Earlier this year, it was companies like Chicago-based Equity Residential, Palo Alto, Calif.-based Essex Properties Trust, and Alexandria, Va.-based AvalonBay Communities that were announcing the larger transactions. Though their smaller REIT brethren were active making some deals, it seems that recently, transactions by the little guys have picked up.

In the past couple of months, Cleveland-based Associated Estates bought one 304-unit deal in Woodbridge, Va. Rochester, N.Y.-based Home Properties bought two deals totaling 318-units in suburban Maryland area. And Memphis-based Mid-America Apartment Communities announced at last week’s NAREIT convention in Chicago that it has two properties under contract. Dallas-based American Campus Communities recently bought 14 student housing properties containing 8,534 beds from Fidelity Real Estate Group. (It previously had a 10 percent interest in the deals, which were held in two joint ventures.)

“Everybody is reporting more deal flow,” says Paula Poskon, a senior research analyst with Robert W. Baird & Co., a Milwaukee-based wealth management, capital markets, asset management, and private equity firm. “By virtue of their operating strategies and portfolio strategies, companies like Home, Mid-America, and AEC are just finding it a little easier to find those one-off opportunities.”

Basically, these companies are looking for different deals compared to their more urban competitors. “They’re looking for more suburban, garden-style stuff,” Poskon says. “I think it’s a little bit easier to find those kinds of properties on a one-off basis versus a high-rise that an Equity Residential or an AvalonBay may go after. There’s not a lot of trophy, high-rises for sale and it’s a lot harder to sniff those out.”

By the sentiment at last week’s NAREIT conference, REITs expect things to continue to pick up throughout the year. Home pushed its acquisition guidance up to $250 million, while Mid-America said it had two deals under contract. “There seems to be a lot more product being brought to market,” says MAAC CEO Eric Bolton.

Bolton also expects to see more deal flow. “We’re seeing more activity from merchant builders and developers,” he says.

With their knowledge that fundamentals are improving, buyers are lining up, and interest rates could ultimately go up, Bolton thinks sellers, including banks, will be more likely to put product on the market. Improving fundamentals are also helping buyers underwrite a little more aggressively. “Sellers are more realistic about what they can get,” says Ed Pettinella, CEO of Home. “Along with other companies, we think we can build in [rent] growth potential.”

Associated Estates would like to pull its allocation of properties in the Midwest from 50 percent down to 30 percent. And it plans to do that by buying properties in other regions, not by selling in the Midwest. “We believe that now is the time to buy at attractive prices,” says Jeffrey Friedman, CEO of Associated.

While the first quarter marked the first time that REITs were net buyers in the past 10 quarters, they're chasing more deals than they are closing, according to Andrew J. McCulloch, an analyst for Green Street Advisors, a Newport Beach, Calif.-based consulting and research firm. "They're getting outbid for many deals by buyers that are more aggressive in their underwriting" he says.

Though REITs do see issues competing with private buyers who are underwriting deals more aggressively, they do have advantages. For one, REITs can simply write a check for deals, which helps. “In these sales, it’s not all abut prices,” Friedman says. “It’s about consummating the transaction.”

Check out the other segments in this series below. 
Part 1: Multifamily Acquisition Market Heats Up as Cap Rates Fall by Jerry Ascierto
Part 3: Multifamily Dispositions Move to By-the-Pound Pricing by Chris Wood