Following recent fundraising success with its fifth and potentially largest US multifamily fund, a US-based portfolio manager at London asset manager Henderson Global Investors says now is a great time – if not the best time – to invest in multifamily.
Sue Motowidlak told PERE there are many reasons why investors should look to the US multifamily sector for investment opportunities. “We see apartments as the best sector to be investing in now,” she says. “If you look at the last 10 years, it's been a very positive picture.”
Based out of Henderson's Hartford, Connecticut office, Motowidlak cites a number of factors for the allure of multifamily. One such factor is that, compared with other property types, apartments on average require the lowest need for additional capital (for such things as renovations). Another is that interest rates have remained favourable. In addition, occupancy rates on average have been in the low to mid-90s for the past decade.
Motowidlak also points out that, due to the subprime mortgage meltdown that preceded the global financial crisis in 2008, many people who bought homes that perhaps shouldn't have are going back to renting again. In effect, Henderson's research shows that people are moving more nowadays.
The multifamily market is markedly different now than it was during the ‘80s and '90s, when competition led to overbuilding, which in turn led to higher vacancies and lower rents. Now, with an increasing percent of the population moving – and renting – Motowidlak notes that there is not a great deal of new real estate being built in this space, which raises demand and in turn raises rents. “We're going to see significant rent growth in the next couple of years,” she adds.
Bottom line, according to Motowidlak: “It's a good income return”.
Indeed, Motowidlak is seeing the apartment sector grow firsthand, as she co-manages Henderson’s latest US multifamily fund, CASA V. As PERE recently reported, the fund held an initial close on $105 million in equity and is targeting a final close for summer 2012. The value-added vehicle is projected to be the largest fund in Henderson’s CASA Fund series to date, aiming to amass a portfolio size of more than $1 billion with leverage.
The capital raised so far comes from three US public funds, all of whom are repeat clients. This gives the fund $300 million of initial purchasing power to deploy in the multifamily housing market. CASA V, which remains open to additional investors with a minimum commitment of $25 million, is targeting gross equity returns of 13 percent to 15 percent.
Motowidlak, who's been with the CASA team since its inception in 1992, says Henderson’s fifth fund will seek Class B to B-plus properties, with an emphasis on affordable housing. That area in particular is one where investors can find the best value, she believes, citing strong consumer demand.
“It's really a great time to be investing right now,” Motowidlak reiterates regarding the multifamily sector. “There are a lot of opportunities out there. It meets the needs of the market.”
Henderson owns more than 22,000 multifamily units throughout the US. All told, the firm manages $19.2 billion of real estate in Europe, the US and Asia.