Jon Bell believes his company has found the right balance for success and he’s not willing to rock the boat in 2014.
Although Bell Partners recently shook up the company leadership and announced a few organizational changes—promoting Robert Slater to Chief Administrative Officer, and Gwenyth Cote to COO —the operating focus is still the same.
“It’s the discipline of sticking with what we do well,” he says.
Instead of blazing new trails, the Greensboro, N.C.-based company will cut a wider swath in markets where it already operates some of the more than 70,000 units at 251 properties. Particularly intriguing areas that catch Bell’s attention include Nashville, Atlanta, select metros in Florida, Boston, Charlotte, Raleigh and Washington, D.C.
“While we are involved in more markets than that, currently, we want to attempt to go deeper in these chosen markets in 2014,” he says.
Bell Partners had a busy year on the investment front in 2013, acquiring more than 2,280 units as of early November. The company selectively and deliberately closed on acquisitions while, a little more swiftly, parting with other communities in its portfolio, selling about 1,200 units. The firm will continue this strategy next year: As cap rates continue to drop across the nation, Bell expects to see even more of a seller’s market materialize in 2014.
“We plan to be an aggressive seller and a very cautious buyer,” he says.
Many of the markets in which Bell is hoping to double-down are secondary metros that have been somewhat insulated from the bidding wars driving up prices in 24/7 coastal markets.
But its not just the domestic REITs and institutional investors duking it out on the transaction market. Foreign investors, too, are expected to play a large role in shaping next year’s dealmaking environment, with a slight twist. While foreign investors have always favored high-barrier coastal cities, many are now finding better opportunities outside of the nation’s largest metros, according to Brian Murdy, the national director of Encino, Calif.-based Marcus & Millichap’s Institutional Property Advisors, says.
“They’re going to keep driving prices there and the capital is going to stay strong,” he says. “But opportunity may be in suburban markets, the non-24-hour markets. I think there will be significant opportunities to buy there and get a premium off cap rates.”
Foreign investors are increasingly asking Chicago-based Jones Lang LaSalle to introduce them to the American multifamily market in large, coastal cities such as New York and Washington, D.C. But that may just be the first step in a journey that eventually leads to secondary markets and up-and-coming areas, such as less-heralded parts of Texas or Florida, says Jubeen Vaghefi, international director in the Jones Lang LaSalle capital markets group.
“In a lot of instances they come over here and develop relationships with local operators and local investment firms,” he says. “And as those relationships evolve, they start to get into markets they weren’t aware of.”
Yet, there’s plenty of runway left in those markets that many fear are now being overbuilt, such as Charlotte, N.C., Washington, D.C. or Austin, Texas. Vaghefi dismisses the concerns, noting the demand in the so-called at-risk markets will meet the supply coming online.
He warns not to write off the Lone Star state, especially.
“Texas is seeing a lot of development but it’s one of the states leading the country in population growth and employment growth,” he says.
Murdy believes Washington, D.C. and Austin, Texas will also be able to support continued development due to job growth and he doesn’t predict much of a slowdown next year.
“There may be opportunity for projects to get in late next year without a lot of competition,” he says. “There are a lot of unique situations occurring.”
Lindsay Machak is an Associate Editor for Multifamily Executive. Connect with her on Twitter @LMachak.