acquired off market, Kaberna said, and many at bargain prices. “Given the cloud of covid, we were able to secure significant discounts in 2020 and the first part of 2021,” he said.
Greystar increased its exposure to the Sunbelt for GEP X to roughly 70 percent of the fund, he said, up from around 50 percent, its typical allocation to the region.
Kaberna said the apartment buildings it has acquired are class “B-plus and better,” noting that rent collections from higher-earning tenants have been more resilient during covid and still have room to grow. Most of the assets are low-rise or garden-style buildings and, on average, were built in the late 1990s.
Competition for multifamily properties has become fierce, Kaberna noted, driving prices up and cap rates down. But, with construction costs increasing replacement costs, he is confident there are still deals to be found.
“The market will be aggressive next year,” he said, “but we feel like we’re well positioned based on our platform advantages.”
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